March 15, 2024
Joint settlement provides industry changing framework for NAR, MLS, and other real estate entities.
WASHINGTON, DC– A nationwide class of home sellers has reached a landmark $418 million joint settlement with the National Association of Realtors (NAR) that will resolve claims in four antitrust class actions against NAR. Those class actions allege that NAR and several of the nation’s largest residential real estate brokerage companies adopted illegal rules requiring home sellers to pay buyer broker fees – at an inflated rate – in addition to their own brokers’ commissions. The settlement with NAR is in addition to $208.5 million in settlements reached with additional defendants Anywhere Real Estate, RE/MAX, and Keller Williams.
Under the terms of the settlement, NAR will be responsible for paying $418 million in four annual installments along with interest, for the benefit of home sellers across the United States, as well as $3 million toward settlement notices. In addition, the settlement creates a framework for other real estate industry participants to resolve actual or potential claims against them. It also provides for far-reaching changes to NAR’s rules governing real estate broker compensation.
“For years, anticompetitive rules in the real estate industry have financially harmed millions of Americans. This settlement will bring sweeping reforms that will help countless American families,” said Benjamin D. Brown, managing partner of Cohen Milstein Sellers & Toll and co-chair of its Antitrust practice. “We are proud to play a leading role in addressing this industry’s long-running practices.”
The settlement terms include extensive industry reforms that will increase transparency and fairness regarding buyer broker commissions, while eliminating requirements that sellers must offer on multiple listing services to pay the commissions of brokers representing the buyers they are negotiating against.
“For far too long, home sellers have faced a system recognized by many as blatantly unfair. Individual sellers often feel powerless to negotiate a better deal for themselves given the risk that offering lower commissions will cause brokers to steer buyers to other properties. This class action and settlement provide justice for our clients and will require important changes that help future home sellers.” said Robert A. Braun, a partner in Cohen Milstein’s Antitrust practice.
In the settlement, NAR has agreed to various practice changes, which are to begin 120 days after the plaintiffs seek preliminary approval of the settlement:
- Eliminate and prohibit any requirement by NAR and NAR multiple listing service (MLS) that listing brokers or sellers must make offers of compensation to cooperating brokers or other buyer representatives, and prohibit and eliminate any requirement that such offers, if made, must be blanket, unconditional or unilateral;
- Prohibit NAR MLS participants, subscribers, other real estate brokers, other real estate agents, and sellers from (i) making offers of compensation on the multiple listing service to cooperating brokers or other buyer representatives (either directly or through buyers) or (ii) disclosing on the multiple listing service listing broker compensation or total brokerage compensation;
- Eliminate and prohibit any requirements conditioning participation or membership in a NAR MLS on offering or accepting offers of cooperative compensation;
- Agree not to create, facilitate, or support any non-multiple listing service mechanism for listing brokers or sellers to make offers of compensation to cooperating brokers or other buyer representatives;
- Require NAR MLS participants acting for sellers to conspicuously disclose to sellers and obtain seller approval for any payment or offer of payment that the listing broker or seller will make to another broker, agent, or other representative acting for buyers; and
- Require MLS participants to disclose to prospective sellers and buyers in conspicuous language that broker commissions are not set by law and are fully negotiable.
The settlement also requires NAR to provide valuable cooperation in ongoing litigation against other defendants. The joint settlement will resolve several cases against NAR, including Burnett, et al. v. National Association of Realtors, et al. (W.D. Mo.), where a jury returned a $1.8 billion damages verdict that will be automatically tripled under the antitrust laws.
Moehrl, et al. v. National Association of Realtor was the first-filed case in 2019, and centers on NAR’s adoption of a mandatory rule, which required a blanket, largely non-negotiable offer of compensation to buyer broker when listing a property on a multiple listing service or “MLS.” Across the United States, there are hundreds of MLSs—which are platforms that real estate brokers and agents use to share listings. The vast majority of MLSs are affiliated with the National Association of Realtors and are required to follow rules NAR sets.
Moehrl alleges that those rules incentivize buyer brokers to avoid showing their clients homes where the seller offers a lower commission. This results in sellers offering high and mostly uniform commissions.
Despite the shrinking role of buyer brokers over the years – caused by advances in technology, including the internet and public access to listings – buyer brokers’ commissions have remained artificially inflated. On average, home sellers overpay such commissions by thousands of dollars on any given transaction.
The plaintiffs are represented by Cohen Milstein Sellers & Toll, Susman Godfrey, and Hagens Berman Sobol Shapiro in Moehrl, et al. v. National Association of Realtor, et al. (N.D. Ill.) and Umpa v. National Association of Realtors, et al. (W.D. Mo.); and Boulware Law LLC, Ketchmark & McCreight PC, and Williams Dirks Dameron LLC in Burnett, et al. v. National Association of Realtors, et al. (W.D. Mo.) and Gibson, et al. v. National Association of Realtors, et al. (W.D. Mo.).
###
About Cohen Milstein Sellers & Toll PLLC
Cohen Milstein Sellers & Toll PLLC, a premier U.S. plaintiffs’ law firm, with over 100 attorneys across eight offices, champions the causes of real people – workers, consumers, small business owners, investors, and whistleblowers – working to deliver corporate reforms and fair markets for the common good. For more information visit https://www.cohenmilstein.com