Class-Action Lawsuit Putting Pressure on Realtors to Lower Commissions

Class-Action Lawsuit Putting Pressure on Realtors to Lower Commissions

A real estate commission of around 5% to 6% has been the standard for so long that almost no one thinks about it anymore—until, that is, one is selling a home. Then, the joy of realizing that one’s home has appreciated in value and will sell at a tidy profit is often tempered by the realization that, “Hey, my agent is going to earn a heap of money, only because the real estate market is hot!”

So it’s interesting news that a consumer-rights law firm has filed a class-action lawsuit in a federal district court in Chicago, challenging this standard commission amount. The “class” that is suing includes people who, during the past five years, sold a home through one of 20 largest listing services in the United States.

The lawsuit charges that the National Association of Realtors (NAR), as well as the four largest U.S. real estate brokerages and the database known as the Multiple Listing Services (MLS) used to advertise and maintain information on homes, are all in cahoots.

Or, to put it in legal terms, they have engaged in price fixing, by imposing anti-competitive policies to make sure that home sellers pay this inflated commission amount across the board. Examples of how this price fixing has allegedly been implemented include disallowing buyers and sellers from negotiating with each other over the commission the agents will receive, and allowing agents representing buyers to tell them their services are “free” (instead of disclosing that they’ll be paid a cut of the home sale by the seller).

Such collusion, if proven, could be held to be in violation of federal antitrust law. Of course, we might not get a final answer from the courts for some years to come, given the high probability of appeals. But this could be a case to watch. 

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