On March 1, 2019 Christopher Moehrl on behalf on himself and all sellers of real estate in America, filed a class action lawsuit against the National Association of Realtors, Realogy Holdings Corp., Homeservices of America, Inc., RE/Max Holdings, Inc., and Keller Williams Realty, Inc. alleging that these entities violated the Sherman Anti-trust action by requiring sellers to pay the real estate commissions of the Buyers realtor. I have provided a complete copy of the Complaint, for those interested enough to want to read it. Moehrl v National Assoc of Realtors Complaint 03062019
The allegations can be summed as as follows: The NAR, along with its member broker franchisors, use the rules of the Multi-listing services, to require sellers to pay the buyers realtor commissions and a seller has no alternative but to agree to do so, because there is no competing entity to the MLS. The suit goes on to state, that as a result of the seller paying these commissions, the buyers do not negotiate the with buyers realtors to obtain a better price for the services.
The suit goes on to argue that in Countries that require the buyers to pay their own realtor, that the overall commissions paid for real estate transactions are lower than they are in the United States, which the law suit alleges is a result of the sellers paying buyers commission. The argument is the sellers would pay a lower commission, if this rule requiring them to pay the buyers commission did not exist.
I decided to write this to provide my legal interpretation as well as my opinion as to this litigation.
My first thought was to review the legal argument that, if the MLS did not require the seller to pay the buyers broker’s commission, would the seller pay less. Assuming this rule did not exist, if I was an attorney asked to draft a contract on behalf of a buyer, where I was completing a section of the contract where costs were apportioned, I would put as a requirement of the offer, that the seller pay the buyers real estate commissions. Contractually this makes sense, the seller is getting the benefit of the services of the buyers realtor, being a buyer for the real estate for sale. The buyer really is not the one who is benefiting from the service financially. From a legalistic point of view, contractually this cost should and would be shifted to the seller as a result of the contract, if it did not already exist in the MLS, therefore the argument this litigation makes that this “rule” is what is causing the Seller to pay more, is factually not accurate.
The lawsuit argues that if it was not for the MLS rule, that sellers pay the buyers commissions, that the normal listing amount would be around 3%. I agree with that, and so would the buyers commission, and then it would contractually be shifted to the seller, requiring the seller to pay the same amount.
The Complaint argues that the commissions are lower in other countries as a result of the buyers paying their own commissions, however this argument fails to consider most of the countries that it list, if not all, have a value added tax that is part of real estate transactions. This is a tax that is paid to sell real estate, and in some countries it is actually paid by the realtors. This tax is in part why real estate commissions for the buyers realtor is paid by the Buyers.
The Complaint argues that the NAR, engaged in a conspiracy to be anti-competitive and require sellers to pay more for the services than they otherwise would be required. Generally when I think of a conspiracy, I think of the some of the great James Bond villains running a criminal empire, with a secret plan no one knows about.
The NAR and Real Estate Brokers have been transaction business openly and honestly in this manner. They explain to the sellers upfront, that they are going to be required to pay the commission of the buyers and if they do not, it will be harder to sell their homes. THIS IS NOT A CONSPIRACY! — What the lawsuit says is Sellers that participate in this system, are more likely to sell their property, than the ones who don’t… WHAT? you mean if the sellers offer the buyer a better deal, the buyer is more likely to buy the house? — HOW IS THIS AN ILLEGAL CONSPIRACY?
My legal analysis is this, the relationships that the sellers are complaining about it this were contractual, and therefore their damages need to be measured based on what would have happened if the “illegal” system did not exist. What would have happened is contractual cost shifting from the buyer to the seller, the same costs. As such sellers have not been damaged by this.
CLASS ACTION LAWSUITS SUCH AS THIS ARE ABOUT EARNING MONEY FOR THE LAWYERS THAT FILE THEM. It really is that simple. Almost none of the class actions ever filed are about changing the way things are done or about social injustice. This is not a social injustice it is a money grab. The Complaints are written to grab headlines, not to present legal arguments. The allegations are designed to make people think they were cheated. The news releases are done by the lawyers themselves!
This is not a way of creating better competition, or providing better service or making the system better for either buyers or sellers. Notice that the Defendants are not the buyers who allegedly did not pay enough in the transactions?
The NAR, and the large Brokers have insurance that will have to pay to defend this action, and most likely at some point have to pay to resolve this matter is some way. This case is not an indictment of the industry, it is an attempt to exploit the hard work done by realtors to line the pockets of class action attorneys. My hope would be the NAR, local realtors association and the entire real estate industry work together to grind this type of opportunistic money grabbers into the ground. The problem with that is it more expense than paying them off.
If you want an idea of the type of persons the typical class action attorney is, Think Michael Avenatti = Class action lawyer.