Is The 6% Fee For Selling A House About To Get Trashed?

Authored by Mike Shedlock via MishTalk.com,

An antitrust lawsuit against the National Association of Realtors (NAR) is underway. I expect the NAR to lose.

Antitrust Lawsuit Against the NAR

The case, filed in Missouri is Burnett et al v. National Association of Realtors et al

This class action involves allegations that Defendant National Association of Realtors have anticompetitive rules that require home sellers to pay commission to the home buyer’s broker.  Plaintiffs also allege that Defendants Home Services of America, Inc.; BHH Affiliates, LLC; HSF Affiliates, LLC; Keller Williams Realty, Inc.; Realogy Holdings Corp.; and RE/MAX, LLC enforce those rules through anticompetitive practices.

Plaintiffs challenge rules in both the National Association of Realtors Handbook and Code of Ethics that allegedly require home sellers to make a blanket offer of compensation to any potential buyer’s broker as a condition of listing their home on the following multiple listing services: Heartland Multiple Listing Service, Columbia Board of Realtors, Mid America Regional Information System, and Southern Missouri Regional Multiple Listing Service.  

Expect a Decision by November 10

On October 11, Realtor Magazine reported Burnett Trial Opening Arguments Start Tuesday

The trial is expected to go three weeks with a verdict expected by Nov. 10. Plaintiffs in the case allege commission rates are too high, buyer brokers are being paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to set pricing. The case covers the Kansas City, Mo.; St. Louis; Springfield, Mo.; and Columbia, Mo., markets.

“NAR fundamentally disagrees with how class action attorneys are characterizing our rules,” says Katie Johnson, the association’s chief legal officer and chief member experience officer. “NAR’s rules and local MLS broker marketplaces very much benefit consumers and allow business competition to thrive.”

Realtors Face an Antitrust Reckoning

The Wal Street Journal comments Realtors Face an Antitrust Reckoning

The National Association of Realtors requires its 1.5 million or so members to comply with numerous rules that inflate their pay. Missouri home sellers are arguing in the lawsuit that a rule requiring them to make a blanket offer of compensation to any potential buyer’s broker violates the Sherman Antitrust Act.

While innovation and competition have slashed stockbroker commissions, the commission on home sales has stayed basically flat for decades at 6%, split evenly between the buyer and seller agents.

In other developed countries, buyer brokers are far less common and get paid by their clients, on average about 1.5%. This makes sense since the buyer broker is supposed to negotiate for his client against the seller. Having the seller pay the buyer broker creates a conflict of interest. It also prevents a buyer from paying his broker based on performance.

That means there’s little incentive for buyer brokers to negotiate better deals for clients, especially since they earn bigger commissions on higher-priced homes.

It’s clear from the evidence presented by the plaintiffs that the Realtors’ primary interest is ensuring buyer brokers make a 3% commission no matter what. Brokerage firms train agents to set overall commission rates at 6%, split evenly between the buyer and seller agents. “Once you start cutting commissions, you can never stop,” one firm’s training document said. “Charge everyone the same and let them know it.” Ninety percent of transactions offer buyer agent commissions of exactly 3%.

A Ninth Circuit Court of Appeals panel last year overruled a lower court’s dismissal of PLS.com’s lawsuit against the Realtors. Its policy “shares all the hallmarks of a group boycott” and impaired PLS.com’s ability to compete “on almost any dimension” by requiring seller brokers to supply MLSs “even if PLS’s product is better on the merits,” wrote Judge Milan Smith.

We’re no fans of most antitrust suits, but the evidence is strong that Realtors’ practices are classic antitrust violations that harm consumers. The Realtors may own the U.S. Congress, but perhaps independent courts won’t be so intimidated.

No NAR Competition, None

If ever there was a need to invoke the Sherman Antitrust Act, this is the one.

Home prices have skyrocketed but commissions remain a forced 6 percent.

Q: Are Realtors providing any more service for the money they get?
A: Of course not.

Q: Is the NAR an artificial monopoly?
A: Obviously

The NAR is about to get its ass kicked and it’s long overdue.

Technology Competition is Alive!

There is no competition to the NAR. If the Biden administration wanted to strike at monopolies this would be a clear case.

Instead, Biden, Warren, AOC etc. are after the usual boogeymen like Amazon, Google, Facebook, Apple, and Microsoft who are all in competition with each other in various ways.

For discussion, please see Competition is Alive, Microsoft and Google Wage a Search Engine Battle Over AI

Extreme Absurdity from Team Biden

The most ridiculous act yet, the National Labor Relations Board, NRLB, sues X (Twitter) for firing an employee who refused to come to work.

There is now a new mandate from the Biden Administration: The Right to Work From Home.

For discussion, please see New Corporate Ultimatum: Come to the Office in 3 Days, Quit, or Be Fired

There is no end to the insanity from this administration. Unfortunately, there is nothing the administrations has done right.