National Association of Realtors Sued Again

It doesn’t get any more serious than this – the federal government is alleging racketeering and conspiracy over the commissions charged by realtors. This is the third major lawsuit against the association in recent years.

The lawsuit is a Class Action lawsuit and it also names the largest residential brokerage firms as defendants. The four companies named are Berkshire Hathaway HomeServices of America, RE/Max Holdings, Keller Williams, and Realogy Holdings.

The standard Texas Real Estate Commission Residential Contract (Resale) does NOT disclose information about the real estate agents' fees or commissions.

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This is basically an antitrust lawsuit over commissions and the rules of the Multiple Listing Service. The plaintiffs’ goals are to infuse the industry with more competition and more transparency.┬áIt has long been alleged that real estate brokers are wildly overpaid and that their services are not reflective of the large commissions paid on residential home sales.

According to the Antitrust Division of the Department of Justice, which filed a lawsuit against the National Association of Realtors (NAR), there exists “anti-competitive rules, policies, and practices” within the association. The government’s lawsuit also proposes a settlement.

Currently the NAR has rules which allow real estate brokers to withhold information about fees and commissions from prospective home buyers. These rules also prevent this information from appearing on the NAR’s associated service, the Multiple Listing Service, which lists homes and other real estate for sale.

The lawsuit claims that if the information about fees and commissions were fully disclosed to potential home buyers that it would create more competition in the sales of residential real estate. Full disclosure would result in more choice for home buyers and better service from real estate brokers who are paid when a residential transaction is completed.

The NAR has filed a motion to dismiss the broker fee lawsuit but it was rejected by the court. The NAR has also updated its Code of Ethics to address hate speech.

The NAR has proposed a settlement that “fully resolves” the issues being litigated. The NAR has also disagreed with the characterization of the issues and has not admitted any wrongdoing. The court has yet to approve this settlement.

Critics of the NAR and real estate brokers have long disapproved of the structure and relationship of the NAR and realtors nationwide. They claim these parties impede competition with their cushy relationship and opaque disclosure of fee and commission information. They want all real estate broker fees to be disclosed to both the home buyer and the home seller.

Critics of NAR have also taken aim at newer internet oriented methods of buying and selling a home. They feel these companies should also be required to fully disclose all fees and commissions to both home buyers and home sellers.

A NAR representative stated that the NAR is “focused on supporting our members as they preserve, protect and advance the American dream of home ownership”.