Defendants fight to get homebuyer commission suits tossed

Defendants fight to get homebuyer commission suits tossed

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The National Association of Realtors, Keller Williams, Anywhere, RE/MAX, Compass, eXp and other defendants in two massive antitrust commission suits lodged by homebuyers fired off a slew of arguments Monday attempting to get the cases tossed.

The cases, known as Batton 1 and Batton 2, were filed by buyers alleging some National Association of Realtors rules have inflated agent commissions and resulted in higher home prices paid by the buyers in violation of state and federal antitrust laws.

Both suits seek class-action status and, like more ubiquitous suits filed by homesellers nationwide, target NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated multiple listing service.

While NAR and some real estate franchisors have reached proposed settlements in the homeseller suits, those deals would not cover the suits filed by homebuyers. Therefore, both Batton suits are proceeding. Batton 1 was originally filed by New Jersey homebuyer Judah Leeder in January 2021, but homebuyer Mya Batton later replaced Leeder as lead plaintiff.

In November 2023, right after homesellers won a nearly $2 billion verdict in a bombshell antitrust commission case known as Sitzer | Burnett, Batton, along with other homebuyer plaintiffs, filed a second suit with similar allegations to Batton 1 but against different defendants.

Both suits were filed in the U.S. District Court for the Northern District of Illinois Eastern Division in Chicago. In January, Judge Andrea R. Wood, who was already overseeing Batton 1 and another bombshell homeseller commission case known as Moehrl, also took on Batton 2, which had previously been assigned to a different judge in the same court. Contrary to some media reports, Batton 2 was reassigned to Wood, but the suits were not consolidated.

The defendants in Batton 1 were originally NAR, Anywhere (formerly, Realogy), Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries: BHH Affiliates, HSF Affiliates and The Long & Foster Companies.

The defendants in Batton 2 are Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate and Douglas Elliman. Howard Hanna Real Estate was dismissed as a defendant in March.

In February, the court released the HomeServices defendants from Batton 1 after dismissing the case’s claim under federal antitrust law but allowing most of the state law claims to survive. Wood dismissed the HomeServices defendants on the grounds that, without a federal claim under which the court can assert nationwide authority, the court has no personal jurisdiction over the HomeServices defendants because none of them are based in Illinois and the complaint does not include allegations connecting them to Illinois. Because the dismissal was made “without prejudice,” meaning the plaintiffs can re-file their claims, that ruling may ultimately not stand.

Still, that did not stop other defendants from asserting the same arguments that won HomeServices its dismissal. Anywhere, Keller Williams, RE/MAX, Weichert, eXp, United Real Estate and Douglas Elliman all filed motions to dismiss, alleging lack of personal jurisdiction.

“Because the jurisdictional facts pled as to the HomeServices Defendants are the same as those pled as to Defendant Anywhere, the remaining claims against Anywhere in the Amended Complaint must now also be dismissed,” attorneys for Anywhere wrote in their filing.

“Defendant Anywhere Real Estate Inc. is not subject to the Court’s jurisdiction for Plaintiffs’ surviving state law claims,” they added.

Similarly, attorneys for Keller Williams argued lack of personal jurisdiction on the grounds that KW is incorporated in Texas, based in Austin, the plaintiffs “did not purchase homes or suffer alleged injuries in Illinois,” and even if they had, “those alleged injuries were not caused by any activities in which Keller Williams engaged in Illinois.”

Attorneys for Weichert made their case on the same basis, noting that the same facts that apply to HomeServices apply to Weichert.

“WREA is not incorporated in Illinois, does not maintain its principal place of business there, has no offices, property, employees, or business operations in the State, is not a member of NAR, and played absolutely no role in enacting, enforcing, or implementing any NAR rule,” they wrote.

“Indeed, WREA’s only conceivable ‘contact’ to this forum is that it is the franchisor of certain independently owned and operated franchises in Illinois. Courts have consistently held that a franchisor relationship is insufficient to confer personal jurisdiction unless the franchisor exerts a high degree of control over the daily activities of the in-state franchises. [I]it is beyond dispute that WREA exerts no such control.”

NAR, which is based in Chicago, did not attempt to get the suit thrown out on the same jurisdictional premise. Instead, in an answer to the complaint, the 1.5-million-member trade group denied the allegations against it and requested the court dismiss the case, asserting 32 defenses.

One of these defenses reads: “Plaintiffs’ claims and the claims of any putative class members are barred, in whole or in part, because any injury to plaintiffs was caused by their own conduct, representations, failure to protect their interests, or the conduct of third persons, and not by the actions of NAR.”

The defendants in Batton 2 also submitted a joint motion to dismiss, putting forth four arguments:

  • the plaintiffs lack standing to sue the defendants under the federal antitrust laws because they are buyers rather than sellers
  • the complaint “fails to allege facts to plausibly suggest that the Defendants entered into any agreement” with NAR or among the defendants, which is the basis of an antitrust conspiracy
  • the plaintiffs’ claims are “untimely,” given that they challenge a rule that has been in place since 1996
  • the plaintiffs’ “fail to plead sufficient facts in support of certain state law claims” against the defendants

“Plaintiffs’ federal and state antitrust claims are based on allegations about Defendants’ unilateral conduct, not what they agreed to do,” attorneys for the defendants wrote.

“Plaintiffs do not plausibly allege that Defendants’ conduct is the product of any agreement between the Defendants and NAR as opposed to Defendants’ independent business decisions to participate in trade associations and local MLSs, and do not plausibly allege that any such agreement was anticompetitive.”

“Plaintiffs must allege a meeting of the minds to plead an antitrust agreement,” they added.

“The Complaint, however, does not allege that Defendants or their franchisees ever communicated or agreed with each other about the challenged NAR guidelines, let alone their potential impact on commission rates, or any private information about the market.”

The defendants’ lawyers also pointed out that the complaint does not allege that any of the named executives in the defendant companies “actually participated in drafting, developing, or promulgating any guidelines, let alone that they agreed with each other to draft, develop, or promulgate the Buyer Agent Commission Rule or other challenged NAR rules.”

The defendants also submitted a joint motion to strike the case’s class allegations, noting that the plaintiffs’ state claims encompass 25 “materially different” state antitrust statutes and 18 “materially different” state consumer protection statutes.

“Courts in this District and elsewhere have repeatedly held that a nationwide class cannot be certified in cases where claims would be governed by the varying laws of the jurisdictions in which consumers made their purchases, and many courts have made that determination in connection with a motion to strike class allegations where the failure is apparent on the face of the complaint, as it is here,” the motion reads.

Inman has reached out to an attorney for the plaintiffs, Carol Lee O’Keefe of Korein Tillery, and will update this story if and when a response is received.

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Pulte objects to Sitzer | Burnett settlements: What’s in it for me?

Pulte objects to Sitzer | Burnett settlements: What’s in it for me?

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U.S. homebuilder PulteGroup has filed an objection to proposed settlements in the bombshell Sitzer | Burnett antitrust commission case, arguing that it had not been provided enough information to know what every eligible homeseller will likely be asking: What’s in it for me?

Pulte operates in 25 states and sold 28,603 homes in 2023 alone, according to its April 12 filing. The homebuilder says it paid buyer broker commissions and sold thousands of homes during the time frame covered by the Anywhere, RE/MAX and Keller Williams settlements and is therefore a member of the homeseller class.

A final fairness hearing for the proposed deals is set for May 9 in the U.S. District Court for the Western District of Missouri in Kansas City. In its filing, Pulte told the court its attorneys intend to appear at that hearing.

The homebuilder said it lacks the information necessary to even estimate the amount it would recover under the deals and therefore isn’t able to evaluate whether it wants to remain a member of the homeseller class or opt-out to retain the ability to pursue its own legal claims.

“[T]here is nowhere for class members to learn how those funds will be divided up, and what a ‘potential individual award’ will look like,” the filing says.

“Pulte has not seen any information about class size, expected claim rate, or the claim administrator’s evaluations in dividing up settlement funds.”

The company said most of those details would typically be provided in a plan of allocation, which is “routinely” provided before a proposed settlement’s opt-out deadline.

“Yet Pulte sought this information on the website, through the ‘dedicated toll-free telephone number,’ and by contacting class counsel,” the filing says. “The information was not provided and Pulte understands it does not yet exist.”

“[W]ithout a Plan of Allocation, Pulte cannot be sure that, as a large-scale homebuilder, it will not be disadvantaged in some way in the Plan of Allocation,” the filing adds.

If a homeseller chooses to opt-out of the class, the deadline to do so was April 13. The deadline to object to the proposed real estate franchisor settlements was also April 13, but only those who have not opted out of the class may object.

In its filing, Pulte requests that the court defer the opt-out date until “after 30 days after” the class receives notice of a plan of allocation.

The homebuilder also objected to the deals on the grounds that they require claims to be made through a form that must be manually filled out with the address of the home sale, date, listing brokerage, total commission paid and commission paid to buyer’s broker.

Such a requirement, for companies with thousands of sales on their books, is “a needless and time-consuming complication for a homebuilder that will be downloading this information from computer databases.”

Moreover, this process is likely to be more costly for claims administrators and therefore reduce the amount of money available to pay out class members, according to the filing.

“Requiring a manual claims submission process for all sellers, regardless of how that information normally is kept, will create an additional burden on the claims administrator to review thousands of claim forms instead of a single filing by a single claimant,” the filing says.

“This will inevitably increase administrative costs, which will lessen the recovery of the class members under the settlement agreements. And unjustifiably high administrative costs may make a settlement unfair.”

Pulte asked the court to require the settlement parties to provide an efficient way for claimants to submit bulk claims through an electronic spreadsheet.

Lastly, Pulte pointed out it had not received direct notice of the settlements nor heard about them from other approved methods such as magazine publications or digital advertising on social media.

“Rather, Pulte’s representatives independently learned of the settlement, well after the fact, from review of legal news,” the filing says.

“While Pulte’s independent knowledge of settlement may render its notice issues moot … that is not true classwide.”

The homebuilder stressed that many class members are individual homesellers and if Pulte didn’t receive direct notice, they likely didn’t either.

“Those individual home sellers may also lack legal counsel and would be less likely to learn about their class membership through the news,” the filing says. “The notice campaign, while perhaps sufficient in the abstract, did not alert class members of settlement in practice.”

That lack of notice “raise[s] concerns that this settlement will not survive due process scrutiny,” the filing adds.

Pulte therefore asked the court to monitor notices in the future “to ensure class members receive actual notice.”

Keller Williams and RE/MAX declined to comment for this story. Inman reached out to Anywhere and plaintiffs’ lead counsel Michael Ketchmark for comment and will update this story if and when responses are received.

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Opendoor will refund homesellers $62M under FTC settlement

Opendoor will refund homesellers $62M under FTC settlement

The federal agency will send checks to 54,689 consumers it says were deceived by advertising and marketing claims made by the iBuyer.

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Opendoor will pay nearly $62 million in refunds to tens of thousands of homesellers and end its allegedly deceptive advertising under a settlement with the Federal Trade Commission, according to an FTC announcement Wednesday.

The federal agency will send checks to 54,689 consumers it says were deceived by advertising and marketing claims made by the iBuyer.

“According to the FTC’s August 2022 complaint, Opendoor cheated home sellers by tricking them into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process while saving them money on costs,” the FTC said.

“In reality, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process and many paid more in costs than what sellers typically pay. Under a final administrative order, Opendoor agreed to pay monetary relief and stop its deceptive tactics.”

Inman has reached out to Opendoor for comment and will update this story if and when a response is received.


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New commission lawsuit in New York may draw FTC attention

New commission lawsuit in New York may draw FTC attention

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A New York homebuyer and homeseller has filed an antitrust lawsuit attacking an alleged tying arrangement between multiple listing services and brokerage services.

On Friday, March 29, Hao Zhe Wang, acting as his own attorney, lodged the complaint in the U.S. District Court for the Southern District of New York against the National Association of Realtors (NAR), the Real Estate Board of New York (REBNY), HomeServices of America, Compass, eXp World Holdings, Douglas Elliman, Halstead Real Estate, Brown Harris Stevens Residential Sales, and Realty One Group.

Halstead and Brown Harris Stevens merged in 2020 under the BHS banner.

The suit alleges the defendants conspired “to impose, implement and enforce anticompetitive restraints that cause Plaintiff to pay inflated commissions on the purchase and sale of his homes, in violation of federal and state statutes in Massachusetts, New York, District of Columbia and New Jersey.”

Unlike other commission suits filed in the wake of a landmark multibillion-dollar verdict in a case known as Sitzer | Burnett in October, this suit is not seeking class-action status, which means Wang filed the suit on his own behalf only. While NAR and Compass reached proposed settlements last month in class-action commission lawsuits nationwide, any seller can choose to opt out of those deals and pursue their own claims as Wang is doing.

Wang’s suit is also unique in that it heavily emphasizes what Wang calls a “tying” of MLSs as a product to a different product, brokerage services. (A tying arrangement is an agreement in which the seller conditions the sale of one product on the buyer’s agreement to purchase a separate product from the seller, according to Cornell’s Legal Information Institute.)

This is notable because early in President Joe Biden’s tenure, he encouraged the Federal Trade Commission (FTC), which shares responsibility over antitrust with the U.S. Department of Justice (DOJ), to exercise its rule-making authority “in areas such as … unfair occupational licensing restrictions; unfair tying practices or exclusionary practices in the brokerage or listing of real estate; and any other unfair industry-specific practices that substantially inhibit competition.”

Wang doesn’t mince words in his complaint, asserting that the defendants used access to MLSs and to REBNY’s listing service, RLS, “to pressure sellers to set an inflated buyer broker commission rate in their listings and conscribe the sellers into the role of a patsy in the defendants’ elaborate ruse to cheat and deceive the buyers, and sellers would have no choice but to include the buyer broker compensation in the listing (given the prospect of being denied access to MLSs if they refused) and to set the rate at the high level of 2.5% – 3% (given the prospect of being blacklisted by buyer brokers who would steer their clients to other houses on the market).

“But once the sellers played their part in the defendants’ ruse to cheat the buyers, it became the sellers’ turn to play suckers, for [an] artificially inflated commission rate for buyer brokers also created enormous pressure for homesellers to pay a similarly inflated rate to listing brokers.”

The complaint alleges Wang overpaid listing brokers’ fees by tens of thousands of dollars due to the defendants’ conspiracy.

“Without the MLS rule mandating [a] universal, unilateral blanket offer to buyer brokers, Plaintiff would have had no reason to stipulate a rate in his listing agreements with his listing broker; if the buyer brokers were all getting paid rates by their own clients and paid at, say, a rate of 1% or a flat rate of $3000, Plaintiff would have had no reason to pay his own listing broker 3%; if his listing broker was getting paid 1% or flat rate of $3000 in working as buyer broker for her other clients, Plaintiff would have had no reason to pay her 3% either.”

In a statement, eXp spokesperson Jennifer Zimmerman told Inman, “We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions. Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”

HomeServices of America, Realty One Group, Douglas Elliman, and Brown Harris Stevens declined to comment. REBNY and Compass did not respond to requests for comment.

“The National Association of Realtors will respond to this complaint in court,” NAR spokesperson Mantill Williams told Inman in a statement.

In the complaint, Wang details his experience buying seven homes and selling three homes starting in 2014. As Wang tells it, time and again when he wanted to purchase a home as an unrepresented buyer, the listing broker for the home told him he had to hire the listing broker as a dual agent or hire a colleague of the listing broker as his agent in order to make an offer on the home.

“Plaintiff often identified dozens of properties of interest before each purchase and sometimes had to bid for multiple properties before winning one,” the complaint says.

“Plaintiff has thus contacted hundreds of listing brokers, and the conversations they had with him always turned into their professional ‘ethics’ of not taking offers from unrepresented buyers and about Plaintiff’s need to use the listing broker as a dual agent or a colleague or employee of the broker as his buyer agent.

“In shopping for the New York home in 2018, for example, he also viewed properties listed by Compass, BHS, and Halstead Real Estate brokers, all of whom told him he needed to retain the listing brokers themselves as buyer brokers before he could bid on their listings. In buying the New Jersey property in 2023, he also viewed properties listed by Realty One brokers who told him he must retain them as buyer brokers before he could bid on their listings.”

According to Wang, he is an experienced buyer who did not need, want or trust the agents whom he was allegedly compelled to hire and pay for.

“In buying the properties, Plaintiff had his own attorneys, home inspectors, land surveyor, lead paint inspector, and mortgage broker at the ready and did not solicit or receive advice from the buyer brokers,” the complaint says.

“In purchasing properties, Plaintiff usually did his own research before approaching each listing broker. During subsequent price negotiations with sellers Plaintiff rarely solicited advice from the buyer brokers, nor did he trust unsolicited advice that he received from them, because the brokers were either the listing brokers themselves or their employees whose loyalty may be divided.”

“Even in selling his properties Plaintiff relied on his own research in setting the listing price and on his own instinct and experience in negotiating with prospective buyers.”

Like other commission suits, Wang’s complaint challenges an NAR rule and others like it that require listing brokers to offer compensation to buyer brokers in order to submit a listing to a multiple listing service. NAR’s rule is known as the Participation Rule or the cooperative compensation rule.

But Wang reserves much of the complaint to what he calls the “tying” of the MLS to brokerage services. According to the complaint, before 1987, NAR’s Code of Ethics required listing brokers to accept and transmit offers made by unrepresented buyers as well as offers made through buyer brokers.

“But this language was dropped from 1987 onwards: instead, the universal refrain among listing brokers has been that their professional ethics now forbids them from taking offers from an unrepresented buyer until he retains representation, a line that hundreds of listing brokers, including both NAR and REBNY members, uniformly repeated to Plaintiff in slight variations,” the complaint says.

According to the complaint, NAR links the two products — MLSs and brokerage services — on a “propaganda” website created in the wake of the commission lawsuits, Real Estate Compensation Facts, which notes that MLS data is provided to listing sites such as Zillow and made available to the public “for free.”

“It is this ‘free’ product that NAR- and REBNY-aligned brokers and the brokerage defendants relied upon to coerce the general home-selling and home-buying public to pay them a cut of 5-6% in every real estate transaction,” the complaint says.

“For homebuyers, for example, the ‘free’ MLS feeds, widely spread by Zillow, StreetEasy or Google, are indeed useful information. But the ‘ethical’ rules barring the submission of an offer by an unrepresented buyer and transmission of such an offer means the information is useless to buyers unless they also agree to pay 2.5-3% for buyer’s representation that they may or may not want — and they do not get to negotiate the percentage.

“By the same token, homesellers are hardly ever permitted to pay for a stand-alone ‘listing’ service that just consists of the listing part. Rather, the ‘listing’ service would come with a bundle of distinct ‘brokering’ services: staging, photography, showings, price negotiation, help with closings, etc.”

Therefore, NAR and REBNY have allegedly created “an illegal and anticompetitive bundling of the MLS/RLS product and their members’ offline buyer brokerage service” that has been implemented and enforced by the franchisor and broker defendants, according to the complaint.

“In essence, the MLSs are a tying good, and the brokerage services are a different, tied good that may seem an overpriced and not always desirable product to the home-buying and home-selling public,” the complaint says.

“NAR conceded as much on its shiny new propaganda website: most of the information on MLS is available to the public for free, NAR says, but imagine what would happen if the buyer brokers stop getting paid? The doomsday scenario would result in the disappearance of MLSs and all the ‘free’ information and Zillow feeds, NAR admonishes the American public.”

“NAR’s shrill propaganda at once reveals the defendants’ darkest secret: the MLSs are not a free product, and NAR always needed the home-buying and home-selling public to purchase a second, distinct but adjacent product from them — the offline service that involves interacting with buyers and sellers on a human level, the showings, the price negotiations, and the closings — before they were willing to let the buyers and sellers use [the] first product,” the complaint adds.

“To the extent that virtually all sellers and buyers needed the first product but not all of them found the second product useful, the defendants desperately wanted to tie the less desirable product to the first product.”

The complaint contends that the NAR advises MLSs to have third-party websites that receive their data sign non-compete agreements that prevent them from becoming rivals to brokerages and MLSs.

“If the defendants wanted the public to believe that their affiliated brokers and agents deserve to be compensated for their legwork and real estate expertise, they also showed little effort to compete in this market by offering price cuts or superior service,” the complaint says.

“Rather, it was the monopoly of the MLSs that they guarded most jealously and ruthlessly.”

According to Wang, the idea that the NAR’s rules might have been created in order to level the playing field so that represented sellers would not be able to take advantage of unrepresented buyers “is easily debunked by the fact that an unrepresented buyer who showed up at an open house and wanted to make an offer almost always ended up with the listing broker as the dual agent whose primary fealty remained with the seller.

“In other words, in hiring the listing broker as the buyer broker and anointing her as the dual agent, the unrepresented buyer did not buy her loyal service, only the privilege to be able to bid on the home for sale that the listing broker represented.”

The complaint also faults the longstanding practice of buyer agents advertising their services as “free” — a practice that NAR rules allowed until 2022.

“To further mask and conceal their conspiracy to maintain [inflated] prices, the defendants trained and directed their licensees and franchisees and affiliates to falsely advertise their services for buyers as free,” the complaint says.

“From 2014 on, buyer agents or listing brokers who asked to be dual agents when Plaintiff wanted to submit bids for their listings as unrepresented buyers all toed defendants’ lines and repeatedly represented to Plaintiff that their service was free to him.”

“The reality is, of course, that buyer brokers, just like the mortgage brokers, lawyers, home inspectors, were all paid by Plaintiff on the day of closing,” the complaint adds. “Yet, because of the elaborate lie and ruse, Plaintiff, like most other homebuyers, were given to believe that he was not paying for anything.”

The complaint alleges violation of the federal Sherman Antitrust Act as well as state laws barring unfair and deceptive business practices in Massachusetts, New York, New Jersey and Washington, D.C. Wang demands a jury trial and is asking for damages with interest, costs of the suit, and “such other relief as the Court may deem just and proper.”

Read the complaint:

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Association of more than 200 MLSs blasts DOJ ‘flaws’ in Nosalek case

Association of more than 200 MLSs blasts DOJ ‘flaws’ in Nosalek case

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More than five years after the filing of the first bombshell commission case, the Council of Multiple Listing Services has weighed in, coming out swinging against the U.S. Department of Justice’s proposal to decouple commissions.

On Wednesday, March 27, CMLS, a trade association made up of more than 225 MLSs in North America, asked the U.S. District Court for the District of Massachusetts to accept an amicus brief telling the court to disregard a statement of interest the DOJ filed on Feb. 15 in a major antitrust commission case known as Nosalek.

On the same day, attorneys for CMLS member Northwest MLS (MLS) similarly asked the court to accept their own separate amicus brief detailing alleged flaws in the DOJ’s filing. NWMLS’s new president and CEO Justin Haag, formerly the MLS’s general counsel, began serving on the CMLS board of directors in January. CMLS’s MLS members have more than 1.7 million agent, broker and appraiser subscribers combined. NWMLS, which is broker-owned and not Realtor-affiliated, has more than 33,000 subscribers.

“The Council of Multiple Listing Services (CMLS) takes the extraordinary step of filing an amicus curiae brief before this Court to oppose this effort of the Antitrust Division (DOJ) to impose a policy preference on the U.S. residential real estate market that lacks empirical support, conflicts with principles of the Sherman Act, and has negative practical implications for consumers which DOJ has not taken into account,” CMLS’s amicus brief reads.

In its statement of interest, the DOJ rejected rule changes in a proposed settlement between homeseller plaintiffs and defendant MLS PIN (a CMLS member) and instead called for “an injunction that would prohibit sellers from making commission offers to buyer brokers at all,” which the agency said would promote competition and innovation between buyer-brokers because buyers would be empowered to negotiate directly with their own brokers.

In the filing, the antitrust enforcer pointed to rule changes Northwest MLS made in October 2019 (making the offering of buyer broker commissions optional) and October 2022 (specifying that buyer broker commissions, when offered, will come from sellers rather than listing brokers and further laying out sellers’ options regarding compensation) that are similar to those in the proposed Nosalek settlement, but that the DOJ said appear to not have had a meaningful effect.

The agency said the changes didn’t lead to a decrease in buyer broker commissions, “had no apparent effect on either the portion of listings for which a buyer-broker commission offer was made or in the number of offers with zero compensation,” and did not lead to a decline in buyer broker commissions in large metro areas in NWMLS’s region relative to such commissions in other large metro areas where there were no similar changes to MLS rules.

At NWMLS, between October 2019 and March 2022, 99.2 percent of NWMLS listings continued to offer a buyer broker commission (flat from 99.3 percent before the rule was eliminated). Virtually all, 94.5 percent, offered a cooperative commission above 2 percent.

According to CMLS, the court shouldn’t consider the DOJ’s arguments because of “critical flaws.” The trade group’s filing contends that “the internal DOJ study [of the NWMLS changes] suffers from conceptual and methodological problems and does not provide sufficient information for the Court to evaluate its claims,” including only using transaction data from only one brokerage in NWMLS’s footprint for its analysis.

“It is missing, for example, any data about average prices or commissions; who the single real estate broker was that it used for analysis; how representative that broker’s experiences are of brokerage firms generally; which thirty-one other markets DOJ analyzed; or how many transactions were analyzed in any market at any time,” CMLS’s amicus brief states.

The trade group also faulted the DOJ’s comparison of NWMLS to other markets without controlling for differences in those markets, which CMLS said meant the DOJ’s analysis couldn’t actually determine the effect of any NWMLS rule changes.

“In short, the SOI purports to provide empirical evidence to support its claims, but the Court should credit none of it; all of it is either not empirical evidence at all, chronologically or geographically inapposite, or methodologically flawed,” the CMLS filing says.

Moreover, CMLS said its own data analysis by economists John H. Johnson IV and Michael Kheyfets showed “probable positive effects of the rule changes” in the proposed Nosalek settlement, including lower commissions. The analysis looked at all 1.8 million listings from NWMLS in Washington and Oregon sold since 2000, according to the filing.

“[The analysis] demonstrates that cooperative compensation offers have been declining in NWMLS since 2000, but they have declined markedly faster since the NWMLS 2019 Rule Change,” the filing said.

“‘Buyer-broker compensation rates through NWMLS were declining at an average of 0.4% per year from 2000 to 2019. After the 2019 rule change, the decline increased to an average of 1.5% per year.’”

Screenshot from CMLS amicus brief in Nosalek

Put another way, the NWMLS 2019 rule change led to a decline in commission offers of 0.118%, so buyer brokers were offered 2.382% instead of 2.500%, and the NWMLS 2022 rule change led to a further decline of 0.021%, according to the filing.

“These declines are on top of the declines in rates that were already in progress,” the filing says. “The data thus support a reasonable estimate that the buyer’s broker received an average reduction in commission on the sale of a $750,000 home (the average sale price in NWMLS) of more than $1,000 (e.g., $17,708 instead of $18,750) as a result of the NWMLS rule changes.”

“Given the average home price in MLS PIN today is in the same range as those in NWMLS, consumers buying through MLS PIN under the Proposed Settlement Policies are likely to experience similar savings,” the filing adds.

CMLS also maintained that the DOJ’s suggested ban on sellers offering compensation to buyer brokers at all would itself violate antitrust laws.

“Such a rule, if an MLS adopted it, would violate the competition-enhancing principles of the Sherman Act, because it would mean that competitors—brokers who participate and operate the MLS—would be agreeing to dictate that competing seller brokers cannot engage in lawful marketing of property,” the filing says.

In addition, CMLS criticizes the DOJ’s assumption that the transition to its suggested policy change would be smooth.

“[The SOI offers no evidence that DOJ has sought input from third-party industry participants, including mortgage banker associations; appraiser associations; the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which purchase pools of conforming mortgages from lenders; the Federal Housing Administration (FHA); and the Department of Veterans Affairs (VA),” CMLS’s filing says.

“Meanwhile, the Proposed Settlement Policies mirror provisions in effect in Washington state for nearly five years without reports of negative consequences. This Court should prefer the proven track record of the Proposed Settlement Policies to the
optimistic imaginaries of DOJ’s policy preference.”

CMLS stresses that the DOJ doesn’t appear to have considered the effect of its policy preference on first-time homebuyers, low-income buyers, and minorities.

“Importantly, DOJ assumes that the seller will pay the buyer’s broker as part of the negotiated deal,” CMLS’s filing says.

“DOJ offers no evidence for why that will be the case, and other scenarios are possible, and perhaps likely. For example, if a seller receives two offers that are equally financially satisfactory, one where the seller must pay the buyer’s broker and one where the seller need not, a seller might choose to go with the ‘cleaner’ or ‘simpler’ offer, just as sellers today may prefer a cash offer to one that is contingent on financing.”

The CMLS filing concludes by indicating that the DOJ had overstepped its bounds.

“DOJ seeks to secure a major change in U.S. residential housing policy by commenting on a proposed antitrust settlement among private parties, instead of by an enforcement action of its own or by encouraging rulemaking by a federal agency empowered by statute to do so,” the filing says.

“The Court should decline to credit the SOI’s arguments, given that DOJ lacks robust empirical evidence to support its policy preference, overlooks the anticompetitive nature of its policy preference, and does not have the institutional expertise to assess the effects of its policy preference on the real estate market.”

NWMLS’s amicus brief also slams the DOJ’s filing, calling it “ill-informed,” “ill-supported” and “based on a highly flawed analysis of woefully incomplete data” from a single brokerage “over too short a period of time.” The filing contends the DOJ had plenty of NWMLS data at its fingertips that it had demanded from NWMLS that it could have used for its analysis but chose not to.

“Unfortunately, DOJ demands immediate impact from NWMLS’ changes, and then using limited data from a single brokerage firm in a very short time period, DOJ declares NWMLS’s changes to be ineffective. Evolution takes time,” the filing says, pointing to recent, similar commentary from the Consumer Federation of America regarding changes in the proposed National Association of Realtors commission settlement and from a plaintiffs’ attorney in the bombshell Moehrl commission suit..

The filing also criticizes the DOJ’s “myopia” in only allegedly only considering “decreased buyer broker commissions” the barometer for competition.

“Transparency and the expansion of informed consumer choice are the guiding principles of NWMLS’s revised rules,” NWMLS’s filing says.

“Providing consumers with more information in turn promotes competition and lowers prices. In revising the rules, NWMLS created a more open and free market for consumers of brokerage services.”

NWMLS suggests the DOJ’s proposal will lead to “secret” deals between brokers.

“DOJ’s preferred system, in which there is literally no opportunity for compensation transparency in the MLS, invites brokers to make deals in secret, creating opportunities for deceptive practices, discrimination, and unfair housing,” the filing says.

However, while NWMLS attempts to poke sundry holes in the DOJ’s analysis, unlike CMLS’s filing, NWMLS’s amicus brief contains no data or data analysis to counter the DOJ’s arguments regarding the rule changes’ effects on commissions.

The filing seems to eschew even attempting that sort of inquiry, noting, “NWMLS does not analyze levels of compensation offered by its members, much less the amounts of compensation actually received by buyers’ brokers after negotiations between parties.”

Inman has reached out to NWMLS, CMLS, and the DOJ for comment and will update this story if and when responses are received.

Email Andrea V. Brambila.

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