It appears to have become open season on buyer-broker commissions following the Burnett vs. NAR class action lawsuit in which the defendants were found to have conspired to inflate commissions in violation of federal law, with an award of $1.78 billion to the plaintiffs.
With another, larger lawsuit filed immediately after that trial, now two more have followed, with one in New York City and another in South Carolina.
On Nov. 8, Monty March, a New York City home seller, filed a class action lawsuit in the U.S. District Court in the Southern District of New York, with a jury trial demand, claiming that Real Estate Board of New York rules governing the multiple listing service (MLS) in Manhattan kept commissions high and violated state and federal antitrust laws.
Although the National Association of REALTORSⓡ (NAR) is not listed as a defendant, many real estate companies are, including Brown Harris Stevens, Christie’s International Real Estate, Coldwell Banker, Compass, Core Marketing Services, The Corcoran Group, Douglas Elliman, Elegran, Engel & Volkers, Fox Residential Group, Halstead Real Estate, Homesnap, Keller Williams NYC, Leslie J. Garfield & Co, Level Group, M.N.S. Real Estate, Modern Spaces, The Agency, The Modlin Group, Nest Seekers International, Oxford Property Group, R New York, RE/MAX, SERHANT., Sloane Square, and Sotheby’s International Realty Affiliates.
In the 105-page complaint, March alleges that REBNY’s Universal Co-Brokerage Agreement forced him to pay an inflated commission fee to the buyer’s broker.
Similar to what played out in Burnett vs. NAR, the new filing claims that “The inclusion of language concerning the commission to be paid by the Seller Broker to the Buyer Broker in the listing agreement, commonly known as the Buyers Broker Commission Rule, constitutes an antitrust violation under Section 1 of the Sherman Act and the Donnelly Act as there is no separate negotiation/competition concerning the commission paid to the Buyer Broker. The REBNY Listing Service’s commission rule fosters an environment in which brokers work co-operatively to split a total commission instead of open and separate negotiation. The anti-competitive nature of commission rule is clear when compared to other countries with competitive markets for residential real estate brokerage services.”
March’s lawsuit is seeking class action status, with the proposed class including Manhattan home sellers who worked with an agent from one of the defendants between Nov. 8, 2019, and the present.
On Nov. 6, Shauntell Burton filed a complaint against NAR and Keller Williams in U.S District Court in South Carolina’s Spartanburg division, alleging that the defendants are “conspiring to impose and enforce an anticompetitive restraint that requires home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount, in violation of federal antitrust law.
“The effect of these rules is not simply that the seller must pay the buyer broker’s compensation,” the complaint continues. “These rules effectively take the compensation structure out of the view of the buyers and sellers, masking who pays the buyer broker’s compensation.
“Indeed, a buyer broker may not even present an offer to a seller that is conditional on the seller reducing the buyer broker commission.”
Burton is also seeking class action status that would include homesellers across the state.
This is getting out of hand. The tradition of commissions being paid by a seller has stood the test of time for over the 40 years I’ve been in business and much longer. Allowing on a few disgruntled sellers to alter this tradition is ridiculous.
The impact on Veteran buyers and first time buyers will only create another hurdle to home purchasing. It will further force dual agency on transactions where the buyer goes around having a buyer’s agent represent them to balance out the transaction for FAIR representation…
The courts are being short sighted of the overall impact of their decision.
99% of all sellers are only concerned with the bottom line NET proceeds which has ALWAYS included the total commissions paid
Yes, it is attorneys in a frenzy making a quick buck. The scarier thing is what the jurors believe.
I totally agree with James Allen. This will force buyers to go to the listing agents and feel like they’re not getting represented properly. How does that protect the consumer??? It will just be one big mess and make it even more difficult for buyers to get into a home! How sad! The folks that started these lawsuits should be ashamed of themselves!!! Ridiculous!
I’m confused on how the two different lawsuits have the same basis for the lawsuits, buyers agent compensation, but they have a different result for sellers. There are a few from the sellers who state that paying buyers agent compensation decreased their net profit but there is a buyers lawsuit stating that sellers paying buyers agent compensation increased sales prices and netted the sellers a higher net profit. How both can exist?
Within 5 years there will be lawsuits from Buyers who feel they had no representation when buying and were coerced into a contract to buy a home where they were harmed.
The sharks ( attorney’s) and consumers have their hands out for pay days and this will be a vicious cycle for years.
Why do these lawsuitskeep comparing our structure to real estate in countries with universal Healthcare? In addition, sellers signed contracts blantantly explaining commission, and now they’re suing bc they didnt read what they signed?! Lastly, they aren’t paying the buyer’s agents commission, they pay a listing commission and the listing brokerage pays that and discloses it IN THE PAPERWORK THEY SIGNED AND NEGOTIATED. Of course juries are awarding in favor of the sellers, because they’re not understanding the law.
The sellers have always paid commission to the buyers agent and it has worked out fine for years. I don’t feel that is fair for the first time buyers to paid for the buyers agent. Most of them have only their down payment now they won’t be able to buy their home.
I don’t approve for the buyers agent to paid their agent.
This is long overdue in NY and The Hamptons where the holier than thou, self-righteous and entitled attitudes are omnipresent within the “majors”.
I totally agree with both previous comments. Commissions have always been negotiable. The people bringing these suits do not understand how this business works. Let’s find out what line of work they are in and sue for something so they can get a taste of what it will feel like to have your livelihood impacted by this nonsense.
The fact that it’s always been done does not mean that it’s always been right or clear to the consumer.
It appears there may be plenty more lawsuits from unrepresented or misrepresented buyers when they think the best way to get what they want is to go to the seller’s agent. If I were a buyer in these circumstances, I would have my lawyer present for negotiations and closings. This is likely to increase buying expenses in order to have appropriate and professional representation. I’ve been licensed since 1972. This is a travesty from which I will soon retire.
There is an example of how this can work. The online platform used to sell HUD Owned homes ask that the Buyer Agent submit on the offer submission form the amount of commission being requested. The maximum allowed is 3%. ( For this system – it is a published amount and I am not suggesting what, if any, other commissions have been offered or paid outside of this system) This allows the Seller ( HUD) to accept offers based on the net. The listing agent commission is defined in the listing agreement and remains constant no matter what the Buyer’s Agent receives. Buyer’s Agent have a valid and important role in the real estate transaction process. An educated Seller will understand how this could benefit them.
No one is forcing a seller to sign a listing agreement. Afterall, most sellers have interviewed with and have the option to talk to as many listing agents as they want creating competition that stands to prove the industry is not in violation of anti trust laws. Should we sue a fast food restaurant because they forced us to purchase their overpriced food? No, the consumer made a willing choice to purchase the food at the price stated.
James Allen has made a very strong argument to which I agree. All the jurors should have been mandated to take at least the pre licensing course to get an understand of the industry first, before being put in a position to rule on a subject to which they are oblivious.
I do not see how it will stand after the appeal process, because it is a contract. The aspect of conspiracy is a mystery to me as at the time of the listing agreement I have no Idea who the selling agent is going to be. So how can I be in a conspiracy? These decisions seem more emotional rather than legal. Its going to take a long time to settle and cost a lot of money and unnecessary disruption in the industry.