Metro home sellers sue realty companies, say commission fees making home prices ‘illegally warped’

Four Georgia plaintiffs, most of whom are from the Atlanta metro area, are suing more than two dozen real estate companies over what they say is a conspiracy to increase compensation for brokers at the expense of Georgians selling homes.

Among the many companies listed as defendants in the recently filed class-action lawsuit are the National Association of Realtors, Keller Williams, Re/Max, Ansley Atlanta Real Estate, Sotheby’s International Realty, Coldwell Banker Real Estate and Atlanta Fine Homes, among over a dozen others.

The plaintiffs who filed the legal action are residents of Brookhaven and Atlanta, an Atlanta real estate company, and a Savannah resident.

According to court documents, the plaintiffs in the case are suing due to buyer-broker commission fees connected to sales starting in November 2019 to the present.

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The case “involves a nationwide conspiracy by and between the National Association of Realtors (“NAR”) and residential real estate brokerages orchestrated to increase broker compensation at the expense of home sellers, including Georgia home sellers,” which they allege was undertaken to make those selling their homes pay for both the commission of the listing agent and the commission for the buyers’ agent when listing a property on a Multiple Listings Service.

The documents from the plaintiffs allege the requirements of listing a property on the MLS include agreeing to comply with rules set by NAR, which they say includes a “mandatory offer of compensation rule.”

According to their allegations, “The NAR’s Compensation Rule compels home sellers to set the commission of the buyer’s agent. By enforcing this mandate, the NAR establishes an anti-competitive market where sellers are coerced into subsidizing the buyer’s costs,” and that the defendants named in the lawsuit continue to “advance the conspiracy by annually ratifying the NAR rules.”

As a result, the home sellers suing the variety of real estate companies named in the lawsuit say the “scheme” makes it so “non-negotiable commissions of buyer agents are rolled into the sale price of homes,” making the real estate market become “illegally warped.”

The plaintiffs said this is different than in foreign markets, where the buyer-brokerage fees are paid by the buyer, not the seller, according to the court record. The document compares commission rates in other countries compared to the United States, which they said were between 1%-4% outside the U.S., while 5%-6% in America.

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Based on the difference in commission rates, the Georgia home sellers suing the real estate companies are alleging that the “defendants’ scheme has artificially and anticompetitive maintained commissions of buyer brokers ranging from 2.5% to 3.0% over many years,” and therefore overcharges home sellers with no ties to volume or caliber of the services provided.

In short, the Georgians suing are claiming that by having higher commission rates, they’re making the process of selling your house more expensive for you, the seller, rather than increasing prices for buyers, while not ensuring the broker provides better services, or more sales.

Additionally, plaintiffs’ attorneys alleged that the so-called conspiracy requires sellers to “bear excessive costs for services rendered by buyer brokers to the seller’s opponent, artificially inflates buyer brokers’ compensation, and promotes and abets ‘steering’ and similar practices that thwart innovation and stifle competition.”

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Steering, according to the document, is when the defendants require sellers’ brokers’ “obligation to extend blanket, non-negotiable commission offer to buyer brokers,” showing up in MLS systems to realtors while being invisible to customers. They said it’s an incentive to buyer broker to have their clients choose properties where they’ll earn higher commissions, hurting competition.

The lawsuit filed in Georgia follows a recent, and similar, case in Missouri, where during a class action lawsuit over real estate, “a federal jury reached a verdict holding the NAR along with some of the nation’s biggest real estate brokerages liable for almost $1.8 billion in damages for artificially inflating commissions.” The lawsuit was filed in 2019 on behalf of 500,000 home sellers in Missouri.

The Missouri case, which settled on Nov. 1, led to the NAR CEO stepping down, according to reporting by the Associated Press. The NAR told the AP it plans to appeal the decision.

In a statement provided to Channel 2 Action News by NAR, the company’s Vice President of Communications Mantill Williams said that “The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible. Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of REALTORS® will respond to this complaint in court.”

While Coldwell Banker, one of the named defendants, declined to respond directly, they directed Channel 2 Action News to a release from their parent company, Anywhere Real Estate, regarding a national settlement related to antitrust claims and lawsuits which were previously in court.

“I am pleased the court has granted Anywhere preliminary approval of our nationwide settlement,” Ryan Schneider, Anywhere CEO and president said in a statement. “Our efforts to resolve these claims remove future uncertainty and legal expense for Anywhere, our franchisees, and affiliated agents as, together, we focus on serving home buyers and sellers as they move to what’s next.”

Coldwell Banker is one of several companies under the Anywhere umbrella, including Sotheby’s International Realty and Corcoran, ERA, and Better Homes among others.

In response to a request from Channel 2 Action News, Re/MAX declined to comment on the pending litigation.

Channel 2 Action News has reached out to multiple companies named as defendants in the lawsuit and are waiting for their responses.

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