Antitrust Lawsuit of 2024

The Antitrust lawsuit against the National Association of Realtors (NAR)

What is an antitrust law?  Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don’t overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies.

Antitrust laws also prevent multiple firms from colluding or forming a cartel to limit competition through practices such as price fixing. Due to the complexity of deciding what practices will limit competition, antitrust law has become a distinct legal specialization.

In May of 2024, the National Association of Realtors settled a series of class-action lawsuits alleging that its compensation rules, which forced selling agents to advertise compensation for buyer’s agents on listings, essentially amounted to antitrust, reducing competition and artificially inflating commission prices.  

The NAR settled the lawsuit and agreed to a slate of changes in how they operate as well as agreed to pay over $400 million in damages.  

These are the biggest changes (From US News 15 Aug 2024):

1) Buyers must now enter into a contract with an agent before that agent can show them any properties. Some states already require this, but now, it’s required for any agent who’s a member of NAR (which is a whopping 1.5 million agents in America). “A signed buyer representation agreement is required in many states already and has been a common practice many agents engage in – even in states where it was not required,” says Amy Lessinger, president at real estate brokerage RE/MAX. “It will be a change for agents in roughly 30 states.” There is no hard-and-fast rule regarding how long these contracts must be. While a contract must be in place before you can tour a home with an agent, the terms of that contract are flexible. It could be for one day, one house tour, or any other term you and your agent can agree upon, as long as it’s prior to the showing. Agent's like Agent X didn't mention the fact that he was required to sign an agreement with me before showing me the homes.  He is going against his own regulations and again leveraging my ignorance at my expense.  Others may attempt to lock you into a binding agreement without informing you that you have the right to sign a contract of non-representation with no obligations to the agent whatsoever.  If he doesn't agree to these terms, walk away and find one who will or simply call the seller or seller's agent and arrange the viewing directly. 

2) Shift in agent commissions. Prior to the settlement, NAR members who listed properties included offers of shared commissions within their local multiple listing services (MLS) – the platforms on which most homes are listed. It's a tool real estate professionals use to view and share information regarding property listings. The exact amount varied, but this led to most sellers paying about 6% of the home’s sales price, with 3% going to their agent and 3% to the eventual buyer’s agent. Starting on the 17 Aug 2024, those advertised offers of compensation are no longer allowed in an MLS. While sellers and their agents can still offer to pay a buyer’s agent's fee, that must happen via outside negotiations. That could mean that in some transactions, sellers pay no portion of the buyer’s agent fee at all – putting that burden fully on the buyer instead.  The buyer could then negotiate and pay their agent’s fee out of pocket or go without an agent, managing their transaction on their own.  “The biggest change is that buyers and their agents will need to negotiate compensation directly before viewing homes,” says Jen Routon, president of the Denver Metro Association of Realtors. “If a seller is not offering compensation to the buyer’s agent, the buyer will pay their agent directly.”    

Agents, like my Agent X purposely keep this information from you in order to use your ignorance against you.

3) Sellers do not have to pay buyer's agent fees at all.  Sellers will technically have the choice whether they want to offer any compensation to the buyer’s agent – or none at all.  If you’re selling a home, you can expect to negotiate more, too. As He puts it, “In the old world, most times sellers would pay fees on both the buy side and listing side. In the post-August 17 world, each deal would be different. Any combination is a possibility.”  That could mean lower out-of-pocket expenses on the surface, but agents say failing to provide a fee – or offering a low one – will likely have some residual blowback.  “Sellers expecting to net more on the sale of their home may be surprised that buyers will now be making offers lower than the asking price, due to factoring in the cost of paying for the buyer’s agent’s commission,” says Alex Mendel, an agent with Keller Williams Realty Boca Raton in Florida.  You also may see a smaller buyer pool if you’re unwilling to pay a portion of the other agent’s fee, as agents may be less likely to show your home at least until people finally realize that they don't need a buyer's agent at all and that they can get a better deal potentially without having one attached.   The consequence of telling a buyer's agent that you will not pay a commission is that they will discourage their clients from your home or if the client really wants your home they will have to wait to get out of their exclusive agreement if they were foolish enough to sign into one.  Staying independent of exclusing agreements allows full flexibility and the truth is that all or nearly all houses are now advertised on Zillow to include all the for sale by owner homes that are not advertised on MLS.  Don't get locked down where you as a buyer are the one who is stuck paying the bill for a house where the seller refuses to pay the buyer agent fees.  Don't do it.

Ask any potential agent about this lawsuit and what your rights are to see if they lie to you, if they do, walk away.  Also ask them about negotiations of fees and what your options are.  If they do not tell you about the options for flat fees, a la carte services, or tiered commissions then walk away, they aren't honest.