– A new lawsuit alleges that real estate brokers in Utah conspired with the National Association of Realtors (NAR) to keep broker commissions artificially high.
– The lawsuit claims that NAR, brokerages, and franchisors created rules that require seller’s brokers to offer buyer broker compensation, which effectively prevents negotiation.
– Several major firms, including NAR, Anywhere Real Estate, HomeServices of America, RE/MAX, and Keller Williams, are named as defendants in the lawsuit.
– The lawsuit argues that the commission structure created by the alleged conspiracy lacks competition and leads to higher costs for sellers.
– The complaint also alleges that buyer agents will steer clients away from listings that offer a lower commission.
– The lawsuit seeks a permanent injunction and damages, and it includes thousands of potential plaintiffs who used a listing agent from one of the named firms in Utah.
– The complaint also mentions the recent change in NAR’s Code of Ethics regarding the representation of free services.
– The lawsuit claims that sellers would be willing to pay lower commissions if given the opportunity.
– The defendants listed in the lawsuit include NAR, Anywhere Real Estate, HomeServices of America, RE/MAX, Keller Williams, and several others.
The complaint — one of nearly two dozen targeting real estate’s long-standing commission-sharing structure — alleges that “most” buyer agents will steer clients away from listings that offer a lower commission.
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Real estate brokers working for the nation’s largest brokerages and franchisors in Utah allegedly illegally conspired with the National Association of Realtors to keep broker commissions artificially high, according to a new lawsuit filed on Friday by a homeseller near Salt Lake City.
The new commission lawsuit, filed by Dalton K. Jensen, repeats many of the claims made in nearly two dozen separate lawsuits filed in recent years that generally challenge the way real estate buyer agents and their brokerages get paid.
Jensen filed the lawsuit in the U.S. District Court in Utah, alleging in his complaint that rules created and followed by NAR, the brokerages and franchisors, and their brokers and agents amounted to an illegal conspiracy.
“The cornerstone of Defendants’ conspiracy is NAR’s adoption and implementation of a rule that requires all seller’s brokers to make a blanket, unilateral and effectively nonnegotiable offer of buyer broker compensation (the ‘Adversary Commission Rule’) when listing a property on a Multiple Listing Service,” the complaint alleges. The rule is also known as the Participation Rule or the Cooperative Compensation Rule.
The complaint accuses several of the same firms that were named as defendants in the landmark lawsuit known as Sitzer | Burnett, which went to trial in October. That includes NAR, Anywhere Real Estate, HomeServices of America, RE/MAX and Keller Williams.
It also includes the three firms that have reached proposed settlement agreements with the plaintiffs in two lawsuits, including Anywhere, RE/MAX and Keller Williams. Those proposed settlements must be approved by the court to go into effect.
Jensen’s lawsuit also mentions the four multiple listing services in the state, though it doesn’t name them as defendants.
It says there are thousands of members of the proposed class, which includes homesellers who used a listing agent from one of the firms to sell a home in Utah since Feb. 9, 2020.
It asks for a permanent injunction preventing the industry from requiring sellers to pay buyer brokers and an award for damages.
The complaint alleges that “most” buyer agents will steer clients away from listings that offer a lower commission.
The lawsuit also alleges that NAR created the rules and the brokerages and franchisors required their brokers to follow them, which effectively led to commissions that are higher than they otherwise would be.
“This structure results from a lack of competition and makes no economic sense, except for the buyer broker,” the complaint alleges.
“If NAR’s Adversary Commission Rule were not in place, then the cost of buyer broker commissions would be paid by their clients (home buyers),” the complaint alleges. “Buyer brokers would thus have to compete with one another by offering a lower commission rate.”
The complaint alleges the rule kept buyer broker commissions between 2.5 percent and 3 percent, “despite the diminishing role of buyer brokers” as a result of real estate portals.
The lawsuit alleges the rules kept commission rates high even while other services that benefit from the Internet have driven costs down, such as travel booking, insurance, banking and stock brokering.
The complaint says that “a standard of conduct in NAR’s Code of Ethics permits and encourages buyer brokers to tell their clients that their services are free, which obviously is not a true statement.”
NAR changed that rule in November 2021, and the current version of its Code of Ethics says Realtors “must not represent that their brokerage services to a client or customer are free or available at no cost to their clients,” unless they actually aren’t paid.
Jensen is being represented by the law firm Christensen & Jensen and the Law Office of Bobby Udall. Jensen didn’t immediately respond to a request for comment.
If given the opportunity, sellers would pay “far less” than the 2.5 percent to 3 percent commission commonly given to buyer brokers, according to the complaint.
Jensen sold a home in Eagle Mountain, Utah, about 38 miles south of Salt Lake City, in October 2022 using an Exit Realty agent. He paid a 6 percent commission, which was split with the Century 21 broker representing the buyer.
The complaint alleges that the firms took part in the conspiracy by serving in roles within NAR that created the rules and by requiring brokers and Realtors to comply with the rules.
Inman reached out to all of the defendants named in the new lawsuit. HomeServices of America Executive Vice President Chris Kelly said the company was reviewing the suit.
“We are analyzing the specifics of the case, particularly the timeframes and MLSs mentioned in the suit, to ascertain the relevance of HomeServices as a defendant in this matter,” Kelly said, “especially considering that we do not have any company-owned brokerages operating in the specified areas.”
Full list of defendants:
- National Association of Realtors
- Anywhere Real Estate
- HomeServices of America
- HSF Affiliates
- BHH Affiliates
- Keller Williams
- Keller Williams of Salt Lake
- KW St. George Keller Williams Realty
- KW Westfield
- Equity Real Estate
- Century 21 Everest
- Windermere Real Estate Services
Read the complaint:
Property Chomp's Take:
The real estate industry is no stranger to controversy, and a new lawsuit filed in Utah adds to the growing list of legal challenges facing the industry. The complaint, filed by a homeseller named Dalton K. Jensen, alleges that real estate brokers working for the nation’s largest brokerages and franchisors conspired with the National Association of Realtors (NAR) to keep broker commissions artificially high.
This lawsuit is just one of nearly two dozen similar lawsuits filed in recent years that take aim at the commission-sharing structure in the real estate industry. The complaint specifically targets a rule known as the Adversary Commission Rule, which requires seller’s brokers to offer a blanket, non-negotiable commission to buyer brokers when listing a property on a Multiple Listing Service (MLS).
According to the complaint, this rule and the practices surrounding it create an illegal conspiracy that keeps broker commissions higher than they would be in a competitive market. The lawsuit alleges that most buyer agents will steer clients away from listings that offer a lower commission, perpetuating the artificially high commission rates.
The lawsuit names several major players in the real estate industry as defendants, including NAR, Anywhere Real Estate, HomeServices of America, RE/MAX, and Keller Williams. These firms have been accused of serving in roles within NAR that created the rules and requiring their brokers to comply with them, effectively participating in the alleged conspiracy.
The lawsuit also highlights the role of multiple listing services (MLSs) in the alleged conspiracy. While the MLSs are not named as defendants, the complaint argues that their participation in the Adversary Commission Rule contributes to the artificially high commission rates.
The complaint seeks a permanent injunction to prevent the industry from requiring sellers to pay buyer brokers and an award for damages. It also alleges that sellers would be willing to pay significantly less than the current commission rates if given the opportunity.
This lawsuit comes on the heels of other legal challenges to the real estate industry's commission structure. One notable case, known as the Sitzer | Burnett lawsuit, went to trial in October and named NAR, Anywhere Real Estate, HomeServices of America, RE/MAX, and Keller Williams as defendants. Proposed settlement agreements have been reached with Anywhere, RE/MAX, and Keller Williams, but they still require court approval to go into effect.
The outcome of these lawsuits could have far-reaching implications for the real estate industry and the way brokers and agents are compensated. If the allegations in the complaint are proven to be true, it could lead to significant changes in the commission-sharing structure and potentially lower costs for buyers and sellers.
As the legal battles continue, it's important for those involved in the real estate industry to stay informed and be prepared for potential changes. The outcome of these lawsuits could reshape the industry and create new opportunities and challenges for brokers, agents, and consumers alike.