– Seven homebuyers have filed a federal antitrust lawsuit against several real estate companies, accusing them of engaging in a conspiracy to inflate buyer costs.
– The lawsuit seeks class-action status and targets Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate, and Douglas Elliman.
– The plaintiffs claim that the defendants’ conduct leads to inflated commissions, inflated home prices, and reduced quality broker services for homebuyers.
– The lawsuit is similar to another pending lawsuit against the National Association of Realtors and other real estate companies, alleging that NAR rules have inflated agent commissions and resulted in higher home prices.
– The lawsuit seeks class certification, damages, a jury trial, and a permanent injunction against the defendants.
– The complaint specifically targets NAR’s cooperative compensation rule, which requires listing brokers to offer compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS.
– The defendants have not yet commented on the lawsuit.
– The plaintiffs’ attorneys have not reached out to the attorneys representing a similar case, indicating that they may not be aware of each other’s lawsuits.
– The lawsuit has significant scope, seeking class certification for a nationwide class and a damages class.
– The complaint lists multiple co-conspirators, including local Realtor associations, NAR MLSs, franchisees and brokers of the defendants, and other brokers who complied with the rule.
– Some of the defendants have issued statements in response to the lawsuit, expressing confidence and commitment to fair and transparent practices.
– Redfin’s CEO wrote a blog post stating that structural change is coming in the real estate industry.
– Douglas Elliman declined to comment, while Weichert and United Real Estate did not respond to requests for comment.
The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.
Seven homebuyers, lead by Mya Batton, filed a federal antitrust lawsuit Nov. 2 seeking class-action status against Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate and Douglas Elliman in the U.S. District Court for the Northern District of Illinois Eastern Division.
“Defendants’ unlawful, anticompetitive conduct causes America’s home buyers to pay inflated commissions for broker services they misrepresent as free, to pay inflated prices for the homes they purchase, and to receive reduced quality broker services,” the complaint states, adding later: “Plaintiffs and the other Class members have each incurred at least thousands of dollars in overcharges as a result of Defendants’ conspiracy.”
Both the plaintiffs and the defendants are familiar players. The plaintiffs are the same as those who currently have a lawsuit pending in the same district against the National Association of Realtors, Anywhere (formerly, Realogy), Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries alleging that NAR rules have inflated agent commissions and resulted in higher home prices paid by the buyers.
With one exception, the defendants are the same as those in a case filed last week, Gibson, by the same attorneys who filed the Sitzer | Burnett suit. The only difference is that the Gibson case is also suing NAR, but this second Batton case is not.
Michael Ketchmark of Ketchmark and McCreight, lead counsel for the Sitzer | Burnett plaintiffs, told Inman none of the law firms representing the Batton plaintiffs had reached out to him about the suit, so he didn’t know anything about it.
The scope of Batton 2 is exponentially larger than Gibson, Sitzer | Burnett, or another, similar case, Moehrl. Both Batton 1 (formerly, Leeder) and Batton 2 seek class certification on behalf of two proposed classes:
- a “Nationwide Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the United States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for injunctive relief, meaning either a court-ordered prohibition or a requirement on the defendants’ behavior.
- a “Damages Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the Indirect Purchaser States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for damages under “antitrust, unfair competition, consumer protection, and unjust enrichment laws.”
The Indirect Purchaser States listed in the Batton 2 complaint are Arizona, Arkansas, California, Connecticut, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin, Puerto Rico, and Washington D.C.
The complaint seeks class certification, a jury trial, a damages award, and a permanent injunction preventing the defendants “from establishing the same or similar rules, policies, or practices as those challenged in this action in the future.”
Like the other cases, Batton 2 targets 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 MLS.
“Steering is made easy for buyer-agents by the fact that the blanket commission offer must be made available to every buyer-agent using the MLS,” the complaint says.
“NAR’s requirement that offers of compensation be expressed in specific dollar or percentage terms enables buyer-agents to easily compare the financial compensation offered to them by home sellers and steer their clients to higher commission homes.
“Thus, the Rule is designed to create tremendous pressure on sellers to offer the high, standard commission and to act as a powerful deterrent to anyone who may attempt to offer a discounted commission.”
The reason for the rule is clear, according to the complaint: “to maintain high broker commissions for NAR members at the expense of home buyers. In the absence of the Rule, buyers rather than sellers would negotiate buyer-agent commissions, and brokers would compete with each other by offering lower commission rates and/or higher quality services.”
The complaint lists multiple “co-conspirators,” including the defendants in the first Batton suit as well “multiple local Realtor associations,” “the NAR MLSs” who’ve adopted the rule, “[f]ranchisees and brokers of Defendants” who “complied with and implemented” the rule, and “other brokers” who complied with and implemented the rule.
“Defendants are jointly and severally liable for the acts of their co-conspirators, whether named or not named as Defendants in this Complaint,” the complaint says.
Inman reached out to the defendants in the Batton 2 case Monday.
Compass spokesperson Devin Daly Huerta told Inman the company doesn’t comment on pending litigation, but provided comments from the company’s earnings call on Monday, saying the company “will respond accordingly to the complaints filed against us at the appropriate time” and that the company feels “confident that Compass is well-positioned.” Compass pointed to rule changes at Northwest MLS that made listing broker compensation to buyer brokers optional and didn’t result in any decrease of offers of compensation or the amounts offered.
“So we have evidence in a major U.S. market of what this change might look like that gives us confidence,” the company said.
“Secondly, we believe we are positioned well because we have the combination of some of the most productive agents and the only end to end technology platform in our industry. Third, we currently have agents that successfully ask their buyers to sign buyer broker agreements in order to work with them. We are in the process of launching trainings to all of our agents to empower them to successfully get buyer broker agreements signed with their buyers.
“Lastly, we operate largely in the luxury segment, where we think buyers will always want the help of an advisor through their home-buying journey.”
In an emailed statement, Howard Hanna spokesperson Lindsay A. Kovach told Inman, “In light of ongoing legal matters within our industry, we are actively monitoring the situation and will provide updates as necessary. We will continue to represent buyers and sellers in real estate transactions, and remain committed to upholding our core values and guiding principles as a company.”
Also in an emailed statement, eXp spokesperson Jennifer Zimmerman told Inman, “While we are still studying the formal complaint, we have been closely observing the ongoing antitrust litigation against our competitors in recent years. 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.”
A Redfin spokesperson told Inman that a blog post Redfin CEO Glenn Kelman wrote last week “pretty much sums up our thoughts on the overall litigation and all copycat suits.”
The post concluded that “structural change is coming” in the wake of the Sitzer | Burnett verdict.
“As a company that exists to give real estate consumers a better deal, Redfin is proud of our unwavering consumer advocacy. Redfin has saved our clients more than $1.5 billion in fees,” the post added.
Douglas Elliman declined to comment. Weichert and United Real Estate did not respond to requests for comment.
Read the complaint:
Property Chomp's Take:
The real estate industry is facing a major shake-up as homebuyers take legal action against several prominent real estate companies. Seven homebuyers, led by Mya Batton, have filed a federal antitrust lawsuit accusing Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate, and Douglas Elliman of engaging in a conspiracy to inflate buyer costs. The lawsuit alleges that these companies' unlawful actions have resulted in inflated commissions, higher home prices, and reduced quality broker services for homebuyers.
This lawsuit comes on the heels of another pending lawsuit against the National Association of Realtors, Anywhere (formerly Realogy), Keller Williams, RE/MAX, HomeServices of America, and three of its subsidiaries. Both lawsuits claim that NAR rules have inflated agent commissions and led to higher home prices for buyers. The scope of the latest lawsuit, known as Batton 2, is much larger than previous cases, seeking class certification on behalf of a "Nationwide Class" and a "Damages Class" of homebuyers who have purchased residential real estate listed on an NAR MLS since December 1, 1996.
The complaint specifically targets NAR's cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to offer compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS. The lawsuit argues that this rule maintains high broker commissions for NAR members at the expense of homebuyers and prevents competition among brokers to offer lower commission rates or higher quality services.
The defendants in the lawsuit have not yet publicly commented on the allegations. However, Compass has stated that it is confident in its position and pointed to rule changes at Northwest MLS that made listing broker compensation to buyer brokers optional without resulting in any decrease in offers or amounts of compensation. Redfin, on the other hand, stated in a recent blog post by CEO Glenn Kelman that "structural change is coming" in the wake of a recent trial verdict.
This lawsuit highlights the growing dissatisfaction among homebuyers with the traditional way of doing business in the real estate industry. As technology continues to disrupt the industry and empower consumers, it is clear that the old way of doing business is no longer sustainable. Homebuyers are demanding greater transparency, fairer practices, and more competitive options when it comes to buying a home.
Inman Connect New York, taking place from January 23-25, 2023, will be an important event for industry professionals to come together and discuss the future of real estate. It is a chance to tackle the challenges of today's market and prepare for the opportunities of tomorrow. As the industry evolves, it is crucial for real estate professionals to adapt and embrace change. The verdict is in – the old way of doing business is over. It's time to defy the market and bet big on the future.