A federal jury in Kansas City deciding a class-action lawsuit involving a class of home sellers recently found that the National Association of Realtors (NAR) and certain other residential real estate brokerages conspired to maintain artificially high commissions using the “Mandatory Offer of Compensation Rule,” also known as cooperative compensation.
The rule required sellers of residential real estate who wished to list homes on the Multiple Listing Service, where the majority of homes are listed for sale, to offer compensation to the buyer’s agent. The jury found that the defendants colluded to create an environment that forced sellers to pay an inflated commission to buyers’ agents (typically 2-3% of the purchase price) to have their property sold on MLS, rather than being able to negotiate a lower commission.
The jury awarded the class of affected homeowners $1.8 billion. The damages can be trebled, meaning the defendants face the potential for over $5 billion in damages.
The finding may have dramatic effects on the methods brokers use to list property for sale along with how buyers’ agents are compensated. As plaintiffs have begun to file similar lawsuits in other jurisdictions, real estate brokerages large and small may find themselves in the crosshairs and will need to consider carefully the antitrust risk associated with current procedures.
If you have immediate questions about the federal ruling regarding NAR’s cooperative compensation rule and its implications, or about broker representation in the residential real estate industry, please contact the authors of this article.