A lawsuit filed by home sellers in 2019 against the National Association of Realtors (NAR) and various franchisors, including Anywhere, HomeServices of America, RE/MAX, and Keller Williams, alleging that commission sharing inflates costs for sellers, has been granted class certification by Judge Andrea R. Wood of the U.S. District Court for the Northern District of Illinois. The lawsuit that gains class action certification, commonly called the “Moehrl case” after its lead plaintiff, could have far-reaching effects on how agents are compensated across the United States if a ruling goes against the NAR and the franchisors.
Wood’s recent ruling certifies two classes in 20 MLS (Multiple Listing Service) markets across the country. This certification means that home sellers who paid a commission between March 6, 2015 and December 31, 2020, to a brokerage affiliated with a corporate defendant listed on a covered MLS and jurisdiction can now ask for reimbursement for billions in commissions paid to buyer agents. The ruling also makes “current and future owners of residential real estate in the covered jurisdictions or are presently listing or will in the future list their home for sale on a Covered MLS” eligible for reimbursement.
The Implications on Commissions and Industry Practices
However, it is still being determined when a trial for the Moehrl case would begin. The smaller of the two lawsuits, known as the Sitzer/Burnett case, was scheduled to begin in February but has been postponed indefinitely at Anywhere’s request.
The plaintiffs in the Moehrl case claim that the NAR and the franchisors have conspired by mandating the NAR’s “buyer broker commission rule” when listing a property on an MLS. According to attorneys for Cohen Milstein, this conspiracy has imposed a cost on home sellers that buyers should bear in a competitive market. They further argue that most buyer brokers will not show homes to their clients if the seller offers a lower buyer broker commission, incentivizing sellers to offer high commissions to procure buyer brokers’ cooperation.
Industry Response and Future Preparations
In a statement, NAR spokesperson Mantill Williams expressed disappointment with the ruling. Williams argued that pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency, and market-driven pricing options for home buyers and sellers. The NAR maintains that the practice of listing brokers paying buyer brokers’ compensation saves sellers time and money by having more buyer brokers participate in the local marketplace, thus creating a larger pool of buyers for sellers.
Although the Moehrl certification is a setback for the industry, even if a jury finds in favor of the plaintiffs, it may be some time before any significant changes go into effect for agents and brokerages. According to Steve Murray, senior advisor for RealTrends, the case will likely go through appeals. Unless an injunction requires immediate action, it will be a while before the ruling is final. Despite the potential impact of the lawsuit, a recent RealTrends survey found that only 3.45% of brokers surveyed felt that the outcome of commission lawsuits posed a challenge or concern. When asked what they are doing to prepare for a worst-case scenario, 60% of respondents answered, “Nothing.” Other popular responses included implementing buyer representation agreements, fully disclosing client options, and more training on the value proposition.