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Commission lawsuits could change the industry

On Behalf of | Aug 15, 2022 | Real Estate Transactions |

The real estate industry is always in a state of change, particularly here in Florida. But the usual trends involving buying habits, prices and increasing use of technology may be swept aside by ongoing commission lawsuits currently in the courts, including Moehrl, Sitzer/Burnett and others. These cases look at how realtors are paid, which could change how the U.S. real estate market works. Rather than taking their usual percentage of the sale as commission, will realtors charge a flat fee, or will their services be ala carte?

Moehrl v. NAR

Filed in 2019, this case involving the National Association of Realtors (NAR) targets their Buyer Broker Commission Rule (also known as Participation Rule). This lawsuit accuses NAR of conspiring with four major franchisors (RE/MAX, Keller Williams, HomeServices America, and Realogy) to escalate commissions. The complaint alleges that the Participation Rule is anti-competitive because it requires brokers to make a blanket and non-negotiable offer of buyer broker compensation when listing on Multiple Listing Services (MLS), including the locally used My Florida Regional MLS. Plaintiffs are currently seeking class-action status.

Plaintiffs are seeking damages over sales commissions starting in 2015, but they are also seeking an injunction for sellers to pay the buyer broker’s commission and the non-negotiable rate, which plaintiffs believe restricts competition.

Could mean more out of pocket costs for buyers

Critics of the lawsuit note that buyers paying their realtor means more out-of-pocket costs for those already trying to arrange financing. Others argue that the current arrangement makes it easier for first-time buyers, low- and middle-income buyers and minority buyers who otherwise may not be able to afford to own.

Class action status for Sitzer/Burnett

While one case in Illinois was dismissed, a Missouri federal judge granted class action certification to Sitzer/Burnett in April of 2022. This ruling was based on procedure and did not reflect the case’s merits. Like Moehrl, this case also focuses on the seller paying the buyer representative’s commissions, using the same arguments against fixed rates and inflated commissions. While this action only involves plaintiffs in Missouri, Illinois and Kansas, it is still worth watching here in Florida.

What can buyer representatives do?

Representatives should use or continue to Buyer Representation Agreements to formalize their working arrangement. It also doesn’t hurt to remind clients that commissions are negotiable within the confines of the signed agreement. Representatives with questions or concerns can speak with a real estate attorney who can explain this issue’s local impact on the local Florida real estate industry.