Federal Antitrust Lawsuit Driving Changes to Increase Transparency and Flexibility of Real Estate Broker Commissions

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A class action lawsuit filed in March of this year has spurred significant changes in the way real estate brokerages are setting and disclosing commissions for listing and selling brokers. The suit, filed in the United States District Court for the Northern District of Illinois, names the National Association of Realtors and the four largest residential real estate brokerages in the US as defendants, and alleges antitrust violations and a conspiracy to fix and inflate commission payments to brokers representing homebuyers. In response, several regional MLSs have responded by implementing new regulations or guidelines focused on increasing transparency and flexibility of broker commissions.

The NWMLS, an early adopter, announced rule changes on July 22, 2019, revising rules pertaining to the commission paid by a property seller to the broker representing the buyer, known as the selling office commission (“SOC”). NWMLS’s changes include allowing real estate firms to publicize the SOC being offered by a seller’s broker with other listing information for the property, and remove the requirement that a seller’s broker offer a SOC at all. This will make more transparent to buyers the commission being offered to their own broker, and will allow more negotiation of the compensation for the buyer’s broker in a truly open real estate market. The changes will also likely lead to negotiating other terms of real estate purchases in the same vein, and the additional information will provide buyers more insight into the seller’s expense, in turn informing what to offer for a property.

Online real estate brokerage and technology company Redfin too has made changes to increase the availability of information regarding the compensation a buyer’s broker will receive on a given property. Just last week, Redfin announced it would be publishing the SOC offered on all of Redfin’s own home listings to add additional transparency for buyers.

These changes are likely to be adopted by other regional MLSs and brokerages going forward, and will result in greater transparency for buyers not familiar with the homebuying process, especially first-time buyers, while also allowing room for negotiation of the terms of the purchase, including the compensation of the buyer’s broker.

Please contact one of Helsell Fetterman’s Land Use and Real Estate attorneys with any questions or if you would like to learn more.

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