[co-author: Brooke Norton1]
The homebuying market as we know it is about to see sweeping changes. On Friday, March 15, 2024, the National Association of Realtors (NAR) announced a settlement with groups of home sellers, agreeing to end antitrust lawsuits against it. The NAR is going to pay $418 million in damages and eliminate rules on commissions. This agreement will change the current homebuying and selling model when using a real estate agent.
On October 31, 2023, a jury verdict in Burnett v. The Nat’l Association of Realtors awarded $1.8 billion in damages to Missouri home sellers.2 The Plaintiffs in this case alleged the NAR conspired to keep real estate commissions inflated.3 The NAR is one of the largest trade associations in the United States. Plaintiffs argued that the NAR’s policies maintain these high commission rates. Sellers typically pay this commission, which typically ranges from five to six percent, as part of their closing costs.
After the Burnett jury verdict in October, ten copycat lawsuits have been filed across the United States. Most of these cases are class actions brought by home sellers against the NAR and brokers for alleged violations of the Sherman Act. Other common allegations include violations of the Cartwright Act, unjust enrichment, and violation of state antitrust and consumer protection statutes. On December 27, 2023, Plaintiffs in some of the cooperative commission lawsuits filed a Motion to Transfer to the Judicial Panel on Multidistrict Litigation.4 The NAR supported consolidation. Now, the NAR has agreed to settle.
The Burnett jury award and the Settlement announced last week will likely have large implications for real estate market participants and antitrust law. Home prices will presumably be impacted, as the six percent average commission can more easily be negotiated down. Real estate agents might leave the profession or alter their business practices, as this will impact how agents are compensated in many real estate transactions. Buyers will likely reassess the role (and forms of compensation) they are willing to pay to the agents involved in transactions, most notably the compensation paid to their own agents that may be involved (if at all).
This may also hold implications on antitrust laws and how professional associations can influence market prices. These cases have brought to public attention how much impact trade and professional associations can have. The verdict and this sweeping settlement may lead to more lawsuits challenging established practices. More commission rate cases may pop up as this behavior becomes seen as anti-competitive.
Snell & Wilmer will continue to monitor as these issues develop and more comes from the courts.
Footnotes
1. Snell & Wilmer 2024 legal writing intern Brooke Norton provided material assistance in the production of this article. Brooke Norton is not a licensed attorney. [Back]
2. Jury Verdict, Sitzer v. National Association of Realtors, 4:19-cv-00332, (W.D. Mo.) DKT. 1294 (settlement of $1,785,310,872). [Back]
3. Second Amended Complaint, Sitzer v. National Association of Realtors, 4:19-cv-00332, (W.D. Mo. Jun 30, 2021) DKT 477. [Back]
4. In Re: Real Estate Commission Antitrust Litigation, JPML MDL NO. 3100, DKT. 1. [Back]
