Real Estate Industry Issues Report

Industry Issues – A Report on the Real Estate Industry

Issue 1: NAR Sexual Misconduct, Harassment, and Hostile Work Environment.

Some 30 plus complaints over have been surfaced in an investigation with allegations of wrongdoing by since resigned NAR President, Kenny Parcell. There has also been broad coverage in the Industry press as well as the New York Times.

It is important to understand, that while no instance of sexual misconduct can be tolerated at our REALTOR organizations, or in our society, NAR is an organization of over 300 employees and thousands of volunteers, and the facts have not been made clear in support of the allegations. There are many good people, staff and volunteers who work hard for real estate, private property rights, and the membership.

Issue 2: MLS Litigation, 3 antitrust, CLASS ACTION lawsuits, and a Department of Justice Case against NAR.

Cases:

  • Moehlr v. NAR, et al
  • Sitzer v. NAR, et al
  • Nosalek v. MLS PIN, et al
  • Department of Justice v NAR

History of Cases:

Plaintiffs allege that Defendants’ conspiracy has centered around NAR’s adoption and implementation of a mandatory rule that requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation (the “Buyer Broker Commission Rule”) when listing a property on a MLS. This conspiracy has resulted in millions of dollars in costs to sellers in the sale of their properties.

Buyer Broker Commission Rule:

Buyer-Broker Commission Rule causes commissions to be artificially inflated. Plaintiffs allege that the rule causes listing brokers to price commissions at supercompetitive levels to attract buyer brokers.

Buyer broker commission rule replaced Unilateral Offer of subagency as the compensation model for NAR insured MLSs in 1996.

Case 1: Moehlr v. NAR, et al – Goes to Trial October 11, 2023 (today)

Biggest case with up to $14 Billion in potential damages (retroactive 4 years)

Defendants:

The defendants are the National Association of Realtors, Anywhere Real Estate, Keller Williams, RE/MAX, HomeServices of America, and several other real estate brokerage firms.

MLSs covered in this action:

  • Plaintiff brings this lawsuit as a class action on behalf of home sellers who
  • paid a broker commission in the last four years in connection with the sale of residential real estate listed on one of the following MLSs (the “Covered MLSs”):
  • The Bright MLS (including the metropolitan areas of Baltimore, Maryland; Philadelphia, Pennsylvania; Richmond, Virginia; Washington, D.C.);
  • My Florida Regional MLS (including the metropolitan areas of Tampa, Orlando, and Sarasota);
  • The five MLSs in the Mid-West that cover the following metropolitan areas: Cleveland, Ohio; Columbus, Ohio; Detroit, Michigan; Milwaukee, Wisconsin; Minneapolis, Minnesota;
  • The six MLSs in the Southwest that cover the following metropolitan areas: Austin, Texas; Dallas, Texas; Houston, Texas; Las Vegas, Nevada; Phoenix, Arizona; San Antonio Texas;
  • The three MLSs in the Mountain West that cover the following metropolitan areas: Colorado Springs, Colorado; Denver, Colorado; Salt Lake City, Utah;
  • The four MLSs in the Southeast that cover the following metropolitan areas: Fort Myers, Florida; Miami, Florida; Charlotte, North Carolina; and Raleigh, North Carolina.

Settlements thus far:

Anywhere (CB, C21, ERA, Better Homes, Sotheby’s, Cocoran): $83.5 M

Remax: $55 Million

Case 2: Sitzer v National Association of REALTORS, et al

The lawsuit claims that NAR rules for the operation of Multiple Listing Services (MLSs) inhibit competition or cause the plaintiffs any harm. The National Association of Realtors moved last week to dismiss the Moehrl v. NAR lawsuit and the copycat Sitzer v. NAR lawsuit because both amended complaints fail to show how NAR rules for the operation of Multiple Listing Services (MLSs) inhibit competition or cause the plaintiffs any harm.

Defendants:

The defendants are the National Association of Realtors (NAR) Realogy Holdings Corp., Homeservices of America, Inc., BHH Affiliates, LLC, HSF Affiliates, LLC, The Long & Foster Companies, Inc., Re/Max, LLC, and Keller Williams Realty, Inc.

Four Missouri MLSs. Sales going back to 2014:

  • Kansas City MLS (“Heartland MLS”)
  • St. Louis MLS (“MARIS MLS”)
  • Springfield, Missouri MLS (“Southern Missouri Regional MLS”)
  • Columbia, Missouri MLS

Case 3:  Nosalek v. MLS PIN, et al

The lawsuit alleges that the broker-owned MLS Property Information Network (MLS PIN) is not directly required to abide by the National Association of Realtors (NAR) rules. However, it has nonetheless adopted a rule similar to an NAR rule requiring listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to MLS PIN

Defendants:

  • MLS PROPERTY INFORMATION NETWORK, INC.,
  • ANYWHERE REAL ESTATE INC. (F/K/A REALOGY HOLDINGS CORP.), CENTURY 21 REAL ESTATE LLC,
  • COLDWELL BANKER REAL ESTATE LLC,
  • SOTHEBY’S INTERNATIONAL REALTY AFFILIATES LLC,
  • BETTER HOMES AND GARDENS REAL ESTATE LLC,
  • ERA FRANCHISE SYSTEMS LLC,
  • HOMESERVICES OF AMERICA, INC.,
  • BHH AFFILIATES, LLC, HSF AFFILIATES, LLC,
  • RE/MAX LLC, POLZLER & SCHNEIDER HOLDINGS CORPORATION, INTEGRA ENTERPRISES CORPORATION,
  • RE/MAX OF NEW ENGLAND, INC.,
  • RE/MAX INTEGRATED REGIONS, LLC
  • KELLER WILLIAMS REALTY, INC.

Settlement:

$3 Million by MLS PIN on hold as DOJ, which is not a party to the litigation), reviews the settlement, and has 2 months to do so.

In addition to the $3 Million ($1.5 M going to the Plaintiffs, and the rest to cover legal fees and set up a fund to help the plaintiffs pursue the remaining defendants), the settlement includes lowering any offered commission to buyer brokers to $0 and requiring a certification from seller’s that they understand that offering commission to buyer brokers is not a requirement and sellers do not have to make any payment offer to buyer brokers

Case 4: Department of Justice V NAR

Defendant:

National Association of REALTORS

The same issue as the 3 civil cases mentioned above. DOJ will use the outcome of the civil cases to force more regulation of the Industry by the FTC. The FTC will be the enforcer. This is a battle that predates the FTC study of the real estate industry published in 1983.

The result of the litigation will most likely be the elimination of offers of compensation through MLS and more civil lawsuits.

It is imperative that MLSs separate themselves from REALTOR associations.

Issue 3: Redfin Quits NAR

NAR did fine before there was a Redfin and will continue to do fine without Redfin. NAR has bigger issues than Redfin.

There is speculation that other brokers may leave NAR (and also State and Local Associations), but it is pure speculation at this point.

Issue 4: Anywhere and other Major Franchisors make REALTOR membership options.

The press makes it sound like they are leaving NAR when in fact, all they are doing is making membership optional. In many states, it is still required that to access the MLS, REALTOR membership is required, so this move is more buzz than bite.

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