Two Lawsuits Might Change the Way You Buy Homes

Billion-Dollar Dilemma

Two current class-action lawsuits could rock the foundation of real estate transactions. The plaintiffs in these cases claim the current method of compensating real estate agents is part of an effort to strip billions from home sellers every year.

Both lawsuits — Sitzer et al. v. NAR et al. and Moehrl et al. v. NAR et al. — accuse the National Association of Realtors® (NAR) and some of the biggest brokerages in the country of misusing multiple listing services to inflate fees and prop up agent commissions artificially.

Plaintiffs argue the current system causes sellers to pay excessive commissions to buyers’ agents to attract interest in their homes.

Manipulated Listing Services

The lawsuits revolve around multiple listing services (MLS) — local online databases where agents share detailed information and photos of homes for sale. They’re a necessary part of the home selling process for most. More than 85% of sellers listed properties on these databases last year.

Plaintiffs argue MLS are being manipulated to unfairly keep agent commissions high. To list on one, you must agree to follow a complex, predetermined payment path from the property sale. The lawsuits say that this essentially leaves sellers no choice but to foot the bill for both buyer and seller agent commissions at closing. Almost 97% of MLS are controlled by the NAR.

The lawsuits call for a system in which buyers would be responsible for directly paying their agents. Plaintiffs say this ‘decoupling’ of commissions could level the playing field and pave the way for a fairer system.

Double-Edged Sword

Advocates of the changes argue it could stimulate competition among agents, dramatically slash commissions, and potentially save consumers a staggering $20 to $30 billion annually.

On the flip side, the defendants assert these shifts would be catastrophic for first-time and low-income buyers. They argue a decoupled system could disadvantage those who lack the necessary funds to pay an agent upfront.

As with any significant change, there will inevitably be winners and losers. While these lawsuits might offer hope for some, they could spell significant challenges for others. It’s all a testament to the impact something as seemingly mundane as commission structures can have on the way you buy and sell homes — and, by extension, your wallet.

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