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Homebuyers are getting in on the action after the Sitzer | Burnett trial verdict and accusing a slew of real estate companies of engaging in a conspiracy to inflate buyer costs.
Seven homebuyers, led by Mya Batton, filed a federal antitrust lawsuit Nov. 2 seeking class-action status against Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate and Douglas Elliman in the U.S. District Court for the Northern District of Illinois Eastern Division.
“Defendants’ unlawful, anticompetitive conduct causes America’s home buyers to pay inflated commissions for broker services they misrepresent as free, to pay inflated prices for the homes they purchase, and to receive reduced quality broker services,” the complaint states, adding later: “Plaintiffs and the other Class members have each incurred at least thousands of dollars in overcharges as a result of Defendants’ conspiracy.”
Both the plaintiffs and the defendants are familiar players. The plaintiffs are the same as those who currently have a lawsuit pending in the same district against the National Association of Realtors, Anywhere (formerly, Realogy), Keller Williams, RE/MAX, HomeServices of America and three of the latter’s subsidiaries alleging that NAR rules have inflated agent commissions and resulted in higher home prices paid by the buyers.
That suit, originally filed in January 2021 by Judah Leeder, was amended in July 2022 with Batton as the lead plaintiff. Motions to dismiss that suit are currently pending.
With one exception, the defendants are the same as those in a case filed last week, Gibson, by the same attorneys who filed the Sitzer | Burnett suit. The only difference is that the Gibson case is also suing NAR, but this second Batton case is not.
Michael Ketchmark of Ketchmark and McCreight, lead counsel for the Sitzer | Burnett plaintiffs, told Inman none of the law firms representing the Batton plaintiffs had reached out to him about the suit, so he didn’t know anything about it.
The scope of Batton 2 is exponentially larger than Gibson, Sitzer | Burnett, or another, similar case, Moehrl. Both Batton 1 (formerly, Leeder) and Batton 2 seek class certification on behalf of two proposed classes:
- a “Nationwide Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the United States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for injunctive relief, meaning either a court-ordered prohibition or a requirement on the defendants’ behavior.
- a “Damages Class” made up of “All persons who, since December 1, 1996 through the present, purchased in the Indirect Purchaser States residential real estate that was listed on an NAR MLS.” For this class, the plaintiffs are asking for damages under “antitrust, unfair competition, consumer protection, and unjust enrichment laws.”
The Indirect Purchaser States listed in the Batton 2 complaint are Arizona, Arkansas, California, Connecticut, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin, Puerto Rico, and Washington D.C.
The complaint seeks class certification, a jury trial, a damages award, and a permanent injunction preventing the defendants “from establishing the same or similar rules, policies, or practices as those challenged in this action in the future.”
Like the other cases, Batton 2 targets NAR’s cooperative compensation rule, also known as the Participation Rule, which requires listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS.
“Steering is made easy for buyer-agents by the fact that the blanket commission offer must be made available to every buyer-agent using the MLS,” the complaint says.
“NAR’s requirement that offers of compensation be expressed in specific dollar or percentage terms enables buyer-agents to easily compare the financial compensation offered to them by home sellers and steer their clients to higher commission homes.
“Thus, the Rule is designed to create tremendous pressure on sellers to offer the high, standard commission and to act as a powerful deterrent to anyone who may attempt to offer a discounted commission.”
The reason for the rule is clear, according to the complaint: “to maintain high broker commissions for NAR members at the expense of home buyers. In the absence of the Rule, buyers rather than sellers would negotiate buyer-agent commissions, and brokers would compete with each other by offering lower commission rates and/or higher quality services.”
The complaint lists multiple “co-conspirators,” including the defendants in the first Batton suit as well “multiple local Realtor associations,” “the NAR MLSs” who’ve adopted the rule, “[f]ranchisees and brokers of Defendants” who “complied with and implemented” the rule, and “other brokers” who complied with and implemented the rule.
“Defendants are jointly and severally liable for the acts of their co-conspirators, whether named or not named as Defendants in this Complaint,” the complaint says.
Inman reached out to the defendants in the Batton 2 case Monday.
Compass spokesperson Devin Daly Huerta told Inman the company doesn’t comment on pending litigation, but provided comments from the company’s earnings call on Monday, saying the company “will respond accordingly to the complaints filed against us at the appropriate time” and that the company feels “confident that Compass is well-positioned.” Compass pointed to rule changes at Northwest MLS that made listing broker compensation to buyer brokers optional and didn’t result in any decrease of offers of compensation or the amounts offered.
“So we have evidence in a major U.S. market of what this change might look like that gives us confidence,” the company said.
“Secondly, we believe we are positioned well because we have the combination of some of the most productive agents and the only end to end technology platform in our industry. Third, we currently have agents that successfully ask their buyers to sign buyer broker agreements in order to work with them. We are in the process of launching trainings to all of our agents to empower them to successfully get buyer broker agreements signed with their buyers.
“Lastly, we operate largely in the luxury segment, where we think buyers will always want the help of an advisor through their home-buying journey.”
In an emailed statement, Howard Hanna spokesperson Lindsay A. Kovach told Inman, “In light of ongoing legal matters within our industry, we are actively monitoring the situation and will provide updates as necessary. We will continue to represent buyers and sellers in real estate transactions, and remain committed to upholding our core values and guiding principles as a company.”
Also in an emailed statement, eXp spokesperson Jennifer Zimmerman told Inman, “While we are still studying the formal complaint, we have been closely observing the ongoing antitrust litigation against our competitors in recent years. We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions. Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction.”
A Redfin spokesperson told Inman that a blog post Redfin CEO Glenn Kelman wrote last week “pretty much sums up our thoughts on the overall litigation and all copycat suits.”
The post concluded that “structural change is coming” in the wake of the Sitzer | Burnett verdict.
“As a company that exists to give real estate consumers a better deal, Redfin is proud of our unwavering consumer advocacy. Redfin has saved our clients more than $1.5 billion in fees,” the post added.
Douglas Elliman declined to comment. Weichert and United Real Estate did not respond to requests for comment.
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