Judge denies motion to dismiss broker commissions lawsuit

A group of Massachusetts sellers claim the brokerages are conspiring to inflate broker commissions

From left: RE/MAX CEO Adam Contos, KW CEO Carl Liebert, Home Services of America CEO Gina Blefari, Realogy Holdings' Ryan M. Schneider (Photos via Facebook, KW, Home Services)
From left: RE/MAX CEO Adam Contos, KW CEO Carl Liebert, Home Services of America CEO Gina Blefari, Realogy Holdings' Ryan M. Schneider (Photos via Facebook, KW, Home Services)

In the quest to explain why home sale commissions are consistently high, it turns out conspiracy theorists could be on to something.

A judge denied a motion from Realogy Holdings to dismiss a lawsuit by a group of home sellers that argues brokerages conspire to inflate commissions.

A group of Massachusetts home sellers filed the suit, Bauman v. MLS, in December 2020. It alleges that brokerages including Realogy, Keller Williams, HomeServices of America and RE/MAX, along with the owner of multiple listing service Pinergy, violated antitrust laws with a “buyer-broker commission rule.”

Sellers that use Pinergy are required to offer a set commission to any broker that found a buyer for their home, according to the complaint. It is typically a percentage of the sales price.

The sellers argue in the suit that such a practice is anticompetitive and causes sellers to pay “artificially inflated, supra-competitive commission rates.”

The system promotes steering, the suit argues, which “prevents rates from falling to competitive levels and enables brokers to avoid doing business with or otherwise retaliate against brokers who attempt to offer materially lower rates.”

Realogy and the suit’s other defendants filed a motion to dismiss the complaint in March 2021. A judge denied the motion Dec. 10, according to a Jan. 5 SEC filing.

MLS Property Information Network, which owns Pinergy, did not immediately respond to a request for comment. Keller Williams, HomeServices and RE/MAX declined to comment. The SEC filing noted that the defendants dispute the allegations and will “vigorously defend” themselves.

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With 41,000 members, MLS PIN is the seventh-largest multiple listing service in the U.S., serving brokers and salespeople across New York and New England. Eight of its 15 board members are realtors for franchises owned by Berkshire Hathaway HomeServices, which owns HomeServices of America, RE/MAX and Realogy.

Rather than have sellers pay buyer-broker commission rates, the suit claims that if buyers and sellers each paid their own brokers, the total commission would be less than in the current system, in which sellers pay both.

The sellers involved in the suit did not respond to requests for comment.

Bauman v. MLS isn’t the only suit alleging anticompetitive behavior by brokerages. Other legal battles include Moehrl v. NAR in Missouri and Sitzer v. NAR in Illinois.

Instead of going after the National Association of Realtors, Bauman v. MLS took a different route by targeting a multiple listing service.

Conversations have been brewing regarding who should be responsible for paying brokerage commissions fees. A consumer watchdog organization pushing for the uncoupling of buyer and seller commissions found the broker fees were suspiciously uniform in markets up and down the East Coast.

The group argued that such a move would make homes more affordable. But NAR said it would do the opposite.

“Forcing buyers to take on the additional out-of-pocket expense would cause added financial hardship and could freeze out many from the market entirely, particularly first-time and low- and middle-income homebuyers,” the NAR spokesperson told The Real Deal last month.

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