Recently, a federal jury in Missouri returned a verdict ordering the National Association of Realtors ("NAR"), along with several other national real estate brokerages, to pay $1,785,310,872.00 in damages after finding NAR and the brokerages conspired to adopt, promote, implement, and enforce the Adversary Commission Rule of the NAR in violation of federal and state antitrust law. If treble damages are awarded, which are available under the Missouri's Antitrust Law, the jury verdict could ultimately exceed five billion dollars ($5,000,000,000.00).
At its core, the class-action lawsuit, filed in 2019, concerned the NAR's Adversary Commission Rule, which as alleged in the lawsuit, "requires a seller broker, on behalf of the seller, to make a blanket, unilateral and effectively non-negotiable offer of compensation to buyer brokers whenever listing a home on a Multiple Listing Service ("MLS") owned by a local NAR association."1 Plaintiffs argued that "[t]he Adversary Commission rule shifts a cost to the seller that would otherwise be paid by the buyer in a competitive market . . . [,] provides an incentive for seller brokers to cooperate with buyer brokers by offering a high commission for the buyer broker . . . [,] [and] fosters an environment in which brokers work cooperatively to split a total commission, instead of openly competing to earn the business of both potential home sellers and potential home buyers based solely on the services to be provided to that represented party."2 Accordingly, the central question presented to the jury was whether the implementation of the Adversary Commission Rule has an anti-competitive effect on the residential real estate market to the detriment of individuals selling their homes. In rendering its verdict for roughly $1.8 billion, the jury answered that question with a resounding "yes."
While it has been the industry norm for seller brokers and buyer brokers to split the roughly 5-6% commission evenly between themselves, the verdict issued by the federal jury threatens to turn that traditional system on its head and bring down all real estate brokerages implementing this rule with it. Indeed, this is not the only lawsuit of its kind. Following the verdict, on October 31, 2023, a separate class action lawsuit was filed in the United States District Court for the Western District of Missouri against other real estate brokerages, which attempts to include as proposed class members anyone in the United States who sold a home from October 31, 2019, to the present with one of the named corporate Defendants.3
Ultimately, this appears to be only the beginning, and it is likely that similar lawsuits will be filed across the country, particularly in areas that have experienced a residential real estate boom. One such area is middle Tennessee. As recently reported by Forbes, the median sales price of residential homes in the Nashville metro area increased from $330,000.00 to $455,000.00—i.e., 37.9%—from August of 2020 to August of 2023.4 While time will tell whether such a similar suit will be filed in Tennessee, one thing is made certain by the jury verdict in Missouri—residential real estate commissions are in the crosshairs, and the days of both buyers and sellers of homes blanketly accepting the payment of commissions to brokers as simply a "cost of doing business" seem numbered.
Footnotes
1. Scott and Rhonda Burnett, et al. v. The National Association of Realtors, et al., Case No. 19-CV-332-SRB (W.D. Mo. 2019) (Third Am. Compl., ¶ 49).
2. Id. at ¶¶ 61-62.
3. Gibson et al. v. National Association of Realtors, et al., Case N. 4:23-CV-00788 (W.D. Mo. Oct. 31, 2023).
4. Prices are High in the Nashville Housing Market But Sales Have Slowed in 2023, Forbes, Oct. 11, 2023 (https://www.forbes.com/sites/andrewdepietro/2023/10/11/prices-are-high-in-the-nashville-housing-market-but-sales-have-slowed-in-2023/?sh=23238ee42f83).
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