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Combatting key claims in class-action accusations toward NAR [EDITORIAL]

(REAL ESTATE ASSOCIATIONS) With the latest accusations in class-action suit against the NAR, one real estate agent has done some digging to see how viable these claims really are.

Woman looking at laptop working on marketing..

I am a member of NAR, and for full disclosure, I am not an attorney. I reviewed the various complaints and performed research, discovering information that could aid in the defense. In my view, Plaintiff (Conti-CA) makes misleading claims and adds assertions to muddy the waters in this class-action suit.

For example:

“Requiring every seller‐broker, when listing a property on an MLS, to make a “blanket unilateral offer […] of compensation” to any buyer agent who may find a buyer for the home;”

This is misleading; compensation is not paid to agents who “find a buyer for the home.” Commissions are earned upon an Agent procuring a client who successfully closes on a transaction that includes mutually agreed terms and conditions. This is not an adversarial transaction, despite how Attorneys try to frame it. Sellers want to sell; Buyers want to acquire, and Agents facilitate.

Moreover: “Requiring that the offer of compensation to the buyer agent be a blanket offer — i.e., the exact same compensation terms must be simultaneously offered to every buyer agent without regard to their experience, the services they are providing to the buyer, or the financial arrangement they have made with the buyer;”

If a Buyer’s Agent procures a Buyer who successfully acquires a residence at a price and terms agreeable to the Seller, then “compensation terms must be simultaneously offered to every buyer agent without regard to their experience” is irrelevant.

Furthermore, I challenge these “high power” law firms to name a profession where compensation is not established upfront.

Additionally, they claim “NAR’s requirement that offers of compensation be expressed in specific dollar or percentage terms enable buyer agents to easily compare the financial compensation offered to them by home sellers and steer their clients to higher commission homes.”

Would the Plaintiff’s Counsel share an alternative method for conveying compensation? Maybe the Peso so Agents would take extra steps using currency converters?

In the same complaint, Plaintiffs assert, “According to data from the NAR, many homebuyers no longer locate prospective homes with the assistance of a broker, but rather independently through online services. Buyer agents increasingly have been retained after their client has already found the home the client wishes to buy.”

These assertions obliterate the Plaintiffs’ allegations of massive steering. If a Consumer finds a home, and a Realtor refuses to show the house, the Consumer will find another Agent. Zillow had 9.8 billion page views in 2020.

Conspiracy

The most significant allegation is that a conspiracy exists between NAR members to use the MLS to create a supra-competitive pricing scheme, and decoupling agent commissions (each Consumer pays their agent) would result in a significant decline in commission structures.

This claim fails.

1st Plaintiffs attempt to frame the argument based on the percentage of the sale price when the fees to transact are a superior factor. Consumers bank dollars, not percentages. Moreover, they cherry-pick a few markets with an emphasis on Singapore as examples of lower commission percentages.

In a three-minute discovery session, I researched the US v Singapore markets, and these are my findings.

  • The average price of a US residence totaled $389,400 (based on 2019 data.)
  • The commission paid, based on the US average of 4.94%, totaled $19,236
  • The average price of a Singapore residence totaled $874,372 USD.
  • The commission paid, based on the Singapore average of 3%, totaled $26,231 USD.

Moreover, some publications suggest there is commission sharing between Buyer/Seller Agents in Singapore. Again, Consumer’s bank dollars, not percentages, it appears that the Plaintiff’s counsel is oblivious to this variable.

It is MORE expensive to transact in Singapore.

Decoupling Commissions

I have found no evidence that decoupling reduces commissions. As shown in the following images, I discovered the opposite based on a 2015 study by the Wall Street Journal. The WSJ articles display in the first position when performing a simple Google search; however, I have yet to see WSJ commission studies cited in any complaints. Alternatively, they cite studies from 2002. Furthermore, the US average rate is only slightly higher than the 10-Country average.

Data | WSJ

 

Counterclaims Against Plaintiffs

In my view, a reasonable person would conclude Plaintiffs used irrelevant data and omitted material information. Most purchase agreements include language similar to “ATTORNEY FEES: In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller.”

Considering Plaintiffs are suing NAR, the four largest Brokerages, the MLS system, and smaller Brokers as co-conspirators, these misleading claims impact 1000’s firms, so I suggest counterclaiming Plaintiffs for $5,000,000 and publicize it.

This may deter Consumers from engaging with ambulance-chasing law firms.

The issue of who pays commissions is irrelevant and undeterminable because Sellers will claim they are deducted from net proceeds while Buyers will claim it is baked into the purchase price, thus commissions are paid by Buyers. Even the various class-action claims conflict related to the party paying commissions.

In reality, the commission percentage assertions are a feeble attempt by parties to create an apples-to-apples comparison to other markets, however the information included in this opinion makes these claims defective.

It is time to inflict an overwhelming response.

Anthony Phillips is the Co-Founder and President of Luxury Real Estate Advisors and non-profit, Luxury Cares. Luxury Real Estate Advisors is the preeminent provider of sales, leasing, property management, home and investor services to the Las Vegas luxury real estate segment.

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