Burnett v. NAR lawsuit: Is this the end of 6 percent REALTOR commission?

Burnett v. NAR lawsuit: Is this the end of 6 percent REALTOR commission?

The National Association of REALTORs (NAR) was found guilty of conspiring to keep commission artificially high by a federal jury in Missouri court. The court held NAR, Keller Williams Realty and HomeServices of America liable for 1.8 billion USD damages in the NAR lawsuit. This verdict has the potential to disrupt the US real estate industry permanently.

The home seller argued that NRA rules and policies leave no choice to sellers but to list their property on the Multiple Listing Service (MLS) , a database of listings shared by all NAR members. Whether the seller wants to sell via other channels becomes irrelevant. They further accused that it NAR makes the seller unable to negotiate commission. It also gives NAR members an undue advantage over others and artificially increases commission fees.

NRA and brokerage firms argued that all of their rules including the clear cooperation rule is pro-consumer – as it helps buyers to find all homes available for sale in preferred areas conveniently.

The jury rejected the defendants argument and found NAR and the brokerages guilty of violating antitrust law by conspiring to fix prices and restrain trade. They also ruled that the clear cooperation rule restrained real estate trade unreasonably.

Implications of the lawsuit on NAR and US real estate Industry

This case holds significance in many fronts. It is the first time a jury has found NAR guilty of antitrust violations. In the long run, the verdict could pave the way for significant changes in the industry. NAR’s lobby and policies have had a substantial influence on how houses are sold and bought. If the verdict holds in the appeal, then the real estate companies will have to change in order to survive. New innovative companies are likely to emerge.

The CEO of the National Association of REALTORs, Bob Goldberg has resigned from the top position in the wake of this historic verdict . On November 20th, NAR welcomed a new interim CEO named Nykia Wright who served as the CEO of Chicago Sun Times previously. 

This is not the first tussle with the law for NRA. Before the class action lawsuit, they have been defending acquisitions of anti-competitive practices for years. The federal trade commission’s antitrust bureau has been keeping a close eye on their activities.

They are also facing several other lawsuits and the US Department of Justice seems to be very busy with proceedings against the NRA. This case was the heaviest hammer on NAR this year. 

However, the National Association of REALTORs has announced that the case is far from over. Mantill Williams VP of NRA communications said,

This matter is not close to being final as we will appeal the jury’s verdict. In the interim, we will ask the court to reduce the damages awarded by the jury.”

NAR and the companies are fighting tooth and nail to overturn the verdict. This could potentially lengthen the judicial proceedings. In the meantime, it is safe to assume that this is not the end of the excruciating real estate commission for US consumers, at least for now.

How to avoid 6% real estate commission?

The sure fire way to avoid any commission is to buy and sell property yourself. However, it may require a lot of time and effort to understand the process and actually close the deal. The upside is that you won’t have to share your hard earned money with anyone as a commission. But understandably, this is not a viable option for most of the people. 

No doubt that a professional REALTOR can help you get a better price faster with convenience. So, Opting for a flat fee REALTOR like AzFlatFee can be a good alternative and reduce the burden of commission on your pocket. Unlike traditional REALTORs who charge percent based commissions on property price, flat fee REALTORs charge a fixed amount. This could potentially result in savings of thousands of dollars.

Who are the accused in the NAR case?

The Burnett v. NAR lawsuit currently has three defendants. There were another two but they have already settled outside of the court. Anywhere Real estate and Re/Max paid a cumulative total of $138.5 million as settlement. They have committed to change their business policy and practices including the removal of mandatory NRA membership requirements for its agents. This settlement and announced commitments has saved them from the $1.8 billion damages of the NRA lawsuit verdict.

National Association of REALTORs

National Association of REALTORs is one of the most powerful and the largest trade associations in America. This lobbying group exerts significant influence on America’s real estate industry. The association was founded in 1908 and has 1.5 million members.

The state government holds the authority to issue licenses for real estate agents. However, agents are expected to be members of the association and abide by their extensive code of conduct which are often accused of being against the interest of home buyers and sellers.

Keller Williams Realty

Keller Williams Realty is a privately owned real estate company headquartered in Austin Texas. It was founded in 1983 by Gary W. Keller. It boasts of being the largest real estate company by agent volume. As of 2022 it has accumulated 1100+ offices and 20000 associates all over the globe.

HomeServices of America

HomeServices of America is presently owned by Warren Buffett’s Berkshire Hathaway. It was founded in 1998 in Minneapolis, Minnesota. They claim to be the largest real estate company by transaction number.

Public Sentiment on the NAR class action lawsuit

Many homeowners feel that the 6% real estate commission is too exuberant. Lots of talks around the nar class action lawsuit are going on in all kinds of social handles. Some redditors have even dubbed it a scam. “I can’t see how anyone would think it’s sane to pay $30,000 on a 1M dollar home” a redditor commented in the r/homeowners subreddit. Another redditor shared his thoughts that,My primary concern is that if you try to go around the MLS system you are effectively blackballed in the market.” 

There is much hope and excitement in the homeowners community around the verdict. However, not everyone is convinced and shares the same optimism though everyone is expecting that there will be positive changes in how business is conducted in this industry. 

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