The moneymaking real estate-commission system where brokers pocket as much as 6% of a sale — and critics charge inflates home prices — could face a federal antitrust probe after a years-long investigation, people familiar with the matter told Bloomberg.
The reported scrutiny by the Justice Department comes amid two private class-action lawsuits that look to loosen the stranglehold the powerful National Association of Realtors has over the residential housing market.
The NAR — the trade and lobbying group which most real estate brokerages are required to join — controls many of the country’s multiple listings services, an essential industry tool that aggregates properties available for sale in a given region.
The Justice Department has turned its focus to the real estate commission-sharing system that bakes in a 5% to 6% cut of the sale, which is split between the seller’s and buyer’s agents, according to Bloomberg.
The system, which is largely unique to the US, pushes up the overall price of homes, critics contend.
In Australia and the UK, total commissions on a home sale are roughly 2%, Bloomberg reported.
America’s real estate-commission system charges home sellers as much as 6% — versus 2% in other parts of the world like Australia and the UK. Critics have argued that hefty rates push home prices higher. Newsday via Getty ImagesThe difference in commission prices costs a US seller listing their home for $416,100 house — the median price of a house in the US, according to Federal Reserve data — about $14,000 more than it does in the other countries.
The Justice Department “is concerned about policies, practices, and rules in the residential real estate industry that may increase broker commissions,” the agency said in a recent court filing asking a federal judge in Boston to delay her decision two months on a potential settlement in a separate antitrust suit challenging commission rules.
Meanwhile, a class-action lawsuit in Missouri that began Monday is seeking as much as $4 billion in damages from the so-called “participation rule” in the commission sharing system.
A group of Missouri home sellers brought the suit to Kansas City District Court, arguing that the longstanding process by which residential real estate is sold is anti-competitive because it requires sellers to list their homes on a multiple listings service, where they have to agree to a predetermined commission.
The fee — typically 6% — is “effectively non-negotiable,” the court documents say.
The commission-sharing structure equates to “collusion,” Michael Ketchmark, the lead plaintiffs’ attorney in the Missouri case, told Bloomberg. “The day of accountability is coming.”
The NAR has warned that a ruling in the plaintiff’s favor could render buyer’s agents unaffordable, block equal access to listings and restrict buyer choice, the trade group’s lawyer Lesley Muchow told The Real Deal.
“NAR has developed guidance for local MLS broker marketplaces that supports consumers getting comprehensive, equitable, transparent and reliable home information while brokerages of any size, service or pricing model get a fair shot at competing,” a spokesman for the group told The Post after the story was published.
“REALTORS® adhere to a strict Code of Ethics and bring incredible expertise to guide consumers through the financial, legal and community complexities of buying or selling a home. We are confident we will prevail in proving the lawfulness of the rules being questioned in the trial of Burnett v. NAR, et al. The DOJ is not involved in this matter.”
Another class-action lawsuit in Illinois makes similar claims and is set to go to trial early next year.
The plaintiffs are seeking as much as $40 billion in damages.
Justice Department did not immediately respond to The Post’s request for comment.
The Department of Justice is reportedly gearing up to file it s own antitrust lawsuit that poses a threat to the commission-sharing system altogether. REUTERSThe two lawsuits open the door for the DOJ to file its own antitrust lawsuit, In the worst-case scenario for the real estate industry, it could result in the ban of commission sharing, prohibiting sellers’ agents from compensating buyers’ agents, according to Bloomberg.
The DOJ had reached an antitrust settlement with the NAR during President Donald Trump’s administration in 2020, though it pulled out of the settlement a year later so it could proceed in investigating the association’s rules and whether they harm homebuyers and sellers.
The federal agency said its withdrawal allowed it to move forward with its probe of the NAR “without restriction,” Bloomberg earlier reported.
