Real Estate

NAR ‘Cut A Deal’ With Trump DOJ To Undermine Commission Suits: CFA

The National Association of Realtors countered that the Consumer Federation of America’s assertions are “wrong and misleading” and “commissions are very much negotiable.”

A consumer watchdog group is suggesting the National Association of Realtors may have cut a deal with Trump officials in order to undermine class-action lawsuits against the association.

In a press release Thursday, the Consumer Federation of America said there was “some circumstantial evidence” that indicates the proposed settlement between the U.S. Department of Justice and NAR was designed to blunt class-action antitrust lawsuits brought by homebuyers and sellers against the 1.48-million-member trade group.

The suits — the biggest of which are dubbed Moehrl and Sitzer after their lead plaintiffs — seek to have buyers pay their agents directly rather than have listing brokers pay buyer brokers from what the seller pays the listing broker, in order to discourage steering and encourage buyers to negotiate lower buyer broker commissions. Such an outcome could upend the U.S. real estate industry by effectively forcing changes in how buyer’s agents are traditionally compensated.

The DOJ sued NAR in November, alleging some of its rules are illegal restraints on Realtor competition. The federal agency filed a proposed settlement at the same time as it filed the antitrust suit requiring NAR to repeal or change several rules regarding buyer broker commissions and lockbox access.

But the DOJ withdrew from the settlement last week, saying NAR refused to modify the deal to protect the agency’s ability to investigate other NAR conduct that could impact competition in the real estate market.

The CFA argued these points in speculating that NAR’s deal with Trump’s DOJ was meant to undercut the commission suits:

  • “The proposed settlement would have weakened and possibly devastated the claims of plaintiffs in the class-action lawsuits” because it would have been used by NAR in its defense “and possibly to great effect.”
  • “The settlement would have limited DOJ’s pursuit of other antitrust claims against the NAR.”
  • “The NAR appears to have readily assented to the proposed settlement even though it had previously defended NAR Rules that forbid MLSs from making buyer broker commissions public.”
  • “The proposed settlement was announced in November 2020 just after the [presidential] election.”
  • Makan Delrahim, the assistant attorney-general heading the DOJ Antitrust Division, and Michael F. Murray, the division’s deputy assistant attorney-general who signed the original complaint both joined the DOJ and received these appointments during the Trump administration and both left the DOJ in early 2021 after the election.
  •  The Biden administration appointed Richard Powers, a career DOJ official, to the position of assistant attorney-general in the antitrust division and the deputy assistant attorney-general position is now vacant.
  • “It is very unusual for DOJ to withdraw a proposed antitrust settlement. NAR called it a ‘complete, unprecedented breach of agreement.’”

Stephen Brobeck

“One can speculate that the proposed settlement received strong pushback from some career officials strongly committed to impartial antitrust enforcement,” said Stephen Brobeck, a CFA senior fellow, in a statement.

“After the election, these officials were able to delay a final settlement until after the departure of the Trump appointees and their replacement by career officials. There ensued a months-long negotiation with the NAR to give the DOJ greater ability to continue pursuing anti-competitive practices by the industry. When the NAR refused to budge, or budged only a little, the DOJ decided to withdraw the proposed settlement.”

Brobeck said the withdrawal was “good news for consumers” because “the proposed settlement would not have significantly advanced price competition in a marketplace with high, fairly uniform commissions” and because “the settlement threatened to undercut several class action lawsuits that seek to remove the most important barrier to price competition.”

That barrier is NAR’s buyer broker commission rule which the CFA said requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation to participants in the MLS.

“This rule institutionalizes a very strange and anti-competitive method of broker compensation,” the release said. “Sellers and their listing agents decide the commission to be paid to the buyer broker working with the home purchaser. Buyers not only cannot negotiate this commission but usually are not aware of its level because buyer brokers either do not discuss it with them or inform them that it is paid by the seller.”

Mantill Williams

Asked whether NAR had indeed cut such a deal, NAR Vice President of Communications Mantill Williams told Inman, “There’s so much wrong and misleading about this press release, but what we can tell you is as longstanding advocates for consumers, their best interests guide everything we do. Any and all questions about our rules and policies are viewed through that lens: What is in the best interest of the consumer.”

Echoing comments made by Katie Johnson, NAR’s general counsel at the Realtors Legislative Meetings in May, Williams continued, “We need to continue to create greater awareness about how the MLS system creates competitive markets while simultaneously encouraging cooperation between brokers to efficiently transact real estate and ultimately allow more people to achieve the American dream.

“The value of the MLS system to consumers cannot be overstated. The MLS and associated system foster cooperation between brokers providing the best and greatest number of options for buyers and sellers. The MLS is designed to incentivize brokers to work together to buy and sell homes on behalf of their clients as efficiently and transparently as possible.”

Williams also stressed that “commissions are very much negotiable” and “can be negotiated at any point throughout the transaction, including at the outset, after the results of a home inspection and after an offer has been made. Market forces are what drive commission amounts for brokers.”

Email Andrea V. Brambila.

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