Real estate brokers pocketing up to 6% in fees draw antitrust scrutiny

16 October 2023

(Bloomberg) -- The lucrative broker commission system at the heart of the US residential housing market is facing unprecedented antitrust scrutiny from the Justice Department and two private class-action lawsuits that risk weakening the National Association of Realtors, the industry's powerful lobbying group.

Federal antitrust enforcers are poised to decide whether to pursue their own case after a years-long investigation, according to a person familiar with the issue. The Justice Department is focused on the real estate commission-sharing system that typically puts homesellers on the hook for a 5% to 6% cut of the sale, split between their agent and the buyer's agent.

It's a structure largely unique to the US, preserved by the association's control of many of the country's multiple listing services - an essential tool that aggregates properties available for sale in a given region. To use the system, NAR requires sellers to offer compensation to the buyer's representative, which critics say inflates home prices.

This practice will also be on trial in two antitrust class actions, including one beginning Monday in Missouri. That case could result in as much as $4 billion in damages, while plaintiffs in an Illinois trial early next year are seeking as much as $40 billion.

The commission-sharing structure equates to "collusion," Michael Ketchmark, the lead plaintiffs' attorney in the Missouri case, said in an interview. "The day of accountability is coming."

The DOJ began investigating residential real estate under the Trump administration, and NAR agreed to measures, including increased price transparency, to settle the case. Biden officials in 2021 pulled out of that agreement, saying they wanted the ability to pursue future antitrust claims against the group, but a federal judge in January said the...