'Mounting pressure' on industry as MLS agrees to settle commission suit
MLS PIN has agreed to pay $3 million and stop requiring sellers to offer buyer-broker compensation, a practice at the core of two other major lawsuits.
- The proposed settlement covers MLS PIN only, a broker-owned MLS in Massachusetts.
- While not a legal precedent, the deal “will certainly” come up at trial in other cases.
- Anywhere, HomeServices of America, RE/MAX and Keller Williams are also defendants in the suit and have not settled.
In a move with implications for high-stakes commissions cases, a Massachusetts MLS has agreed to pay $3 million and alter its business practices to settle a class action lawsuit challenging buyer-broker compensation.
In the case brought by Jennifer Nosalek and others, MLS PIN has agreed to change its rules to eliminate the "the requirement that a seller must offer compensation to a buyer-broker," according to a settlement agreement filed Friday in U.S. District Court in Massachusetts.
This is the issue at the heart of two other class action lawsuits — the Moehrl case and the Sitzer/Burnett case — filed against the National Association of Realtors and several major real estate brokerage companies, including Anywhere, HomeServices of America, RE/MAX and Keller Williams.
Both suits claim NAR and the other defendants participated in anticompetitive practices by forcing sellers into a system where they pay a commission that is split between buyer and seller agents. The plaintiffs believe this system has led to inflated buyer agent fees to the detriment of home sellers, and they argue that homebuyers should pay for their own agents.
The Sitzer/Burnett case is scheduled for trial in October in the U.S. District Court for the Western District of Missouri. The Moehrl case is expected to go to trial in 2024.
The same brokerage companies named in the Moehrl and Sitzer/Burnett cases, as well as several subsidiaries, are also defendants in Nosalek vs. MLS PIN, et al — but the settlement agreement filed Friday does not include them.
In fact, the settlement funds will be used toward the continued prosecution of the remaining defendants, and the agreement "guarantees MLS PIN's ongoing cooperation with Plaintiffs' Action against those remaining Defendants," according to the filing.
NAR, meanwhile, is not a defendant in the MLS PIN case. That's because MLS PIN is a broker-owned MLS, which means it may operate with the same rules as association-owned MLSs — NAR's rules — but it is not required to.
"This settlement has nothing to do legally with the Moehrl and Sitzer case but it will certainly be brought up as evidence in the trial," said Russ Cofano, CEO of Collabra Technology. Cofano also has served as an attorney and industry legal counsel. "MLS PIN's decision to settle this case versus going to trial will certainly provide mounting pressure to the defendants in these larger cases."
An Anywhere spokesman shared comments from Pauline Bennett, Coldwell Banker Realty regional president from the Northeast region. Bennett defended the practice of seller-paid compensation for buyer's agents, saying it provides "demonstrable economic benefits" by helping to "unlock homeownership for tens of millions of Americans."
She also said the proposed settlement allows for "seller choice" by making an offer of buyer compensation on the MLS voluntary, not mandatory.
Real Estate News has reached out to the other defendants but they were not immediately available for comment.
Northwest MLS is also broker-owned and last year decided voluntarily to remove requirements around buyer-broker compensation.
"This settlement, and NWMLS's previous voluntary move regarding seller compensation, is in alignment with what plaintiffs are seeking" in Moehrl and Sitzer, Cofano said. "While it's not a legal precedent, it certainly creates a business precedent that MLSs can service the real estate industry without requiring buyer compensation."