Batton suit seeks class status, estimates billions in damages
Millions of homebuyers could seek tens of billions in monetary relief if a court grants class certification in a case that mirrors Sitzer/Burnett and others.
The plaintiffs in a price-fixing lawsuit filed against the National Association of Realtors and major real estate franchisors are requesting class certification to represent the estimated millions of buyers who allegedly overpaid as a result of NAR's commission rules.
Similar to the landmark Sitzer/Burnett case — but filed by buyers, not sellers — the suit, known as Batton, alleges that NAR, Anywhere, Keller Williams and RE/MAX engaged in a "decades-long, nationwide antitrust conspiracy" to inflate buyer-broker commissions, resulting in buyers paying "billions in overcharges."
"This lawsuit seeks to make them whole," the Sept. 26 filing states.
Who would be included: The class, which attorneys for the plaintiffs estimate would number in the millions, would comprise buyers in 23 states and Washington, D.C.
To qualify, buyers had to have paid a buyer-broker commission when they purchased a property listed with any of 39 MLSs — including the nation's largest — from as early as Jan. 25, 2015 to as late as Dec. 31, 2021. The specific time period for each MLS depends on the state antitrust or consumer protection laws under which the plaintiffs are suing.
Calculating damages: Dr. Rosa M. Abrantes-Metz, an expert witness hired by the plaintiffs, examined transactions across four sample MLSs — Triad MLS in North Carolina, Stellar MLS in Florida, Southwest MLS in New Mexico and South-Central Kansas MLS in Kansas — and compared buyer agent commissions in those markets to comparable foreign markets.
Abrantes-Metz determined that buyer agent commissions abroad averaged about 1.38% compared to the "typical" 3% rate in the U.S. By her calculations, each buyer in the proposed class would be entitled to damages in the amount of $8,524 due to inflated commissions and home prices.
The class damages, according to Abrantes-Metz, would add up to $3.6 billion for those four MLSs alone. Extrapolated to the rest of the subject MLSs, the total damages could be in the tens of billions.
Will buyers who also sold be eligible to join? A question currently on appeal concerns whether the court will allow buyers who also sold homes — and whose claims as sellers were already covered by nationwide settlements in other cases — to remain part of the buyer class. A judge in the Sitzer/Burnett and Gibson cases previously ruled that such buyers would not be eligible to participate in the class.
Abrantes-Metz determined that at least 24-28% of class members would not have had a home sale during the period of time covered by Batton, but even if the class were reduced by roughly three-quarters, its size would still be substantial.
Expert calls out commission 'rigidity' regardless of agent quality: The primary rule at issue is NAR's now-defunct Participation Rule — also known as the buyer-broker commission rule — which required listing brokers to make a blanket offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS.
The rule "mandated sellers to offer the exact same compensation terms to every buyer agent without regard to their experience, the services they were providing to the buyer, or the financial arrangement they made with the buyer," the filing alleges.
Dr. Norman Miller, another expert hired by the plaintiffs, found that U.S. commission rates "displayed extreme price rigidity, remaining around the same elevated rates despite inflation and changes in technology that have increased efficiencies and regardless of the agent's experience, hours worked, or tasks performed."
The issue of steering: Miller also alleged that NAR's rules were "incentivizing agents to 'steer' buyers to particular homes based on the home's commission rate" and added, "even the mere threat of steering incentivizes agents to charge higher commissions."
What NAR has said: In an emailed statement, a NAR spokesperson told Real Estate News that the trade association "fosters a competitive, fair, and transparent real estate marketplace, empowering buyers and sellers to fully negotiate compensation with their agent and access the many benefits that professional representation provides."
"We will continue to advocate for our position as the case proceeds," the spokesperson said.
Anywhere and RE/MAX declined to comment on the filing. Real Estate News has also asked Keller Williams for comment and will update this story if and when a response is received.