Biden Must Bring Relief to Real Estate Consumers, But Will He?

A home is the largest purchase most Americans make, and the real estate market should be subject to rigorous competition. That’s why a recent federal jury verdict concluding that the National Association of Realtors’ (NAR) Buyer-Broker rule violates the antitrust laws is a victory for homebuyers.

Unsurprisingly, a new wave of nationwide class-action lawsuits have been filed around the country in the wake of the nearly $1.8 billion verdict.

On its face, the Buyer-Broker commission rule plainly hurts consumers. The NAR’s “price-fixing collusion,” as the Wall Street Journal referred to it in a recent editorial, has historically required “seller agents to provide a blanket offer of compensation to a buyer’s broker to list a home on the association’s affiliated multiple-listing service (MLS).”

The rule locks in 6% commissions, effectively eliminating competition, and ensures that Americans pay far more to sell their homes than those who sell their homes in the rest of the world where “such self-serving industry arrangements don’t exist.” But the adverse effect of NAR's buyer-broker commission rule is only the tip of the iceberg.

Multiple-listing services ("MLSs") continue to dominate home sales in the United States, which in effect means that the residential real estate market in this country is governed by approximately 500 local NAR Realtor associations. But they have only been able to maintain this power through a series of anticompetitive, monopoly rules that hurt consumers and make them pay abnormally high commissions.

For example, the NAR and MLSs implemented what they call the "Clear Cooperation Policy," which states that if a listing broker markets a property to the public (anywhere), then that broker must publish that listing to the MLS within one day. And because almost all brokers are MLS members by necessity, the MLSs guarantee that all listings will be posted to the MLS, whether or not that is the choice of the consumer.

Similarly, the MLSs have protected against any potential upstart competitors through the "No-Commingling Rule," also referred to as the “Segregation Rule” — which requires that all home portals (like Realtor.com) display non-MLS homes separate and apart from MLS listings. Combined, these rules entrench the NAR/MLS real-estate cartel, thereby, they prevent brokers and portals from working outside the MLS system that controls their listing feeds.

This concerted effort to maintain the cartel penalizes home sellers heavily. The second largest MLS in the country, Bright, recently issued its "On-MLS Study" bragging that "between 2019 and the first quarter of 2023, homes sold on the MLS sold for 17.5% more than comparable homes sold without being listed on the MLS."

The American home seller is therefore stuck — they can either pay the mandated inflated fees determined by NAR and the MLSs, or they can forgo a significant portion of their home's value — resulting in hundreds of billions annually in price disadvantage. This is a false choice imposed on homesellers to force them into overpaying on commissions.

Recognizing that their iron grip on the industry is threatened, the NAR and the MLSs have fought hard to maintain the status quo and maintain their monopolistic pricing practices.

The NAR has responded to recent lawsuits by promising to appeal, to tie up the new cases in lengthy litigation, and to make the commission rule "optional," rather than making any meaningful change to their practices. The time is ripe for federal antitrust enforcers to step up.

The Biden administration previously announced initiatives to protect consumers from billions in "junk" fees, while doing virtually nothing to protect consumers from the NAR-MLS anticompetitive monopoly rules.

A $12 processing fee for a concert ticket can be annoying, but paying tens of thousands of dollars in extra commissions is more than annoying. It hits Americans very hard in the wallet, to the tune of tens of billions of dollars annually.

Since the advent of the internet, shopping, travel, financial and other online companies have disrupted entrenched industry models, saving consumers billions of dollars annually. Yet the NAR and the MLSs have maintained their control over home listings.

It is time to prohibit these anticompetitive and monopolistic policies which only serve to constrict competition, inflate commissions, spur inflation and most importantly penalize homesellers who wish to work outside the NAR/MLS cartel.