Residential real estate brokerage franchiser RE/MAX has agreed to pay $55 million to settle two class-action lawsuits alleging the long-established way that U.S. homes are bought and sold is anticompetitive.
The preliminary agreement, if approved by judges, could remove a second defendant from a case that threatens to upturn the National Association of Realtors and its members’ regional databases of home listings.
Publicly traded RE/MAX on Monday said in a Securities and Exchange Commission filing that the company has agreed to settlements to resolve the Burnett v. NAR and Moehrl v. NAR lawsuits in Midwest federal courtrooms. The Burnett trial is set to begin next month in Kansas City, Missouri.
In both cases, groups of home sellers allege they were forced to pay preset commissions — often 6%, split between buyer and seller agents — from the sale price.
Plaintiffs in both cases say the process is anticompetitive because NAR members are required to post listings on regional multiple listing services and follow the NAR’s guidance on commission structures, leaving few realistic options for home sellers to negotiate lower compensation based on factors such as the complexity or time involved in a potential home sale.
They argue that the longtime way of doing business artificially drives up home prices.
The NAR says the MLS model best serves consumers because it brings together motivated buyers and sellers in a streamlined process. The arrangement also prevents buyers from having to come up with big out-of-pocket payments to their brokers.
Potential for Industry Changes
A multibillion-dollar verdict in either case could be a threat to the Chicago-based NAR and its members’ MLS systems, potentially leading to massive changes in the sector, some industry professionals have told CoStar News.
Defendants in both class-action suits are the NAR and residential brokerages HomeServices of America, RE/MAX, Keller Williams Realty and Anywhere Real Estate.
Denver-based RE/MAX joins Anywhere in offering to settle the lawsuits before they go to trial. Earlier this month, Anywhere offered an $83.5 million settlement.
Both settlements are pending court approval.
Anywhere, previously known as Realogy, is the parent company of residential broker brands Coldwell Banker, Century 21 and Better Homes and Gardens, among others.
‘Clear Path Forward’
RE/MAX’s public filing Monday said the company has offered $55 million and “agreed to make certain changes to its business practices,” which it does not specify.
Proposed settlements by RE/MAX and Anywhere include agreements by those firms to no longer require home sellers to pay buyers’ agents, real estate news website Inman reported. RE/MAX emailed a statement to CoStar saying it's looking to cap legal costs with the settlement offer.
“If approved by the court, the settlement paves the way for a clear path forward for the RE/MAX brand, its franchisees and its agents, removing the uncertainty of ongoing litigation related to these cases,” RE/MAX said in the statement. “While RE/MAX, LLC steadfastly refutes the allegations presented in the lawsuits, this forward-looking decision was made in the best interest of RE/MAX, LLC, its agents and its franchisees, after carefully considering the significant risks and costs associated with continued litigation.
“Co-founders Dave and Gail Liniger built the RE/MAX brand with broker/owners, agents and consumers at the center of the business and, if approved, the settlement specifically includes releases of liability for RE/MAX franchisees and agents.”
RE/MAX said in the filing that it has agreed to pay the settlement into a qualified settlement fund, with an agreement to pay the initial 25% by late this month, another 25% after preliminary court approval and the remaining 50% within 10 days of final court approval.
Defendants that do not settle are at risk of paying out multibillion-dollar settlements. In the larger Moehrl case, headed for a potential trial next year in Chicago, maximum damages could be more than $41 billion.