The decades-old way homes are sold could change dramatically if plaintiffs in two class-action lawsuits prevail, potentially putting multiple listing services out of business and erasing billions of dollars in future broker commissions.

That is the worst-case scenario for the National Association of Realtors and its members’ regional databases of home listings throughout North America.

The organization faces the threat of extinction, or at least major changes to the way its members do business, because of two federal lawsuits scheduled to play out in Midwest courtrooms, industry professionals say.

The lawsuits allege that the longstanding process by which residences are sold is anticompetitive because sellers are required to list their properties on an MLS and agree ahead of time to provide commissions at a predetermined rate — typically 6% of the sale price — to be split among buyer and seller agents, with few realistic options to avoid or significantly reduce the amount of those fees.

Plaintiffs argue that the longstanding system provides little flexibility to adjust agent compensation based on the complexity of a deal or other factors.

Although the cases have received relatively little attention from homeowners, and even some rank-and-file Realtors, their outcomes could bring a seismic shift in home transactions.

A market-moving judgment in either case also could have broader implications for the economy, while directly affecting online home marketplaces such as Redfin, Zillow, Trulia and Realtor.com that post MLS-listed properties and collect portions of broker commissions on deals for which they provide sales leads.

With potential damages in the tens of billions of dollars, the cases could have devastating effects on the NAR as well as every multiple listing service, Realtor association, brokerage and franchise, according to Rob Hahn, a longtime MLS consultant.

“Depending on the size of damages, every one of them could go bankrupt,” Hahn, founder of Las Vegas-based 7DS Associates, told CoStar News. “It’s huge, and most people simply aren’t talking about it. Few people are sounding the alarm, I think, because they don’t want to freak people out.”

Hahn, a strategic consultant to MLS operators since 2009, is now focused on running Decentre Labs, an auction-based MLS in Las Vegas that he expects to become a future model for home sales.

Plaintiffs in the two federal cases allege that the process by which most U.S. homes are sold — through the MLS databases with brokers splitting a commission — artificially drives up home prices.

Plaintiffs in the lawsuits accuse the NAR and residential brokerages of perpetuating a longtime system designed to guarantee a hefty commission split among buyer and seller brokers, regardless of the time or complexity involved in a particular sale. In supporting that system, and discouraging deviation from the formula, the NAR is costing consumers billions of dollars in fees collectively each year, lawyers allege in the lawsuits.

The NAR says the MLS model best serves consumers because it brings together motivated buyers and sellers in a streamlined process. The arrangement, in which sellers pay the commission, also prevents buyers from needing to come up with big out-of-pocket payments to their brokers.

The NAR “vehemently disagrees with the assertion that the current system is anticompetitive,” the organization’s vice president of public relations and communication strategy, Mantill Williams, said in an email to CoStar News. He added that the NAR is “confident we will prevail in all cases because our rules are pro-consumer and pro-competitive."

“The U.S. model of local broker cooperation has long been — and is still — viewed as the best value for consumers around the world,” Williams said. “Local broker marketplaces provide sellers equal access to the largest possible pool of potential buyers and create the greatest number of housing options for buyers in one place without hidden or extra costs.

“Sellers making offers of compensation to buyer brokers also gives first-time, low/middle-income and all homebuyers a better shot at affording a home and professional representation,” Williams said.

Even if there were to be a devastating verdict, a major player from the residential or commercial real estate technology sector probably would step in to provide an MLS replacement to offer consistency in the industry, Hahn conceded.

Another MLS and Realtor association consultant, Jack Miller, is less convinced that the worst-case scenario will play out for the NAR. Miller, president and CEO of Ladera Ranch, California-based T3 Sixty, said in an email to CoStar News that the lawsuits "have significant implications for the practices in buyer brokerage in the industry."

But Miller added: "The plaintiffs’ attorneys, while desirous of achieving a good settlement from the court cases, would be working against their own interests to produce a settlement so large that it is unpayable by the industry. It is far more likely that settlements will be reached that are attainable by the industry, and that industry practices will adjust."

Defendants in the cases are the NAR and residential brokerages HomeServices of America, RE/MAX, Keller Williams Realty and Anywhere Real Estate.

Anywhere, formerly known as Realogy, is the first defendant to emerge with a potential settlement in the case. It is the parent company of several residential brokerage brands, including Coldwell Banker, Century 21 and Better Homes and Gardens.

The NAR says it is America’s largest trade organization, with more than 1.5 million members throughout the country. Members oversee hundreds of MLS systems and set industry standards, with the NAR providing guidelines on how homes should be listed and sold.

That includes requiring member agents to post available properties and prohibiting so-called pocket listings, or listings not available to the average homebuyer.

There are about 560 MLS systems in the United States and about 40 more in Canada, according to the NAR.

“Without the National Association of Realtors and its guidelines for the local [MLS] broker marketplaces, information on homes would be inaccurate, unreliable and scattered across real estate sites, disadvantaging buyers and sellers,” Williams said in the email. “Buyers and sellers likely would have less choice among brokerages, services and commissions, hurting the average consumer. It would remove a central database for consumers to access, leading to a few players dominating the market.”

The Chicago-based NAR is trying to preserve its longstanding compensation model for agents in the wake of a sudden leadership change in late August. President Kenny Parcell resigned following a New York Times report that accused him of sexual harassment and fostering a toxic workplace. Parcell denied the allegations to RISMedia, which first reported his resignation.

One case, set to begin Oct. 16 in U.S. District Court in Kansas City, Missouri, could bring multibillion-dollar damages against the NAR and hundreds of MLS members. The other, potentially headed to trial in a U.S. District Court in Chicago in 2024, could lead to more than $40 billion in damages in the worst-case scenario for the NAR and MLS systems.

A ruling anywhere near that amount could put the NAR out of business, leading to massive changes in how homes are bought and sold and potentially pushing thousands of agents out of the business, some industry professionals predict.

The Burnett v. NAR lawsuit in Missouri and Moehrl v. NAR in Illinois are similar antitrust cases filed by home sellers who allege they were forced to pay inflated broker fees. Sellers pay commissions at closing based on the sale price.

The lawsuits seek to disentangle commissions paid to buyer and seller brokers, arguing that each side should be allowed to negotiate its own fee structure.

“These are big, complex antitrust cases, and the defendants are treating them as if they have significant implications for how they do business,” Northwestern University law professor James Speta said in an interview.

The NAR argues that the existing 6% model encourages cooperation between agents, creating an effective marketplace for sales.

HomeServices and RE/MAX declined to comment. Keller Williams did not respond to requests for comment from CoStar News.

Including likely appeals, the lawsuits could take years to fully play out without major settlements.

Earlier this month, Anywhere agreed to an $83.5 million settlement of its part in the two major lawsuits, real estate industry news publication Inman reported. The settlement still must be approved by both courts, and it's yet to be seen whether resolving those cases would protect the company from additional cases that could arise in other parts of the country not currently affected by the two class-action suits.

“We are pleased that Anywhere has reached a nationwide settlement with the plaintiffs in the Burnett and Moerhl lawsuits," Anywhere said in a statement emailed to CoStar News. "The path to obtain final approval and implement the settlement is a long one, and Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees. We believe the settlement will remove future uncertainty with respect to the upcoming trial, potential additional claims, and legal expense, enabling Anywhere to focus on and continue delivering what’s next for agents and franchisees.”

The exact terms of the settlement will remain confidential until the plaintiffs file a motion for approval, Inman reported.

Williams said in an email that the "NAR’s commitment to defend ourselves in court remains unchanged" by the proposed Anywhere settlement. "We look forward to arguing our case," he added.

Nearly 97% of the country’s multiple listing services are owned or operated by one or more local Realtor association, according to the lawsuit in Chicago. An MLS listing contains details on broker commissions agreed to at the time a property is listed, typically at or close to the 6% standard. Those listing agreements are not visible to consumers.

Williams said, “It is a pure myth that there is a standard commission used throughout the industry.”

Plaintiffs in the Chicago case, though, say listings with below-standard commissions are likely to languish, giving consumers little leeway to renegotiate the rates at which agents are compensated.

One expert witness for the plaintiffs, New York University economics professor Nicholas Economides, said buyer brokers are used in 87% of U.S. home sales, compared with 5% to 20% in three comparison markets: Australia, the Netherlands and the United Kingdom, according to court filings. In those countries, agent commissions also are typically lower than those seen in the United States, he said.

If not for the MLS system in place, commissions likely would fall, Economides argued.

The NAR disputes his methodology and says his estimated $13.7 billion in damages is arbitrary. Because treble damages — effectively triple the settled amount — are applicable in this case, that figure could amount to $41.1 billion.

Another plaintiff witness, Harvard Law School professor and antitrust expert Einer Elhauge, argues that buyer brokers would be used far less frequently if consumers were given the option. Instead, buyers would use online marketplaces such as Zillow to find homes, he said in the filings.

Elhauge noted that other industries, such as travel and stock trading, have dropped or significantly lowered commissions as consumers have adopted online platforms, while residential real estate commissions have not come down.

The NAR said it provides updates on the court cases to members.

"The industry is becoming much more aware of these lawsuits, but it is still evident that they are not on the radar of a significant number of volunteer leaders, association and MLS executives, agents and brokers in the industry," Miller said in his email. "We have heard the refrain that results from these lawsuits are years away; the recent Anywhere settlement is a cutting rejoinder to this argument, demonstrating that change could happen a lot faster than some have relied on.

"Many will not pay attention to possible changes in the buyer brokerage business until it is forced on them via a settlement with conditions, and at that point, they will be behind those that have prepared," Miller said.

Establishing damages is likely to be one of the biggest challenges for the plaintiffs, according to Northwestern’s Speta.

“In a world without these rules, how much would they actually have paid?” he asked.

In the Missouri case, the plaintiffs already have one early advantage. That court has ruled the case can proceed on a per se basis, meaning the alleged actions are so likely to have been anticompetitive that they’re treated differently in court, Speta said.

“It’s a very important ruling that creates much more significant risk for the National Association of Realtors,” Speta said. “It makes the plaintiffs’ chances of winning the case significantly higher.

“It’s not over for the defendants, but as of now, the court has said the case can proceed under the per se theory. It’s troublesome for the defendants,” he said.

The key distinction could make moot the NAR’s position that the cooperation between buyer and seller brokers benefits the consumer, Speta continued.

“In a per se case, the defendant can’t win by saying there are really good reasons for doing this,” Speta said. “The consequence of a per se case is that the agreement is illegal.”

Homes.com, owned by CoStar News parent CoStar Group, would not be directly affected by the ongoing lawsuits because its revenue comes from advertising fees rather than commissions.

It’s unclear how much effect MLS verdicts could have on commercial real estate, where broker commissions also are common, but some brokers do business in both sectors.

“If the worst-case scenario [for the NAR] comes to pass, residential will look like commercial real estate,” Decentre's Hahn said.

“You’ll end up with four to five dominant brokerage firms, the way commercial real estate is dominated by three firms,” he said of CBRE, JLL and Cushman & Wakefield. Broker commission structures would be negotiated upfront by sellers, as also seen in commercial deals.

Home sales could shift more to an auction format such as Hahn’s Las Vegas-based MLS, he said. The only one of its kind, the MLS sells homes by auction, with buyers paying a premium.

Having a comprehensive list of properties is so vital that, if the MLS network were to collapse, a large company likely would step in to replace it with one nationwide database, Hahn said.

One major player would step forward to run a single, national MLS-like database containing every available home, Hahn said. Two candidates are CoStar, which already offers a similar database of commercial buildings used by industry professionals, and online residential marketplace Zillow, he said.

A NAR lawsuit loss could usher in sweeping changes to commissions, with consumers able to negotiate hourly rates, flat fees or other formulas. Buyers could be asked to pay their own brokers, rather than having both commissions funded by the seller at closing.

That would most adversely affect all first-time buyers and increase an already large racial disparity for home ownership, NAR’s Williams said in the statement.

“Or buyers would be forced to go through the most important and complex purchase of their lifetime without the advice and counsel from a trusted professional,” Williams said.

A drop in commission to an average of 2% for each broker would immediately push 40% or more of existing Realtors out of the business, with more likely to follow over time, Hahn estimated.

“If you’re buying a $150,000 condo, do you need an agent with 30 years of experience? Probably not,” Hahn said. “If there’s a complicated estate sale, you don’t want to do that with an inexperienced agent. How much expertise should you buy? The consumer can decide.

“Right now, it all costs the same. That doesn’t pass the smell test.”