Expected Air Date: 3/30/19
It’s March madness time again. How’s your bracket doing?
Someone is suing the system. Yes the entire MLS system is under assault. A recently filed class-action antitrust suit against the National Association of Realtors, among other major real estate players, could spell a serious shake-up for the industry. If the claim’s plaintiffs win out? It may change the face of buying and selling real estate as we know it.
In Moerhl v National Association Realtors (NAR), home sellers from across the nation are claiming that NAR’s compensation policies—which require all member brokers demand blanket, non-negotiable buyer-side commission fees when listing a home on a Multiple Listing Service—is a violation of antitrust law. Realogy Holdings, HomeServices of America, RE/MAX and Keller Williams are also named in the suit.
Though Minnesota home seller Christopher Moehrl originated the claim, sellers who listed their properties on 21 different Multiple Listing Services across the country are also plaintiffs on the antitrust suit. These MLSs cover Baltimore, Philadelphia, Washington, D.C., Detroit, Cleveland, Milwaukee, Houston, Dallas, Las Vegas and many of the nation’s largest housing markets.
The suit’s attorneys are currently soliciting eligible class action members—those who have sold a home on a named MLS in the last five years—at HBSSlaw.com.
If the plaintiffs win it could spell the end of the the MLS system and then what? Stay tuned — we will come back and consider the implications of this impending shake-up. How’s that for a doom and gloom headline?
How to contact us
Twitter and Instagram @FlippingAmerica
Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question.
Email your questions to firstname.lastname@example.org. Please always tell us where you are from. We like to know where the show is being heard. And let us know how you found out about us if you don’t mind.
- Lunch with me every Wednesday. Baraonda
- My latest article in Forbes is out. bit.ly/findredeals.
- The FAN is here!
- Hey would you buy me lunch just so you could pick my brain? 32 cents per day. For less than the price of that lunch, just $9.67 per month, you can have a whole month’s worth of my brain pickings by joining the Premium membership. Just go to flippingamericanetwork.com and click on the FAN. On this show I keep a pretty narrow focus on real estate and small business development. But if you subscribe to my FAN premium blog you’ll find out what I think about a wide variety of topics. I will do my best to give you a $10 or $100 idea with every post and I WILL be talking about real estate, but I’m going to weigh in on some other topics as well. Which topics? Whatever interests me. And I have a wide range of interests.
- Would you like to invest in the Flipping America projects across the country? Coming soon you will be able to for as little as $100. That’s right, Flipping America is partnering with Ground Floor Funding to create a crowd-funded platform where you can invest in the deals we are doing here. The fund will pay out a 8% preferred rate of return and can go as high as 16%. You can make money with me, the Flipping America Guy.
- Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
- Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.
There has been considerable media interest in the litigation filed on March 6 challenging the MLS system and the way that broker commissions are paid. The following are FAQs about the case.
1. Is it okay to discuss the lawsuit with my clients?
Absolutely. Brokers and agents are encouraged to have transparent conversations with current and prospective clients about the services they will provide and how they will get paid for those services. This lawsuit doesn’t change that. Brokers are compensated for their services and the MLS system is uniquely designed to facilitate successful closings in the best interest of home buyers and sellers.
2. What is the lawsuit about?
The primary allegation inaccurately claims that home sellers are unfairly being required to pay the commissions of buyers’ brokers, by falsely asserting that NAR rules prohibit seller and buyer brokers from negotiating over the amount of commission that will be paid to the buyer broker, and that such rules have inflated commissions. In fact, the commission offered to the buyer’s broker is not at all determined by NAR or the MLS. And, contrary to what the class action law firms allege, the commission is subject to negotiation.
3. Is it true that listing brokers and buyer brokers conspire to keep commission fees high?
The claim is patently false. First, the commissions established in a listing agreement are the result of negotiations between the seller and the listing broker. Because consumers have a multitude of choices in service and fee models, they also have great choice regarding payment for real estate services. Importantly, sellers have the ability to discuss and negotiate with their broker what fee they are willing to pay for their broker’s services and what fee they are willing to pay a cooperating broker for bringing a willing and able buyer to close the transaction.
Furthermore, the plaintiffs cannot have data supporting their commission claim because, while the MLS displays a listing broker’s offer of compensation to a buyer’s broker, it does not track or record the listing broker’s commission nor the final amount paid to a buyer’s broker. Such information is required by law to be set forth in the final closing documents, which are not publicly available.
4. The lawsuit claims that the role of the buyer broker has been reduced over time, and therefore this broker does not deserve the same level of fees as enjoyed in the past. What’s your position on this?
Again, this is absolutely false. Research has shown that while the vast majority of buyer’s begin their home search online, they soon turn to the assistance of a broker to guide them through this infrequent, complex transaction. In fact, given the voluminous amount of information that buyers now have available, the need to have a qualified, local professional help sift through this information and advise the client is crucial. Buyer brokers do that, as well as many other functions that are essential to the buying process.
5. Do brokers try to keep their commission arrangements a secret from the home seller and home buyer, to better “conspire” to keep fees artificially high?
Absolutely not. Commissions are initially set by the seller with the advice of the listing broker on how much to offer as compensation to the buyer’s broker who successfully closes the transaction with a ready, willing, and able buyer. We believe that the most important part of an ethical negotiation with a prospective seller or buyer is transparency, which includes how commissions are calculated. We encourage brokers to have a conversation with their prospective clients about commissions at the very beginning of the relationship. Furthermore, many listing contracts explicitly state exact commission arrangements, which are then known by the seller before he or she signs the contract in the first place.
6. What is the motivation for the plaintiffs bringing this case?
We won’t speculate on motivation. What we can tell is that this lawsuit is wrong on the facts, wrong on the law, and wrong on the economics. The reality is that the MLS system works in the best interests of both buyers and sellers, and the way commissions are paid plays a key role in maximizing this benefit.
7. What would be the impact on the home buying market if the plaintiffs are successful?
We won’t speculate on what may or may not happen. What we can tell you is how confident we are in our position about the clear pro-competitive, pro-consumer benefits of the MLS system. The MLS has been around for well over 100 years and has contributed to an orderly and efficient marketplace. We are going to aggressively defend ourselves, along with the rights that benefit home buyer and sellers to continue to have access to a highly efficient market.
- Warren, Duluth, GA, “How can I get a list of foreclosures in Georgia?”
- Peter, Tampa, FL, “What are the financial arrangements for buying at the foreclosure auction? How much money do I need to bring?”
- Connie, Decatur, GA “The ad says cash or certified funds. I guess that means official checks, but if I don’t know how much I’m going to bid, how do I know how much to make out the check for?”
- Demetrius, Macon, GA “What type of Deed will I receive? Will it be free and clear?”
- Presley, Milwaukee, WI, “From a list of more than a hundred properties being sold — and I can’t believe it’s so many — how do you begin to sort it all out to decide what to buy? Do you look at all of them?”
- Collette, Douglasville, GA “How do you get into the houses to see what kind of work they will need? I’ve driven by a few and it looks like people are still living in them.”
- Earl, Hoover, AL “What is the right of redemption? It sounds like a reason I would NOT want to buy at the courthouse steps but perhaps I am misunderstanding.”
- Cynandra, East Point, GA “If I buy a house and people are still living there, what do I do with them?”
- Cash for keys
- Sell back to them for better deal?
- Jennifer, John’s Creek, GA “I just heard that it takes 30-60 days to get the deed from the foreclosing attorney. What is my legal status in the property during this waiting period and what can I do with it?”
Comment Line calls and Questions
Call 404-369-1018, press 1 and leave your message!
Motivational Thoughts for the day
- “Security Is Mostly A Superstition. Life Is Either A Daring Adventure Or Nothing.” – Life Quote By Helen Keller