Last couple of days, I’ve given presentations and sat on a panel discussion talking about the class action lawsuits against NAR over the issue of commissions. I thought most people knew about these all-important cases that are making their way through the federal courts. Apparently, only about half of the REALTORS had even heard about them, and those half had not really paid a lot of attention to these cases.
Well, the news that Sitzer v. NAR (now called Burnett v. NAR) got class action status got these cases on the top of people’s minds. Hence, the presentations and panels in 2022 despite the fact that both of those cases were filed sometime in 2019.
In an earlier post, I noted that the potential damages from Sitzer was around $6 billion. (I did the math wrong in the original post.) That was based on the following logic:
Seeing as how Missouri REALTORS says there are about 100K homes sold in Missouri in 2021, at the average price of $258,435 for a sales volume of $25 billion… but 2021 was up 26% YOY… let’s just say we’re talking about $20 billion in sales volume per year since 2015 with about 100K sellers per year.
But, the class is limited to those sellers who used HomeServices of America, KW, Realogy, RE/MAX, HSF or BHH. Let’s say that’s about half the market? The remaining sellers used some other independent brokerage maybe, like EXP or Redfin or someone else.
So this class action lawsuit might be 7 years x 50K sellers = 350K plaintiffs. They’ll be claiming damages equal to 3% of the sales volume, so… call it 3% of $70 billion = $2.1 billion. (Remember that only half the sales are in the class.) Treble for antitrust, so about $6.3 billion in potential damages.
What occurred to me is that as scary as $6 billion in damages is, it pales in comparison to what Moehrl v. NAR is asking for.
Sitzer and Moehrl: One State vs. Many
The two lawsuits are essentially identical, claiming the same violations of antitrust law. The key difference is that Sitzer/Burnett was concerned only with Missouri:
The local realtor associations own and operate various MLSs, including the Heartland MLS, Columbia Board of Realtors (“CBOR”),Mid America Regional Information System (“MARIS”), and the Southern Missouri Regional (collectively, the “Subject MLSs”). Plaintiffs represent classes of home sellers who listed their property on one of the four Subject MLSs.
In Moehrl, by contrast, the targets stretch across the country. From the Complaint:
- The Bright MLS (including the metropolitan areas of Baltimore, Maryland; Philadelphia, Pennsylvania; Richmond, Virginia; Washington, D.C.);
- My Florida Regional MLS (including the metropolitan areas of Tampa, Orlando, and Sarasota);
- The five MLSs in the Mid-West that cover the following metropolitan areas: Cleveland, Ohio; Columbus, Ohio; Detroit, Michigan; Milwaukee, Wisconsin; Minneapolis, Minnesota;
- The six MLSs in the Southwest that cover the following metropolitan areas: Austin, Texas; Dallas, Texas; Houston, Texas; Las Vegas, Nevada; Phoenix, Arizona; San Antonio Texas;
- The three MLSs in the Mountain West that cover the following metropolitan areas: Colorado Springs, Colorado; Denver, Colorado; Salt Lake City, Utah;
- The four MLSs in the Southeast that cover the following metropolitan areas: Fort Myers, Florida; Miami, Florida; Charlotte, North Carolina; and Raleigh, North Carolina.
So if one state yields $6 billion in potential damages, what would Moehrl result in?
The Moehrl MLSs
According to the T360 Real Estate Almanac, the MLSs involved, in order of size, are:
- #2 Bright MLS – 103,224 members
- #3 Stellar MLS (formerly MyFloridaRegional) – 76,822 members
- #6 NTREIS (Dallas) – 50,309 members
- #7 Miami Association of REALTORS – 49,636 members
- #11 HAR (Houston) – 45,057 members
- #12 ARMLS (Phoenix) – 41,474 members
- #13 BeachesMLS (Fort Myers) – 41,390 members
- #16 REcolorado (Denver) – 27,264 members
- #18 Northstar MLS (Minneapolis) – 21,852 members
- #19 Canopy MLS (Charlotte) – 21,132 members
- #21 ACTRIS (Austin) – 19,139 members
- #22 UtahRealEstate.com (Salt Lake City) – 18,825 members
- #24 RealComp II Ltd. (Detroit) – 17,880 members
- #25 Greater Las Vegas MLS – 17,123 members
- #28 Triangle MLS (Raleigh) – 16,146 members
- #30 SABOR (San Antonio) – 15,613 members
- #33 MLS Now (Cleveland) – 14,254 members
- #43 Columbus and Central Ohio Regional MLS – 10,110 members
- #45 Metro MLS (Milwaukee) – 9,743 members
- #80 Pike’s Peak MLS (Colorado Springs) – 4,604 members
These are some the largest MLSs in the country. It’s nearly impossible to figure out exactly how much past sales we are talking about here, but we just need a high level idea. So I came up with this.
The above MLSs represent a total of 621,597 members. NAR is 1.6 million. So that’s about 40% of the total NAR membership.
Moehrl is asking for damages starting in year 2015.
For the United States as a whole, from 2015 to 2021, a total of 38.65 million homes were sold. 40% of that is 15.46 million homes. While many of the above markets are high-priced areas (like Washington DC), some are lower cost. So let’s go ahead and use the median price for homes for the US (which is wildly incorrect, but good enough for government work).
That gives us a total sales volume of about $4.2 trillion from 2015 to 2021. The buy-side commission, we’ll say was 3%. That’s $125.5 billion. Treble damages for antitrust damages gives us the total: $376.6 billion.
NAR, the above MLSs, Realogy (now Anywhere), RE/MAX, Keller Williams and HomeServices of America would be on the hook for $376.6 billion. Their liability insurance will not, cannot cover that. Nobody’s liability insurance would cover $376 billion.
Just as a point of comparison, the Big Tobacco cases of the late 90s resulted in a settlement of $206 billion paid over 25 years.
Let’s say that NAR and the defendants want to settle. If you were the lawyers for the plaintiffs, what would you accept if you think you can win $376.6 billion? 50%? 30%? 10%? Even 10% is $37 billion — instant bankruptcy for everybody involved.
That’s just money damages from this one antitrust lawsuit. If the plaintiffs win, they’ll get more than just money; they’ll get injunctions against certain practices that will result in buy-side commissions getting wiped out. Plus, note that MLSs #4, 5, 8-10 are all missing from Moehrl. Other lawyers will pick up the slack, and then some.
It is not in the least bit surprising why MLS, Association, and brokerage leaders across the country are so very concerned about these lawsuits.