Georgia homesellers file their own commissions lawsuit
The case takes aim at NAR and local as well as national brokerages, while calling out the current system as a way to protect ineffective agents.
Key points:
- The lawsuit is the latest in a series of commissions-related cases filed in the wake of the Sitzer/Burnett verdict.
- A total of 40 defendants are named following an amended complaint. The list includes the biggest national brokerages and several local firms.
- Homesellers allege that the buyer-broker compensation system “illegally warps the real estate market.”
- The current system also allows “inefficient agents to remain in business without the necessity to enhance their competitiveness or exit the market,” plaintiffs say.
Another copycat commissions lawsuit has been filed — this time in Georgia.
The original suit, filed Nov. 22 in the U.S. District Court of the Northern District of Georgia, Atlanta Division, named a total of 24 defendants. On the list were several local brokerages along with the National Association of Realtors and national real estate companies including HomeServices of America, Keller Williams, RE/MAX, Compass, Anywhere, Coldwell Banker, Century 21, Engel & Vӧlkers, Christie's International Real Estate and Sotheby's International Realty.
On December 6, an amended complaint named another 16 brokerage companies as defendants — among them eXp, ERA and Redfin, plus a number of local firms — and three new plaintiffs.
As with the previous commissions lawsuits filed in the wake of the landmark Sitzer/Burnett verdict, this one alleges a conspiracy to inflate commissions by requiring sellers to offer compensation to buyer agents in order to be listed on the MLS.
"As a result of this scheme, the purportedly non-negotiable commissions of buyer agents are rolled into the sale price of homes," the suit alleges. "This system, with its veiled surcharges, illegally warps the real estate market."
Georgia law requires listing agents to disclose the commission charged and whether that commission will be shared with agents representing other parties to the transaction.
"The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible," Mantill Williams, NAR's vice president of communications, said of the allegations in the suit. "Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of Realtors will respond to this complaint in court."
Keller Williams spokesperson Darryl Frost said the company has "strong grounds for appeal" of the Sitzer/Burnett verdict and a strong defense for the Georgia complaint.
"We have followed the law regarding cooperative compensation and will vigorously defend ourselves against this lawsuit," he said.
"Like other states, Georgia has permitted the practice of listing brokers sharing their compensation with buyer brokers for decades," Frost said. "The complaint ignores this law as well as the benefits home sellers and buyers have received as a result of it."
Frost added that shared commissions are not mandatory. "Offers of cooperative compensation remain negotiable and at the discretion of the seller," he said.
Filed by Georgia homesellers Janet Phillips, Joseph Hunt, Edith Anne Hunt, Penny Scheetz, Benjamin Aune and Parkwood Living, LLC, the suit is a class action on behalf of any homesellers who paid both a seller's and buyer's agent commission after November 22, 2019. The amended complaint added 1925 Hooper LLC, Robert Arko and Andrew Moore to the list of plaintiffs.
The suit alleges that the compensation rule "was strategically formulated to maintain real estate commissions at artificially high, above market levels." The complaint notes that real estate has changed dramatically, but the commissions charged have remained constant.
"Despite considerable social and technological advancements that typically would have reduced these costs, the Defendants have successfully kept the 'standard' commission rate at 6%."
Lawsuit claims existing system protects subpar real estate agents
The suit also alleges that the commissions structure serves to protect inferior real estate agents "who might not be competitive in a more rigorous market environment," the suit reads.
"The establishment of a 'standard' commission insulates buyer brokers from market pressures, consequently allowing inefficient agents to remain in business without the necessity to enhance their competitiveness or exit the market."
In addition to seeking a judgment to cover the excess fees defendants say they paid, the suit seeks "an award of exemplary damages in an amount sufficient to punish Defendants and deter future illegal activity."