Redfin targeted in new commissions suit blasting buyer agents
The plaintiff, who paid a 2% commission, argues in the filing that “a truly competitive rate for buyers’ agents would in fact be 0%.”
Key points:
- Redfin is the only brokerage named in the suit; the other defendants are NAR and the California Association of Realtors.
- The plaintiff, a home seller in Southern California, argues in the complaint that buyer agent services aren’t needed given the prevalence of home search portals.
- The suit acknowledges the value of listing agents and the MLS, but suggests the current system doesn’t allow for competition.
Redfin may have quit NAR, but not soon enough, according to a commissions lawsuit filed Monday that also claims "buyers' agents do minimal if any work."
In a blistering complaint aimed at NAR's mandatory buyer's compensation requirements, Andrea Freedlund, a home seller from Alisa Viejo, California, sued Redfin, NAR and the California Association of Realtors.
"For years buyer broker commission rates have remained stable despite a) the increase in home values, making those commissions much more valuable, and b) the diminishment to near nothing of what buyer brokers actually do to earn their commission," the complaint says.
Freedlund paid a 2% commission to the buyer's agent on the sale of her home in Laguna Niguel, California, in September 2021. Both Freedlund and the buyer were represented by Redfin agents.
The suit, filed Monday in the U.S. District Court for California's Central District, is proposed as a class action on behalf of all California sellers who paid a buyer's commission to or through a Redfin agent from Oct. 2, 2019, to October 2, 2023. That's the date Redfin announced it was cutting ties with NAR because of concerns about the mandatory compensation rule and sexual harassment allegations against the industry group.
The complaint acknowledges the need for seller's agents in the current system, but portrays buyer's agents as nearly worthless.
"A truly competitive rate for buyers' agents would in fact be 0% or $0 as, in the vast majority of cases, buyers' agents do minimal if any work to secure a sale, with buyers doing much of their own searching via popular websites like zillow.com, and redfin.com itself," the suit alleges.
At the same time, the complaint — somewhat backhandedly — nods at the role of buyer's agents in negotiations: "The Challenged Rules require payment of the buyer's agent by the seller despite the fact that the buyer's agent represents the counterparty and adversary to the transaction."
The suit claims that while buyers can go without representation, for sellers, "there are no readily-available substitutes for real estate brokerage services…. Realtors provide a comprehensive package of services and advice that has no currently extant substitute, particularly including access to the MLS, essential to any serious home seller," the complaint says.
But it suggests that while MLS access is critical, the current system lacks competition.
"To truly challenge Defendants, a market entrant would be required to come up with a service comparable to the MLS; an impossibility in an entrenched service market in which access to data on homes actually for sale is paramount."
The suit, however, also argues that commissions based on a percentage of sales price are inherently unfair, even for seller's agents.
"Clearly, selling a million dollar home is not substantially more difficult or costly to the agent than selling a $100,000 home, it may even be easier," the complaint reads. "Yet in the former case the buyer's broker, pursuant to the Challenged Rules, would earn ten times more commission, regardless of their skills or experience."
The lawsuit comes as Redfin releases its fourth-quarter earnings, which show a decline in revenue but an improvement in net losses year-over-year.