Buyer Beware: Who Is Paying the Home Buyer’s Real Estate Agent?

Within the past few years, unprecedented class action lawsuits have been filed against the National Association of Realtors (“NAR”) and major real estate brokerage firms that could have multibillion-dollar implications to homeowners across the United States. One lawsuit claims that NAR rules requiring home sellers’ brokers (“seller-broker”) to offer home buyers’ brokers’ (“buyer-broker”) compensation when listing a property on a local database of properties for sale called the Multiple Listing Service (“MLS”) have driven up costs to the seller and discouraged competition, violating the Sherman Antitrust Act. This commission structure has been upheld in the courts before, but the real estate industry has changed over the years. Technology has had the biggest impact on the real estate industry in recent years. Technology has caused real estate agents’ services to become more expedited and efficient. For example, buyers now have the ability to find property on their own due to real estate websites. Technology like the MLS and current real estate commission rules have been blamed for setting a standard commission that has inflated real estate costs, causing stifled negotiations in real estate transactions and triggering steering of clients to properties with the highest commissions for the real estate agents. However, NAR argues just the opposite of this. NAR contends that its rules and enforcement of its rules on the MLS provide sellers with an increased opportunity to sell their homes by marketing it on an industry-wide platform. The verdicts of pending recent lawsuits will not just be felt by the defendants whom could find themselves potentially liable for millions of dollars. These verdicts will have a historic impact on the entire real estate industry and all American homeowners by changing the way real estate transactions have been conducted in the United States for years. If buyers had to pay their brokers’ real estate commissions, this would discourage buyers from attaining real estate agents, which could lead to buyers entering into one of the biggest purchase of their life without a professional, potentially leading to more lawsuits. Consequently, even though sellers have various options when selling their home that do not force a standard real estate commission for the seller-broker and buyer-broker, how could current commission structures violate an act meant to prohibit restraints on trade? Although many homeowners argue that in today’s modern era buyers should pay the buyer-broker commission, this Comment explores why having sellers pay the buyer-broker commission is beneficial and supported from an antitrust, economic, and equitable perspective.