How DOJ paved the way for the NAR home-selling settlement
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For decades, the Department of Justice pushed for more competition in the real estate market — now the agency might be getting its way.
Why it matters: Pressure from the DOJ's antitrust division likely played a role in getting to the game-changing class action settlement announced by the National Association of Realtors last Friday.
Between the lines: "We've been in their crosshairs for as long as I've been involved at the National Association of Realtors," NAR president Kevin Sears, a licensed Realtor for 20+ years, told hundreds in the industry at a conference in February.
- The writing was on the wall, Sears told the audience. His group faced an onslaught of lawsuits over the way commissions are offered — and the possibility of having to shell out more than $5 billion in damages in just one case.
- The DOJ, though, was "the bigger problem," he said.
- "The way we operate our business is going to change," he said. Either embrace and adapt, he added, or "it's going to be forced down our throats."
Catch up fast: Last Friday, NAR announced it would settle some of the class action lawsuits (including the $5 billy one) filed by home sellers, who alleged the industry group conspired with real estate companies to fix prices.
- The NAR said it would no longer allow real estate agents for home sellers to offer buyer agents commissions in real estate listings — a seemingly small fix with big implications, as we explained Monday.
The big picture: Even though the DOJ wasn't a party in the suit, it's been investigating the real estate industry for years — all the way back to the 1930s. More recently, it was a DOJ lawsuit that made it possible for sites like Zillow and Redfin to post real estate listings.
- During the Trump administration, the agency soldiered on with a lawsuit and settlement over anti-competitive practices.
- But in 2021, under a new administration, the agency filed to stop that agreement from going through. They argued it would have prevented the department from pursuing the NAR in the future.
- Their suit is still working its way through the courts.
- In the meantime, the agency didn't sit on its heels. In February, the department filed an objection to a different settlement in a case over commissions in Massachusetts. The suit mirrors the big case that was settled last week.
Between the lines: In filing that objection, the DOJ was effectively letting the industry know what kind of settlement would meet the department's approval.
- The deal announced last Friday looks a lot more like what the department said it would like to see: a "decoupling," where agents for home sellers no longer set commission rates for buyer agents.
- That objection was a game changer. "They got what they wanted," says Steve Brobeck, a senior fellow at the Consumer Federation of America.
Reality check: The court hasn't yet approved the settlement and the DOJ is still wading through its details.
- Already critics are saying the deal might not do the trick. And DOJ may find the deal, which still allows for the possibility of sellers negotiating to pay buyer agent fees, doesn't go far enough.
