Major Texas Real Estate Players Hit with Class Action Over Allegedly Anticompetitive Conspiracy

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A proposed class action alleges 47 local trade associations, real estate brokerages and multiple listing services (MLSs) have conspired to perpetuate an anticompetitive scheme in the Texas real estate market that inflates costs for home sellers and restricts price competition among brokers in the state.

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The 40-page antitrust lawsuit says the defendants have actively participated in and enforced the apparent scheme by following and promoting a “mandatory offer of compensation” rule set by the National Association of Realtors (NAR), a nationwide trade association for real estate brokers. Per the suit, the rule requires that every seller, when listing a property on an NAR-affiliated MLS—which serves as a reservoir of available listings in a defined geographic area—must make a “sweeping, non-negotiable offer of compensation” to the broker representing the buyer, known as the buyer broker.

The NAR’s rule substantially restrains price competition among Texas brokers and forces home sellers to pay inflated buyer broker commissions, among other “illogical, harmful, and anticompetitive effects” that have resulted in thousands in overcharges to those who’ve listed properties on an MLS affiliated with the defendants, the case alleges.

“The [defendants], acting in concert with NAR, pressurize or incentivize their franchisees, brokers, and agents to become NAR members and adhere to its regulatory regime,” the complaint alleges. “Through this concerted effort, they ensure the implementation and enforcement of the Mandatory Offer of Compensation Rule.”

According to the filing, NAR regulations require seller brokers to list their clients’ properties on an MLS. Notably, many MLSs are owned and controlled by local realtor associations such as some of the defendants, which are NAR members, the lawsuit adds.

Thus, the defendants are able to “leverage their control over MLSs, their agreements with local franchisees and agents, their employee policies, and their active roles within NAR and local realtor associations to compel local residential real estate brokers to comply with NAR's regulations,” including the buyer broker compensation rule at issue, the suit contends.

The case claims that the anticompetitive regulations imposed by NAR and enforced by the defendants stifle price competition among buyer brokers because, under NAR rules, the buyer—who actually retains the buyer broker—does not negotiate or pay the commission for their broker. Therefore, buyer brokers have no incentive to offer lower commission rates, the complaint says.

As the filing tells it, the alleged conspiracy has also led to an industry-recognized practice known as “steering,” whereby homeowners are forced to accept inflated commission rates out of fear that buyer brokers will not show their property to potential buyers. This practice hinders innovation in the industry and blocks lower-cost real estate brokerage services from entering the market, the lawsuit relays.

The plaintiffs, who have listed properties on Texas MLSs, “stand as the voice of those who have borne the brunt of the [defendants'] unlawful collaboration and anticompetitive practices,” the case asserts.

The lawsuit looks to represent anyone in Texas who, since December 13, 2019, used any defendant or their affiliates as the listing broker in the sale of a home listed on an MLS, and who paid a commission to the buyer’s broker in connection with the sale of the property. The suit also seeks to cover those in Texas who, between January 1, 2021 and March 29, 2023, used a listing broker affiliated with Keller Williams Realty, Inc. or HomeServices of America, Inc. in the sale of a home listed on an MLS, and who paid a commission to the buyer’s broker in connection with the sale.

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