Moehrl vs. NAR: Biggest Lawsuit in American Real Estate
Imagine, you are a middle class American living in the suburbs. Now imagine you have to sell your home. It’s your biggest asset, and you believe you will get 400,000 dollars for it.
You hire an agent to get it listed on the MLS. You agree to pay them a commission of 12,500 dollars.
You find a buyer fast. The buyer also hires an agent. The buyer’s agent negotiates the sale price down by 10,000 dollars. And even though that agent worked for the buyer, and they worked AGAINST you, YOU have to pay THEM 10,500 dollars in commission.
You get only 367,000 dollars for your 400,000 dollar asset.
How would you feel?
This is exactly what happened to Christopher Moehrl, a middle-class man from Minnesota.
Moehrl sued. He sued the National Association of Realtors – America’s largest trade association. And he sued some of the most influential brokerages in America. BIGGEST LAWSUIT IN AMERICAN REAL ESTATE.
This lawsuit is almost certainly headed for the U.S. Supreme Court. The potential damages could be as much as 54 BILLION DOLLARS. And, if Moehrl wins, this lawsuit could make buyer agents obsolete!
This story begins in October 2017, in a suburb of Minneapolis. Christopher Moehrl lists his home for 400,000 dollars on Northstar MLS. He uses a ‘seller broker’ from RE/MAX Advantage Plus to represent him.
The home stays on the market for just 35 days. Moehrl finds a buyer fast. And the buyer has a broker – From Keller Williams Realty.
Moehrl pays his own broker 3.3% commission on this sale – so about $12,870.
The buyer’s broker helps negotiate the sale price down from almost 400,000 dollars to 390,000 dollars. But then, Moehrl has to also pay the buyer’s broker 2.7% commission. That’s 10,530 dollars, on top of the 10,000 dollar price reduction. (ref)
The buyer broker worked for the buyer. That broker helped negotiate the sale price down. But Moehrl had no power to negotiate the buyer broker’s commission. He just HAD to pay the full commission.
Christopher Moehrl felt it was unfair that he had to pay the buyer broker commission. Not the buyer who benefited from the broker’s representation. And Moehrl believed he had to pay the buyer broker commission because of a National Association of Realtors rule.
On March 6th, 2019, Christopher Moehrl sued the National Association of Realtors. The NAR is America’s largest trade association with 1.5 million members. Along with NAR, Moehrl also sued 4 of the industry’s biggest brokerages:
- Realogy: America’s largest brokerage, that owns and operates top franchises like Century21, Coldwell Banker, and Sotheby’s
- HomeServices of America
- RE/MAX, and
- Keller Williams Realty
Moehrl also named some of the biggest local realtor associations as co-conspirators. These associations own or operate 20 major MLSs. These are some of the biggest MLS’ in America: Bright MLS, Stellar MLS, Metro MLS, NTREIS MLS, Arizona Regional MLS, REColorado MLS, Miami MLS, Canopy MLS, Triangle MLS and more.
And it’s a class action lawsuit. The “class” consists of all home sellers who sold their properties on these 20 MLSs since March 6, 2015, and continue to do so.
The NAR and other corporate defendants are represented by attorneys from Schiff Hardin LLP. The law firm is known for being one of the oldest in Chicago. And they’ve represented big names including AT&T and Michael Jordan.
NAR’s Response to the Lawsuit
On May 17, 2019, the National Association of REALTORS moved to dismiss Moehrl’s lawsuit. NAR claimed that Moehrl’s case was “insufficient to maintain a claim” and “failed to allege the existence of any conspiracy due to misinterpretation of facts.”
Justice Andrea Wood denied NAR’s motion to dismiss, stating:
“The Court finds that Plaintiffs have sufficiently pleaded that they suffered an antitrust injury from Defendants’ conspiracy. Each Plaintiff was a home seller required to pay a commission to the buyer-broker for the person who purchased their home. But-for Defendants’ conspiracy, each Plaintiff would have paid “substantially lower commissions.”
On November 16, 2019, NAR and the other corporate defendants filed a response to the lawsuit. They denied the allegations of conspiracy, stating that NAR Rules are pro-competition.
In their defense, the corporate defendants claim that the 2002 study relied on by the Plaintiffs overlooks the socio-economic differences between the USA and other countries.
To support their claim, the NAR presented the case of Northwest MLS, based in Kirkland, Washington.
Northwest MLS is a broker-owned listing service, independent of the NAR and its affiliates. In 2019, the brokerage updated its rules to eliminate the Buyer Broker Commission Rule.
Dr. Lauren Stiroh, NAR’s independent consultant, concluded that even after NWMLS’s update, almost 94.5 percent of sellers offered buyer agent commission above 2 percent. That’s close to 2.5% average to what the sellers are already paying!
REX Drops the Bomb on NAR
In January 2021, discount brokerage, Rex Real Estate, released over seven hundred calls with agents from across the nation.
In the audio recordings, agents refused to show properties to their clients due to the REX’s policy of cutting down on buyer agent commission. Some calls also include agents hanging up after learning that REX doesn’t offer an all-inclusive commission.
These tapes have been submitted by the Plaintiffs as evidence.
To know more about Rex Real Estate, check out our video ‘The Rise and Fall of Rex Real Estate.’
What Would Happen if NAR Loses?
If the NAR loses, the potential damages could be huge! Here’s an analysis by Alexander Munn, former Senior Litigation Counsel at the BPE Law Group.
Assuming an average home sale price of 300,000 dollars, a 3% buyer agent commission, and 2 million transactions per year, the damages would be 18 billion dollars!
Section 4 of the Clayton Act allows the courts to award treble damages in antitrust cases. And that’s exactly what Moehrl and the plaintiffs are seeking. That’s 54 BILLION dollars!
The lawsuit demands an order of injunction be passed under Section 16 of the Clayton Act.
This will effectively stop the NAR and co-defendants from enforcing the Buyer Broker Commission Rule.
Finally, the lawsuit demands NAR and the defendants pay all the costs of this lawsuit, including attorney fees. You better believe this army of attorneys isn’t cheap.
All in all, Moehrl’s lawsuit is set to have far-reaching effects on the real estate industry.
If NAR loses this case,
- Shares of real estate giants like eXp, RE/MAX, and Realogy will take a substantial hit
- Buyer brokers will be forced to offer competitive commissions and rebates
- Home buyers could be burdened with paying the agent’s commission. This could take down the housing market lower than it already is
- Most buyer agents will be rendered obsolete. Remember, more than 90% of buyers start their search online! Why can’t they complete it online?!
Final Thoughts
As of today, Moehrl’s consolidated lawsuit is seeking ‘class certification’ for home sellers. The case is currently in the “discovery” stage as both the parties gather evidence.
‘Do you think the lawsuit will END the 6% Commissions for real estate agents? Leave your comment below!