The decision represents the latest blow for the powerful real estate group, which agreed in March to pay $418 million to resolve several class-action lawsuits alleging it conspired to inflate commissions. The NAR, which denies any wrongdoing, also said it would revise a compensation structure that typically carves out 5 to 6 percent of a home’s sale price for agents.
While lawyers for the plaintiffs expect the lawsuit settlement — if approved in federal court — to lower commissions, it would not preclude the Justice Department from further investigating the Realtors association, which counts 1.5 million members.
The Justice Department, which often does not publicly confirm ongoing investigations, did not specifically say it would restart the probe of the Realtors group. But Justice officials went out of their way to note the implications of Friday’s ruling.
“Real-estate commissions in the United States greatly exceed those in any other developed economy, and this decision restores the Antitrust Division’s ability to investigate potentially unlawful conduct by NAR that may be contributing to this problem,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division.
The Realtors association said Friday that it was “reviewing today’s decision and evaluating next steps.” Pointing to a dissenting opinion by U.S. District Judge Justin R. Walker, the association added that it “believes that the government should be held to the terms of its contracts.”
Walker wrote that the Justice Department should be precluded from reopening its investigation because the federal government previously said in a letter that it had closed the matter.
Scrutiny on the commissions system comes as housing affordability weighs on consumers. In the last quarter of 2023, the median U.S. sales price was $417,700, according to the Federal Reserve of St. Louis. Under a standard 6 percent commission, more than $25,000 would be earmarked for agents. In 2023, Americans paid close to $80 billion in commissions at a time when financing and other costs were elevated. As of the third week in March, a 30-year fixed mortgage rate hovered near 7 percent, close to the 20-year high reached in October.
At issue in the D.C. Circuit was whether the Justice Department’s antitrust division could reopen an inquiry it settled with the NAR in November 2020 concerning rules that, the government alleged, “illegally restrained competition in residential real estate services.” Months after the probe officially closed, the Justice Department withdrew from the settlement, which it said prevented the government from further investigating the trade group’s commissions rules. When the Justice Department sought to continue its investigation, the association petitioned to block it.
In January 2023, U.S. District Judge Timothy J. Kelly ruled in favor of the NAR. The Justice Department appealed, leading to Friday’s ruling.
NAR rules have called for sellers’ agents to include compensation offers in listings on real estate databases known as multiple listing services (MLS). Buyers’ and sellers’ agents have traditionally split the compensation, typically 5 to 6 percent of the home-sale price and funded entirely by the seller.
Critics contend the arrangement pays buyers’ agents far more than the value of their services. Such agents have played a smaller role in transactions in recent years with the rise of platforms such as Zillow that let users search for homes on their own.
The issue burst into the spotlight in October, when a Kansas City, Mo., jury found that the NAR and several major brokerages conspired to keep commissions artificially high, awarding a class of home sellers $1.8 billion in damages. A similar case in Illinois had been moving toward trial when the NAR announced in March that it agreed to settle both cases. The trade group said it would modify its rules to limit cooperation between buyers’ and sellers’ agents regarding compensation.
Although the Justice Department declined to comment on that settlement, it still may have a reason to launch an investigation if the proposed settlement does not foster price competition, according to Ryan Tomasello, an analyst at Keefe, Bruyette & Woods who covers real estate technology.
The settlement proposes changes to prevent agents on either side of the transaction from coordinating on commissions, which experts say leads to price fixing. One proposal would prohibit listing agents from making compensation offers through the MLS, which allows buyers’ agents to easily see what commission rate is being offered and steer their clients toward properties with high compensation.
But Tomasello said it includes exceptions that would keep compensation offers visible to buyers’ agents in some cases.
“In our view, so long as listing agents can continue to make and advertise compensation offers to buyer agents, steering incentives will still exist,” Tomasello said in a research note.
The Justice Department took a similar position in February when it intervened in a Massachusetts commissions case that involves an independent MLS with similar compensation rules as the NAR.
In a filing disagreeing with the terms of the proposed settlement in Massachusetts, the federal government noted that as “long as sellers can make buyer-broker commission offers, they will continue to offer ‘customary’ commissions out of fear that buyer brokers will direct buyers away from listings with lower commissions — a well-documented phenomenon known as steering.”
Rachel Weiner contributed to this report.
