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More than five years after the first explosive commission case was filed, the Multiple Listing Service Commission has stepped in to oppose the U.S. Department of Justice’s proposal to decouple commissions.
On Wednesday, March 27, CMLS, a trade association of more than 225 MLSs across North America, petitioned the U.S. District Court for the District of Massachusetts to accept Statement of Friends The court was asked to ignore a statement of interest filed by the Justice Department on February 15 in a major antitrust commission case called Nosalek.
On the same day, attorneys for CMLS member Northwest MLS (MLS) similarly asked the court to accept their own independent opinion. Statement of Friends Details alleged flaws in Justice Department documents. NWMLS’s new president and CEO, Justin Haag, formerly MLS’s general counsel, began serving on the CMLS board of directors in January. CMLS’s MLS membership has a combined membership of more than 1.7 million agents, brokers and appraisers. NWMLS is broker-owned, not affiliated with real estate agents, and has more than 33,000 subscribers.
“The Commission on Multiple Listing Services (CMLS) has taken the extraordinary step of filing an amicus brief with this Court to oppose the Division of Antitrust’s (DOJ) efforts to impose policy preferences on the U.S. residential real estate market that lack empirical support, and the “ The principles of the Sherman Act conflict and have negative practical consequences for consumers that the Department of Justice has not yet considered,” CMLS’s amicus brief states.
In its statement of interest, the Justice Department rejected rule changes in a proposed settlement between home seller plaintiffs and defendant MLS PIN, a member of CMLS, and instead called for “an injunction prohibiting sellers from providing commissions to buyers’ agents.” The agency said this would promote competition and innovation between buyers and agents, as buyers would have the right to negotiate directly with their own agent.
In the filing, the antitrust enforcement agency noted that Northwest MLS in October 2019 (making the offer of buyer’s agent commissions optional) and in October 2022 (specifying that buyer’s agent commissions, when offered, will come from the seller rather than the listing broker) ), and further laid out seller options regarding compensation), are similar to the proposed Nosalek settlement, but the Justice Department said they did not appear to have a meaningful impact.
The agency said the changes did not result in a reduction in buyer’s agent commissions, had “no appreciable impact on the listing portion of buyer’s agent commission offers or the number of zero-compensation offers,” and were relative to other major MLS rules that did not have similar changes. Metro Areas, NWMLS Region Buyer’s Agent Commissions in Metropolitan Areas did not result in a decrease in buyer’s agent commissions.
In the NWMLS, 99.2% of NWMLS listings between October 2019 and March 2022 continue to offer buyer agent commissions (the same as 99.3% before the rule was lifted). Almost all partners (94.5%) offer a partnership commission of more than 2%.
According to CMLS, the court should not consider the Justice Department’s arguments due to “serious flaws.” The trade group’s filing said “the Justice Department’s internal study (of the NWMLS changes) suffered from conceptual and methodological issues and did not provide sufficient information for a court to evaluate its claims,” including using trading data from only one brokerage firm in the NWMLS footprint. Perform analysis.
“For example, it lacked any data on average prices or commissions; who the single real estate agent used for the analysis was; how representative that agent’s experience was of the brokerage firm as a whole; the DOJ analyzed 31 other markets; or How many transactions are analyzed in any market at any time,” CMLS’s amicus brief states.
The trade group also accused the DOJ of comparing NWMLS to other markets without controlling for differences in those markets, which CMLS said meant the DOJ’s analysis could not actually determine the impact of any NWMLS rule changes.
“In short, the SOI purports to provide empirical evidence to support its claims, but courts should not rely on any of that evidence; all of it is either not empirical evidence at all, inappropriate chronologically or geographically, or methodologically flawed, ” CMLS document states.
Additionally, CMLS said its own data analysis by economists John H. Johnson IV and Michael Kheyfets showed that “the rule changes in the proposed Nosalek settlement may Make a positive impact” including lower commissions. The analysis looked at the source of all 1.8 million units sold by NWMLS in Washington and Oregon since 2000, documents show.
“(The analysis) shows that NWMLS cooperative pay offers have been declining since 2000, but that the decline has been significantly faster since NWMLS’s 2019 rule change,” the document states.
“‘From 2000 to 2019, buyer’s agent compensation rates through the NWMLS decreased by an average of 0.4% per year. After the 2019 rule change, the decrease increased to an average of 1.5% per year.’”
Screenshot from Nosalek CMLS Friends briefing
In other words, the NWMLS 2019 rule change resulted in a 0.118% decrease in commission quotes, so the buyer’s agent’s commission quote was 2.382% instead of 2.500%, while the NWMLS 2022 rule change resulted in a further 0.021% decrease in commission quotes. Archive.
“These decreases are on top of interest rate reductions that have already occurred,” the filing states. “Thus, the data supports a reasonable estimate that a buyer’s agent would receive $750,000 in sales for a home (the NWMLS average sales price).” commissions were reduced by more than $1,000 on average (e.g., $17,708 instead of $18,750) as a Consequences of NWMLS Rule Changes”.
“Consumers purchasing through an MLS PIN under the proposed settlement may experience similar savings, given that the current average home price in the MLS PIN is in the same range as the average home price in the NWMLS,” the filing added.
CMLS also maintains that the DOJ’s proposed ban on sellers providing compensation to buyer’s brokers itself violates antitrust laws.
“If the MLS adopted such a rule, it would violate the Sherman Act’s enhanced competition doctrine because it would mean that competitors—the brokers who participate in and operate the MLS—would agree to regulations that prohibit competing selling brokers from engaging in legal Property Marketing,” the document states.
Additionally, CMLS criticized the Department of Justice’s assumption that the transition to its recommended policy changes would be smooth.
“(SOI did not provide any evidence that the Justice Department has solicited input from third-party industry participants, including the Mortgage Bankers Association, the Appraisers Association, the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac Mac), which purchases pools of qualified mortgage loans from lenders; the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA),” the CMLS document states.
“At the same time, the proposed settlement policy reflects provisions that have been in effect in Washington State for nearly five years, with no reports of negative consequences. This court should prioritize the proven record of the proposed settlement policy over
Optimistic imaginings of the Department of Justice’s policy preferences. “
CMLS highlighted that the Department of Justice appears to have failed to consider the impact of its policy incentives on first-time homebuyers, low-income homebuyers and minorities.
“Importantly, the DOJ assumes that the seller will pay a fee to the buyer’s broker as part of negotiating the transaction,” the CMLS filing states.
“The Department of Justice did not provide any evidence as to why this was the case, and other scenarios are possible and may be possible. For example, if a seller receives two offers that are equally financially satisfactory, one of which the seller must Pay the buyer’s agent and the other one is not required by the seller, then the seller may choose a “cleaner” or “easier” offer simply because today’s sellers may prefer a cash offer rather than one contingent on financing Quotation. “
The CMLS filing’s conclusion shows that the Justice Department has overstepped its bounds.
“The Department of Justice seeks to secure significant changes in U.S. housing policy by commenting on proposed antitrust settlements between private parties, rather than doing so through its own enforcement actions or encouraging rulemaking by federal agencies authorized by statute,” the filing said.
“The Court should refuse to believe SOI’s argument that the Department lacks strong empirical evidence to support its policy preferences, ignores the anticompetitive nature of its policy preferences, and does not possess the agency expertise to assess the competitive effects of its policy preferences. real estate market.”
NWMLS’s amicus brief also blasted the Justice Department filing, calling it “ill-informed,” “unsupported,” and “based on grossly incomplete data provided by a brokerage “over a far too short period of time.” A highly flawed analysis.” The document states that the Justice Department has a large amount of NWMLS data that it asked NWMLS to use for analysis, but ultimately chose not to do so.
“Unfortunately, DOJ required that the NWMLS changes have immediate impact, and then using limited data provided by a brokerage firm in a very short period of time, DOJ invalidated the NWMLS changes. Evolution takes time,” the filing said, noting Recently from Consumer Federation of America Changes to proposed National Association of Realtors Commission settlement agreement and input from plaintiffs’ attorneys in explosive Moore Commission lawsuit.
The document also criticizes the Justice Department’s “short-sightedness” in allegedly focusing only on “reducing buyer agent commissions” as a barometer of competition.
“Transparency and expanding informed consumer choice are guiding principles for the NWMLS revised rule,” the NWMLS document states.
“Providing consumers with more information will in turn promote competition and lower prices. By changing the rules, NWMLS creates a more open and free market for brokers to serve consumers.”
NWMLS said the Justice Department’s proposal would lead to “secret” transactions between brokers.
“The DOJ’s preferred system provides virtually no opportunity for pay transparency in MLS, invites brokers to conduct transactions in secret, and creates opportunities for deceptive conduct, discrimination, and unfair housing,” the filing states.
However, while the NWMLS attempted to poke holes in the DOJ’s analysis, unlike the CMLS filing, the NWMLS’s amicus brief did not include any data or data analysis to rebut the DOJ’s arguments regarding the impact of the rule change on commissions.
The filing appears to shy away from even attempting such an investigation, stating, “NWMLS does not analyze the level of compensation offered by its members, let alone the amount of compensation actually received by buyer’s agents following negotiations between the parties.”
Inman has reached out to NWMLS, CMLS and DOJ for comment and will update this report when responses are received.
Send an email to Andrea V. Brambila.
