A Challenge to Real Estate Commissions Gains Ground

Consumer advocates have long criticized traditional real estate commissions as confusing and too high. Now, those commissions are coming under increasing legal pressure.

A federal judge in Illinois ruled last week that a potential class-action lawsuit against the National Association of Realtors and four major brokerage companies could proceed.

The lawsuit, filed last year in Federal District Court in Chicago on behalf of several home sellers, alleges that the way brokerages charge commissions and run property databases called “multiple listing services” is anticompetitive and artificially inflates commission rates paid to real estate brokers. (A similar lawsuit filed in Missouri is also pending, after a federal judge declined last year to dismiss it.)

Mantill Williams, a spokesman for the Realtors association, which represents more than 1.3 million real estate professionals, said in an email that the trade group was “disappointed” in the ruling but was confident that it would prevail in the suit. As the case moves forward, he said, “we intend to demonstrate how the M.L.S. system creates competitive, efficient markets that benefit home buyers and sellers as well as small business brokerages.”

Home buyers in many parts of the country are facing a strong sellers’ market. A lack of houses for sale is pushing up prices, impeding first-time and lower-income buyers even as mortgage rates remain low.

In an order denying requests by the Realtors association and the brokerages to dismiss the suit, Judge Andrea R. Wood said the plaintiffs would have paid “substantially lower” commissions if not for the rules established by the Realtors association and followed by the brokerages.

The suit takes aim

Keep reading this article on The New York Times Your Money.

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