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Douglas Miller says offering compensation to buyer brokers off the multiple listing service is “commercial bribery” and “a group boycott.”
That kind of dramatic language may tempt some in the real estate industry to dismiss Miller, an attorney and executive director of the tiny, volunteer-run nonprofit Consumer Advocates in American Real Estate (CAARE), as an inconsequential flamethrower.
But one of the high-profile law firms behind the first major antitrust lawsuit challenging the U.S. commission structure, filed in March 2019 and known as Moehrl, has openly admitted that Miller was the reason the firm got interested in the case in the first place.
“We were approached by a Realtor and consumer advocate named Doug Miller,” Benjamin Brown, managing partner of Cohen Milstein, said in March after the National Association of Realtors reached a proposed settlement in multiple antitrust commission lawsuits, including Moehrl and a similar case known as Sitzer | Burnett.
“Doug had a wealth of knowledge about the industry but no formal antitrust or economics background,” Brown added. “A small team at my firm worked for months with Doug and a couple of expert economists to build the case.”
Now Miller and CAARE have set their sights on a new, related target: workarounds to the rule changes from the NAR deal.
Doug Miller
“We are extremely concerned that Realtors are using misinformation and scare tactics to try and persuade their clients into signing anticompetitive buyer brokerage and listing contracts that artificially inflate buyer brokerage fees,” Miller told Inman.
“In fact, we are seeing Realtor competitors gather as groups to design fee agreements to accomplish this. We believe this is straight-out collusion that violates the spirit of the settlement agreement.
“Forms committees composed of competitors who design fee agreements that result in higher buyer brokerage fees are likely to be the target of future litigation. Anyone who uses the work product of those committees is likely to face similar threats not unlike the Moehrl and Sitzer cases.”
Miller stressed that he’s warning the industry about this because the last thing he wants to see is more litigation.
“We would prefer to see Realtors engage in honest business practices than to see them get sued,” he said. “This would be better for everyone involved.”
According to Miller and CAARE deputy director Wendy Gilch, some Realtors are perpetuating three “misleading” talking points, even after the NAR settlement’s rule changes went into effect on Aug. 17:
- Sellers must offer money to buyer brokers (off the MLS) or buyer agents won’t show their houses.
- Buyer agents won’t show houses to buyers unless there is an offer of compensation from listing brokers because they are not going to show houses unless they get paid.
- They’ve created a checkbox to continue steering, but blame it on being a fiduciary to the buyer.
“None of these points should be true anymore, and those who continue these practices will likely find their way back into court,” Miller said.
“All Realtors know (or should know) that there is an easier solution and that the above comments are misleading and designed to perpetuate high buyer broker fees through fear.
“By now, all Realtors know that it is very easy for a buyer agent to work with a buyer when the seller isn’t offering compensation. They write the offer with a request for a seller credit. It’s simple, it’s straightforward and it exposes the buyer brokerage fee to free market forces.”
The “checkbox” referred to is giving buyers the option, through a buyer agency contract, to tell their agents not to show them properties based on whether the seller or listing broker is offering compensation to the buyer broker.
[T]he checkbox is not going to protect agents from being accused of steering,” Miller said.
“What it does do is open up a lot of issues with agents who try to call and see what they get paid, but can’t get an answer from the listing agent. Do they just ‘skip that home’ even though they might be offering something. Or, the listing agent says they are open to comp and to submit an offer.
“Are these agents explaining to buyers they can offer whatever they want and ask for concessions to cover the buyer agent fees. They don’t necessarily have to offer over the list price. Some agents are using this checkbox in the buyer agreement as a tool to get sellers to offer agent comp. In what world does an agent refuse to submit a competitive offer because ‘they might not get it?’”
Gilch provided several examples of agents allegedly promoting these talking points.
Wendy Gilch
“These Realtors specifically are all at different brokerages in the U.S., which shows just how widespread these ideas are growing,” Gilch told Inman.
Under the settlement changes that went into effect on Aug. 17, offers of compensation from sellers or listing brokers to buyer brokers may no longer be communicated in multiple listing services. Communicating them off-MLS is not prohibited under the deal, but that does not necessarily mean listing brokers can offer them without worrying about legal trouble.
Offering commissions to buyer brokers off the MLS is “a huge mistake,” according to Miller.
“There are many reasons why brokers should not do this: It is almost identical conduct to the complained-about conduct in the Moehrl | Sitzer cases,” Miller said.
“Just like with Moehrl, it results in artificially inflated buyer brokerage fees. It will create liability for the brokers and their seller clients. It serves as a group boycott because the compensation is not offered to would-be competitors.
“It is a restraint on trade because DIY buyers are automatically excluded from this money. It interferes with the buyer’s fiduciary relationship and demands that the buyer agent perform a service for the seller or listing broker: to procure a ready, willing and able buyer.”
Moreover, even if offering compensation off the MLS doesn’t violate a state’s licensing laws, that does not mean it doesn’t violate other laws, according to Miller.
“It just means that maybe the local regulator won’t take away your license if you do this,” Miller said.
“Look up the definitions of ‘commercial bribery,’ or ‘interference with a fiduciary relationship,’ or ‘group boycott.’ If antiquated licensing law says it’s OK to share your commission with a buyer broker, that does not mean you can do it and be exonerated from violations of common law or federal antitrust law. That’s really poor advice.
“In fact, I’m currently researching how exclusive commission split offers to buyer brokers function as a group boycott against lawyers who want to enter the field. Again, the solution is so simple. Stop offering money to buyer brokers. It will encourage competition.”
CAARE recently published advice for sellers and buyers, urging sellers not to work with real estate agents that say other agents won’t show their homes unless they offer compensation up front and urging buyers not to work with agents who encourage them to skip homes that don’t make such offers.
“[W]hy in the world should sellers put all their cards on the table about compensation or seller credits?” Gilch said.
“If sellers offer nothing, it forces buyers to make the first move to ask for a credit instead. And that leads to competition on buyer broker fees. That credit is going to be smaller if buyers negotiate a good deal with their agents.
“If the listing broker offers fixed amounts to all buyer brokers, the benefit of negotiating the buyer rep fee deteriorates. Plus, it creates the false impression to many buyers that the credit is meant for the buyer agent, not the buyer. We’re back to the same problem that existed prior to the lawsuits.”
Source: CAARE
CAARE referred to the previous system as “socialized real estate commissions.”
“It’s not about whether or not a buyer can afford a buyer agent or not,” Miller said.
“Instead, it is about whether or not a buyer gets to negotiate the fee of their own buyer agent. The current system allows buyer agents all to get paid the same regardless of their experience or skill.
“We call that socialized real estate commissions and we believe that’s wrong and harmful to consumers and causes fees to be set without the benefit of competition. That’s why buyer broker fees are nearly all the same in many parts of the country.”
CAARE is advising buyers to ask for a seller credit in the form of a flat fee, rather than a percentage of the purchase price, if they can’t afford their own agent.
“If you negotiate a fee of around 1 percent, you’ll likely save the seller about 2 percent in commissions,” CAARE said. “Plus, if your offer only includes a 1 perent seller credit and a competing buyer asks for 3 percent, your offer becomes more attractive, increasing your chances of acceptance.”
“It’s a far simpler solution that injects market forces into the fee negotiations,” Miller added. “This is the way it should have been for decades.”
Email Andrea V. Brambila.
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