Justice Department says settlement too lax in real estate commission case
A home for sale sign hangs in front of a house in Oakton, on the day the National Association of Realtors issues its Pending Home Sales for February report, in Virginia March 27, 2014. REUTERS/Larry Downing Purchase Licensing Rights
Feb 16 (Reuters) - The U.S. Justice Department has asked a federal judge in Boston to reject a consumer settlement that it said fails to protect home buyers and sellers from industry practices that allegedly artificially inflate real estate broker fees.
The Justice Department in a filing on Thursday challenged the terms of the settlement between a group of home sellers and MLS Property Information Network, or MLS PIN, a regional database featuring thousands of homes for sale in New England.
The Justice Department said the proposed settlement, which includes a $3 million payment, “makes cosmetic changes” that only will perpetuate “stubbornly high broker fees.”
Attorneys for the plaintiffs did not immediately respond to requests for comment on Friday. MLS PIN and the Justice Department, which is not a party in the lawsuit, declined to comment.
A number of lawsuits around the country are challenging the industry’s so-called “buyer broker” rule, which requires sellers to offer a broker commission to list their homes.
The commission, which is shared between the buyer's and seller's agents, can run upwards of 5% to 6% of a home's sale price. A federal jury in October awarded $1.8 billion in damages to a class of Missouri-area home sellers who claimed the practice drove up commissions and encouraged brokers to steer buyers toward high-commission properties.
The Justice Department is also seeking to broaden an earlier probe into the National Association of Realtors to include allegedly anticompetitive commission practices.
To list a home on the MLS PIN database, sellers have been required to offer compensation to a buyer’s agent of as low as a penny. The settlement in the Boston case would alter that rule to allow sellers to make zero-dollar commissions.
The Justice Department said that does not go far enough.
“Virtually no one will exercise that option for the same reason that they don’t offer one cent now: The modified rule still gives sellers and their listing brokers a role in setting compensation for buyers’ brokers,” the Justice Department said.
The government’s legal team said the central issue that the parties and court should address is not the amount that a seller should offer “but whether a seller should set buyer-broker compensation at all.”
The Justice Department suggested adopting an order that would prohibit offers of buyer-broker compensation.
The Boston judge in the case is not obligated to adopt the government’s view. The proposed settlement must get court approval.
The case is Jennifer Nosalek et al v. MLS Property Information Network et al, U.S. District Court for the District of Massachusetts, No. 1:20-cv-12244-PBS.
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Reporting by Mike Scarcella
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