Illinois Homebuyer alleges National Association of Realtors conspiracy resulting in higher home prices

As detailed in Dennis Rodkin’s article in Crain’s this week, a Chicago-area homebuyer just filed a lawsuit against At World Properties, alleging that At World – the largest residential real estate firm in Illinois, has engaged in a longtime conspiracy to inflate home prices and broker commissions.

The complaint, filed by James Tuccori, ostensibly pertains to his purchase of a home in the West Town neighborhood of Chicago in 2018. But point in fact, the complaint actually is an indictment of the way home sales commissions are handled and seeks recovery not only on behalf of Tuccori but other homebuyers who have also been damaged due to the alleged conspiracy. The link above(hopefully) includes the complaint which accuses At World(and other unnamed conspirators) of violation of federal law; commission-fixing; consumer fraud and unjust enrichment.

There is ALOT going on in the complaint. One of the more interesting theories is how At World and others have worked over the years to keep buyer commissions high. According to Tuccori, that conspiracy starts with At World’s membership in the National Association of Realtors(“NAR”) – a national trade association that offers certain advantages to members. The primary advantage of membership in the NAR is access to Multiple Listing Services(“MLSs”) which have detailed information on available homes. If a broker wants to make a living he or she has to have access to the MLS. The MLS is where seller brokers list and buyer brokers shop. But virtually all MLS services require that before brokers get access to all those potential sales, they have to be members of the NAR.

And membership in the NAR is the lever that keeps broker commission high. Why? Because as the complaint alleges the NAR has long maintained anti-competitive regulations with respect to commissions. One of the key regulations the complaint targets is a NAR provision which includes mandatory(non-negotiable), up-front allocation of a portion of the sale price to buyer agent commissions. Tuccori alleges that by making the buyer agent commission non-negotiable, the NAR eliminates competition. Without the mandatory, non-negotiable portion of the sales prices, buyer agents could lower their commission to snare the sale of the home. Tuccori alleges this and other practices keep buyer agent fees artificially high – which in turn increases the sale price of the home.

In November, a Missouri jury found the NAR and two other brokerage firms liable for $1.8 BILLION(with a “B”) for conspiring to keep commissions artificially high through practices similar to those set forth above. Some experts think that verdict and the anticipated onslaught of other cases like Mr. Tuccori’s will change the way homes are bought and sold.