In a lawsuit filed Thursday, real estate startup Hongmei Technology Claims Home Sellers Consumers aren’t the only ones hurt by alleged anti-competitive behavior in the real estate industry.
The lawsuit, filed in the U.S. District Court for the Central District of Utah, names the usual suspects as defendants in antitrust litigation: national association of realtors (nar), real estate anywhere, Keller Williams Realty, american family servicesand weight/maximum. Headquartered in Utah Wasatch Front Area MLSwhose business is Utah Real Estate Networkis also named as a defendant in the lawsuit.
In the complaint, Homie claims that it brought this legal action “to recover damages… as an excluded competitor that was excluded from effective competition in the relevant market by Defendants’ conduct.”
The company noted that if it were “allowed to compete with Defendants and their co-conspirators, it would gain market share at Defendants’ expense while providing a competitive check on Defendants’ ability to charge consumers exorbitant prices for their brokerage services.” By excluding Homie and other new entrants, defendants in one fell swoop harmed competition, harmed consumers, and caused harm and harm to Homie.
Like antitrust lawsuits filed by consumers, Homie’s lawsuit takes aim at the NAR’s rules, including the Participation Rule, which requires listing brokers to provide buyer’s agents with a compensation package for listing properties on the MLS. As a company that calls itself a “technology-driven industry disruptor,” Homie’s business model involves charging home sellers a flat fee to list their properties on the MLS.
“As part of a low-cost sales strategy, sellers who use Homie often provide buyer’s agents with compensation that is slightly less than the buyer’s agent compensation (BAC) offered to sellers represented by traditional brokers, including corporate defendants. Using Homie of buyers will receive some or all of the BAC provided by the seller.
The buyer’s agent compensation offer that the seller decides to make will be posted on the MLS with the listing. According to the complaint, the buyer’s agent made it clear to Homie that they did not like these lower comp offers and used the MLS comment field and Facebook to indicate that they would not display Homie’s listings due to the lower offers. The so-called “guidance”.
“While the Buyer’s Broker Compensation Rule was in effect, local Utah NAR members used Facebook groups to coordinate boycotts of Homie’s listings and charge lower buyer’s broker commissions, sometimes with the hashtag ‘#boycottHOMIE’,” the complaint states. ‘. “The exclusivity campaign against Homie is also being conducted through the Utah NAR Local Association, which owns and controls WFRMLS. Utah’s NAR Local Association encourages agents to steer clients away from one of their own members, Homie.
Additionally, the lawsuit alleges that when the participation rules were in effect, Homie received text messages from NAR member brokers stating that buyer’s agents would not show Homie’s listings because buyer’s agents were only paid 1.5%.
“I could always present it and negotiate with the BBC in the contract, but I thought, why go through the trouble when we have three other great properties paying 2.5-4%? Anyway. . Please help me tell your seller,” a text quoted in the complaint said.
Homie claims that by boycotting Homie listings and directing customers, “innovative entrants seek to compete on price and other service terms that are attractive to home sellers or home buyers, but are stymied by traditional real estate agents who use The MLS acted in concert and enacted a web of rules and practices that created formidable barriers to competition.
The complaint states that while competition from “innovative market entrants” has been anticipated for years, none has yet emerged due to “anticompetitive conduct by legacy brokerages through NAR.”
“The anticipated wave of disruptive innovation and entry into the residential real estate brokerage market has yet to occur because Defendants conspired to prevent it,” the lawsuit states. “Defendants have used their control of MLSs to impose rules nationwide, creating a huge obstacle for new competitors. Barriers to entry, thereby keeping residential real estate brokerage services priced well above competitive levels.”
Although Homie has experienced multiple rounds of layoffs since its founding in 2015, as of April this year, the company still provides brokerage, mortgage and title services to consumers, but its real estate agents have been reduced from W2 employees to 1,099 contract workers. .
Homie is seeking damages and a permanent injunction against the defendants, as well as a jury trial.
“While we cannot comment on the specific details of the complaint, there is simply no basis for the suggestion that competition within the real estate industry is being stifled,” Chris Kelly, executive vice president of American HomeServices, wrote in an email. “In the past, we cannot comment on the specific details of the complaint.” Over the past decade, the industry has undergone significant evolution as the competitive landscape has changed dynamically. For example, among the top 10 closed-party brokerages in 2023, only three will still be in the top 10 in the past decade. New models are emerging, such as iBuying.
A NAR spokesman said in an emailed comment that the trade group will respond to the charges in court.
“NAR’s goal is to promote the development of the local real estate market, provide fair and equal access to real estate information and promote competition, while empowering REALTORS® to serve customers in their home buying and selling journeys,” the spokesperson added.
RE/MAX declined to comment, and the other defendants did not respond to requests for comment.
