“The Department of Justice appears to be particularly focused on whether standard contracts are a way to avoid changing business practices,” Sears wrote in a message to Realtor Hub.
“To be clear, NAR and I personally oppose any attempt to avoid settlement,” Sears wrote. “Changes in practices should be implemented fully and in good faith in order to promote greater consumer rights, consumer choice, and healthy competition.”
While the open communication between the Justice Department and NAR is a positive sign, Sears noted that the meeting does not indicate that the Justice Department will drop its investigation into NAR and the industry.
Even without the Sears message, the Justice Department’s recent actions leave little doubt that regulators are keeping an eye on the industry.
Last week, the Department of Justice RexAppeals of lawsuits against NAR and JiroThe case revolves around NAR’s optional “anti-mixing rule,” which prohibits MLSs and property portals from mixing MLS and non-MLS listings, such as homes listed by the now-defunct discount broker REX. In its brief, the Department of Justice argues that even though the NAR rule is optional, it could encourage anticompetitive conduct, a central focus of the Commission lawsuit. The Department of Justice argues that the district court did not adequately consider this in its ruling.
“The district court applied an incomplete legal framework in evaluating whether REX had raised genuine disputes of material fact regarding concerted conduct in this litigation,” the complaint states.
The department also argues that the court’s decision fails to consider the risks that trade groups like NAR could evade antitrust oversight through arbitrary regulation.
“The judge’s decision creates a loophole that could allow associations to avoid antitrust scrutiny by masking restrictive rules as optional,” the Justice Department said in the filing.
The Department of Justice’s response to the REX lawsuit: California Association of Realtors (CAR) has notified members that the DOJ has opened a formal investigation into several forms of trade associations related to changes in business practices outlined in the settlement with NAR.
The Justice Department’s formal investigation Consumer Federation of America The report, sent to the Department of Justice, states that CAR’s draft buyer representative and broker compensation agreements are “virtually unreadable.” University at Buffalo.
On Tuesday, the C.F.A. CAR Sales Contract To the Department of Justice. Her report“No seller is likely to read this monstrous document, much less understand it,” Montestier wrote.
Responding to the latest criticism, CAR general counsel Brian Manson said in a statement: “As with the CFA’s report on CAR’s buyer representation agreement, this commentary concerns an early draft of the agreement that was still in the works, and we spent a great deal of time reviewing the grammar, format and design of the early draft of the form.”
“Furthermore, the report contains the wild speculation that brokers using the CAR form are attempting to circumvent the NAR settlement. CAR supports the goals of the settlement and helps its members have clear discussions with sellers about compensation options,” Munson said. “The report also states that the draft form contains too much information about what sellers can expect in relation to selling their home. Instead, we believe information about the MLS and the offer process would help educate sellers and make the form more consumer-friendly.”
“The assertion that the contract is so extensive that it is unlikely the average seller would be able to read or understand it underestimates the capabilities and responsibilities of sellers and their real estate agents. The contract’s complexity reflects the complexity of California real estate transactions. The contract is designed to cover a wide variety of scenarios and provide clear guidelines, ultimately in the seller’s interest by ensuring that all potential issues are resolved up front.”
“Sellers don’t have to navigate these complexities on their own. A real estate professional can guide them through each clause and ensure the seller fully understands it before agreeing to the terms of the contract,” Munson said.
The Justice Department’s recent actions, making clear that it wants to ban collaborative compensation, make it feel to many in the industry that regulators are scrutinizing NAR settlement agreements more closely than ever before.
“The Department of Justice is not done cracking down on this industry.” Real Trend Consulting“They’re pushing the real estate industry into a corner. They had a say in Nosalek and Sitzer/Barnett. They had a say in the settlement, the judge tentatively approved the settlement, and everyone is prepared for changes. But now it seems their only intention is to intimidate the industry. It’s going too far for the Department of Justice to interfere with the CAR form, or any form written by anyone else.”
Ever since a Missouri jury in Sitzer/Barnett found NAR and some of the nation’s largest real estate brokerages guilty of conspiring to artificially inflate real estate agent commissions, industry analysts have speculated about the possibility of the Department of Justice being involved in the case, a suspicion heightened by an appeals court decision that allowed the Department of Justice to reopen its investigation into the trade associations.
With the deadline looming for the implementation of changes in business practices outlined in the NAR settlement and a final approval hearing for the settlement scheduled for late November, industry analysts believe the Justice Department’s recent actions are a good sign that some engagement is sure to occur.
Ryan Tomasello, Analyst KBWsees several possibilities where the Department of Justice could become involved.
“One is for DOJ to formally get involved through the NAR settlement approval process, but this could delay the settlement approval process and prolong uncertainty for the industry,” Tomasello said. “The other is for DOJ to pursue enforcement actions in a more piecemeal fashion, similar to what we’ve seen with the issuance of formal investigations into CAR forms. It’s possible that DOJ is doing that right now and we just aren’t aware of it.”
“It’s also possible that the Department of Justice could manipulate further changes, essentially from behind the scenes, by pressuring various large entities and sending signals of what the Department of Justice will and will not like. Whether the industry agrees with the Department of Justice is a matter of whether the industry wants to not heed those signals and risk further legal action or a more formal investigation by the Department of Justice. And of course, the Department of Justice could reopen a full-scale investigation of NAR, which would lead to another legal battle,” Tomasello said.
As the industry waits for the Department of Justice to act, many major companies are struggling with the uncertainty this has created, Tomasello said.
“It’s unclear for the industry what the ultimate changes will be and what the new ways of doing business will look like going forward. There’s a dark cloud hanging over the industry,” Tomasello said. “I think the industry is just in a transitional period, but no one knows for how long or what it will ultimately look like.”
