Federal judges are weighing whether the Department of Justice can reopen a prior investigation into the National Association of Realtors and its commissions rules under fire on multiple fronts.
The DOJ's Antitrust Division pulled out of a settlement with the association in 2021, citing a need for a further probe into real estate agent compensation rules home sellers have deemed anticompetitive. Attorneys for the DOJ and NAR argued Friday before three justices of the U.S. Court of Appeals for the D.C. Circuit regarding a 2020 DOJ letter in which feds said they would close their investigation.
Friday's hearing came just over a month after a massive victory for home sellers against NAR and other housing market players in a billion-dollar class action lawsuit. NAR, Keller Williams and HomeServices of America vowed to appeal that decision while gearing for another similar, major court battle next year in Minnesota. Two other brokerage giants, Anywhere Real Estate and RE/MAX, meanwhile reached settlements and agreed to rule changes.
Judges did not appear aligned Friday in determining whether the DOJ could reopen its probe as opposing counsel argued the terms of the 2020 letter. One judge compared the scenario to a parent telling a child to close a door, and the child subsequently closing and opening the door.
NAR in a statement Tuesday blamed the DOJ's move on an "apparent institutional change of heart under new DOJ appointees." The DOJ's letter came during the final months of the Trump Administration, while the settlement opt-out came six months into the Biden Administration.
"The Justice Department is not free to ignore the principles of contract law and fair dealing that bind every other party before the courts," said Mantill Williams, NAR vice president of communications, in a statement.
The DOJ and counsel for NAR didn't respond to a request for further comment.
Despite how the Circuit Court justices may rule, analysts still project significant changes to real estate agent commission rules through either federal enforcement or civil lawsuits.
"The best outcome is listing brokers not being required to offer compensation to buyer brokers," a note Monday from Compass Point said. "The more onerous outcome would be a prohibition on listing brokers from offering compensation without the express written consent of the seller."
The perspective aligns with analysis from Keefe, Bruyette & Woods, which suggests the Federal Trade Commission could get involved in rewriting commission rules.
NAR shortly before the major Sitzer/Burnett trial updated its rules to allow brokers to offer no compensation to buy-side brokers. That change didn't sway real estate partners, as Redfin joined Anywhere and RE/MAX in distancing itself from NAR participation.
The commission rules fracas hasn't yet impacted mortgage lenders, although industry experts mull several impacts to home loan providers. Housing agencies could introduce a commission financing workaround that won't impact underwriting, KBW suggested. Less compensation burdens could further unlock strained housing supply, experts said. Alternatively, Realtors could pursue more dual-employment opportunities.
The D.C. justices in Friday's NAR hearing didn't indicate when they would reach a decision.
