Nevada real estate agents ‘conspired’ to inflate broker fees, lawsuit claims

A federal class action lawsuit filed in Nevada earlier this year alleges the local real estate industry has “conspired” to inflate commissions for its brokers since 2020.

Nathaniel Whaley claims in the lawsuit that he paid a “substantial” commission to the buyer’s broker of $40,250 in the sale of his Las Vegas Valley home in April 2022, which was listed on the Northern Nevada Multiple Listing Service for $805,000. The total commission charged was 5 percent, of which 3 percent was paid to the buyer’s broker.

He alleges in the lawsuit filed Jan. 15 in the U.S. District Court of Nevada that the Las Vegas Realtors, the largest association of real estate agents in the Las Vegas Valley, and others “conspired to require home sellers to pay the broker representing the buyer of their homes, and to pay an inflated amount” in violation of antitrust laws.

The lawsuit is one of more than a dozen copycat cases that have popped up around the country since a federal jury in Kansas City, Missouri found the National Association of Realtors and a number of area residential brokerages liable in October for $1.78 billion in damages for conspiring to artificially inflate commissions on residential home sales.

Whaley seeks a jury trial, injunctive relief from the practice and damages to be determined by the court. A specific sum of money was not outlined in the lawsuit.

Samuel Schwartz, one of two attorneys for the plaintiff in the case along with Ben Lehavi, allege that for years, real estate agents in Nevada have conspired together to create fixed commission rates somewhere between 4.5 and 6 percent, creating a “closed market.”

The lawsuit claims that at the center of the conspiracy is the Buyer Broker Commission Rule, conceived by the NAR — which has more than 1.2 million individual members across the U.S. — which requires all home sellers to use an agent and agree to their non-negotiable commission in order to list a property on the MLS, a private database of home listings used by all licensed real estate agents.

“The real estate market has evolved into a closed system that limits the access for buyers and sellers and provides those with access to the system, the real estate agents and the brokers the ability to dictate not only prices but also commissions,” Schwartz said in a phone interview with the Las Vegas Review-Journal.

“And then you’ve limited the people who can have access (to the MLS),” he said. “And you’ve left it to those people that have the control to say, ‘Well, you want access, you have to pay this commission, it’s not negotiable.’ And then you’ve actually given the wrong incentives to the buyer.”

The LVR, which is a member organization of NAR and represents nearly 17,000 local brokers, deferred to the national organization for a request for comment on the lawsuit. NAR responded with the following emailed statement:

“The cooperative compensation practice makes efficient, transparent, and accessible marketplaces possible. Sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. The National Association of Realtors will respond to this complaint in court.”

The lawsuit takes aim at the alleged monopoly that the MLS has on the market, alleging “the MLSs in Nevada are controlled by local realtor associations who adopt and enforce the NAR rules.”

Lehavi said this creates an artificially inflated market, noting other countries’ brokers’ fees are much lower given the market is free from such constraints.

“The United Kingdom, Singapore, the Netherlands, Australia and Belgium, the average commissions is between 1 and 3 percent, and here we’re typically 5 to 6 percent,” he said. “Home sellers must increase their sale price to cover the cost of inflated commissions. This raises the price of homes for all homebuyers at a time when unaffordability is already at record highs.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.