Dawn Pfaff is a free-market evangelist, and that informs how she runs MyState MLS. The privately owned multiple listing service has taken a laissez faire approach since its launch in 2009, as it promises no fees and fewer rules than MLSs owned by Realtor associations.
This manifesto has helped MyState develop a national footprint with listings for all types of properties, including single-family homes, manufactured homes, newly built homes, foreclosures and even land.
“You have to follow the law, but if it’s legal, you can do it,” Pfaff said. “We will always comply with the law.”
But MyState and a number of privately owned MLSs have stepped into a legal gray area by continuing practices that the vast majority of MLSs can’t conduct anymore, due to new rules mandated by the landmark antitrust settlement from the National Association of Realtors (NAR).
While no legal statute presently outlaws these practices, the MLSs might be engaging in a game of chicken with the Department of Justice (DOJ) and the law firms that have won or settled commission lawsuits against NAR and several major brokerages. They’ve made clear — in both words and actions — that they will continue to aggressively pursue bans to anything they perceive to be anticompetitive.
For law firms that have won substantial sums of money in class-action lawsuits against NAR and various brokerages, they’ll keep filing suits as long as they keep getting paid, and they’ll do it in a way that maximizes their payouts.
“Why shoot twice at a target you’ve already drained dry?” said Marx Sterbcow of Sterbcow Law Group. “Big money, class-action lawyers know that milking a cow doesn’t mean you slaughter it. You keep it alive for the next milking. But hit it too hard, too soon and you are left with an empty barn.”
Reasons for opting out
At the heart of the matter are NAR rules that, prior to the March 2024 settlement, required listing agents to make blanket offers of compensation to buyer agents on Realtor association-owned MLSs. If they didn’t make an offer, a listing couldn’t be posted.
A jury in the Sitzer/Burnett antitrust lawsuit in Missouri agreed with plaintiffs that the practice amounted to anticompetitive behavior that artificially inflated real estate agent commissions, in addition to allowing buyer agents to steer clients to listings that offer higher commissions.
NAR settled the case for $418 million, and all MLSs owned by Realtor associations can no longer have a field on their platforms for buyer agent compensation offers. Privately owned MLSs were allowed to opt in to the settlement, which required them to follow the rules of the settlement and pay a fine in exchange for protection from future antitrust litigation.
According to Inman News, 22 of the non-Realtor affiliated MLSs opted out. These organizations say that making offers of compensation to buyer agents was optional but never mandatory. In their minds, this made opting into the settlement unnecessary because their platforms weren’t tied to the rule that’s underpinning the lawsuits.
“We weren’t named in the litigation, we weren’t named in the copycat cases and we didn’t have the mandated rules that were named in the litigation,” said Jeremy Crawford, president and CEO of First MLS. “So, from all of those factors, we just didn’t opt into the settlement.”
First MLS still has a buyer compensation field on its platform. The DOJ declined HousingWire’s requests for comment on whether it views this as problematic, but its actions in another case suggest that it might.
In 2023, MLS Property Information Network (MLS PIN) settled the Nosalek commission lawsuit against it and four major brokerages for $3 million. The terms of the settlement required MLS PIN to remove mandatory offers of buyer agent compensation. But it also allowed the MLS to leave the field up, which gave listing agents the option to make offers.
But the DOJ entered a statement of interest prior to the settlement’s final approval, saying that it had “significant concerns” about the terms of the agreement, which it equated to a “cosmetic change.” After months of legal maneuverings, the suit has since been stayed until after the final approval of NAR’s settlement of the Sitzer/Burnett case in November.
MLS PIN did not respond to interview requests, but HousingWire independently confirmed that its buyer agent compensation field remains up — but not mandatory — on the platform.
Prior to the spree of antitrust suits, the Washington state-based Northwest MLS (NWMLS) removed its requirement to make buyer agent compensation offers. It has taken a defiant stance against the NAR settlement and the DOJ.
In a statement in May, NWMLS announced it was opting out of the NAR settlement. It unloaded on the terms of the agreement, claiming that NAR was pushing “consumers and brokers to make secret deals off MLS, inviting deceptive practices, discrimination and unfair housing.“
In an emailed response to questions from HousingWire, NWMLS said that it didn’t opt into the settlement because the new rules “largely duplicate the rules and practices that have been in place.” Applying that reasoning, NWMLS has left up its field that allows listing agents to make offers of buyer agent compensation.
Looming legal threats
While cooperative compensation is technically optional on these MLSs, National Economic Research Associates President Lawrence Wu testified in the Sitzer/Burnett trial that buyer agent compensation offers are included in roughly 99% of listings.
MyState MLS no longer has a dedicated field for buyer agent commission offers, but it retains a comment box where agents could do so. REsides, an independently owned MLS based in South Carolina, has a similar comment box that can be used for seller concessions. But REsides CEO Colette Stevenson said that an explicit offer of compensation is a violation of platform rules that would result in the listing being taken down.
The DOJ isn’t the only remaining legal threat to the real estate industry. Michael Ketchmark, the plaintiffs’ attorney in the Sitzer/Burnett case, filed additional antitrust lawsuits after the jury in that case awarded plaintiffs a $1.8 billion judgment. Other attorneys across the nation have since filed copycat lawsuits.
Most notably, Ketchmark filed the Gibson and Umpa suits in Missouri against a host of major and midsize brokerages, which were later consolidated.
Two suits in Illinois — Batton I and Batton II — come at it from a slightly different angle, as the plaintiffs are buyers rather than sellers. But the essence of the suits are the same: Homebuyers allegedly paid inflated commissions as a result of NAR rules, in collusion with major national brokerages.
Defendants in the Batton cases, both of which are in the pretrial stage, have filed motions to dismiss. Given the success of previous suits, there will almost certainly be more to add to the dozens already filed.
Ketchmark declined interview requests from HousingWire, but in an interview with Inman in August, he made clear that he’s keeping a close eye on the industry as it moves into a post-settlement environment.
The No. 1 question for MLSs is simple: Why take the risk when the legal repercussions and the monetary cost of fighting back are so high?
“They’re not just going to go after these MLSs that are obstructionist, in DOJ’s opinion — they’re going to go after the executives and bring criminal charges against them and brokerage owners that are part of that MLS,” Sterbcow said. “It’s coming, and don’t think for a second that the DOJ hasn’t already geared up for that.”
The fury from brokers and agents toward NAR is palpable, and Pfaff said that agents are “calling like crazy” since the settlement to register with MyState MLS. Private MLSs tend to have geographic overlap with Realtor-owned MLSs, so theoretically, the buyer compensation field could give private MLSs a competitive advantage for agents wanting to push back on the new settlement rules.
Potential defense angles
Some MLSs are looking for workarounds, but many have already backed off.
The Bay East Association of Realtors in the San Francisco area recently removed a “yes/no” field that listings agents could use to communicate whether sellers were willing to offer concessions, similar to the comment box used by REsides. California Regional MLS, the nation’s largest MLS, did the same after the DOJ launched a formal inquiry into the standard forms of its owner, the California Association of Realtors.
Another question is how these MLSs believe they can beat back the DOJ and any potential class-action lawsuits. Northwest MLS thinks that the forced removal of the buyer agent compensation field is a First Amendment violation of free speech.
Section 230 of the Communications Decency Act of 1996 — which says that internet platforms can’t be held liable for content posted by users — has also been evoked as MLSs can argue that listings are user-generated content.
If Section 230 sounds familiar, it might be because Facebook and other social media companies have pushed back against congressional inquiries into extremist content and disinformation on its platform by using Section 230 as a defense.
Facebook has argued that it couldn’t possibly police the billions of users on its platform or the astronomical amount of data they generate. It’s a little different for MLSs, however, because the number of users on even the biggest platform doesn’t exceed five figures, and the amount of data these users collectively generate doesn’t come remotely close to that of Facebook’s. And MLSs already have systems for policing fair housing violations that could be used to catch violations of the NAR settlement-mandated rules.
Even if their positions win in court, the cost of litigating these cases could drain the coffers of an MLS, particularly if they’re going against the DOJ, which has a virtually unlimited budget. And with the DOJ continuing to issue subpoenas to organizations within the real estate industry — including MLSs — it’s all but certain they’ll face a legal challenge.
“I don’t think [the Section 230] argument is going to go very far,” said Rob Hahn, a real estate consultant who owns 7DS Associates. “I wouldn’t do it, but God bless them for trying. Just make sure you have a very nice legal budget.”
