Understanding how antitrust law applies to the practice of real estate is foundational knowledge. Let’s see how much you know.

Understanding how antitrust law applies to the practice of real estate is foundational knowledge. Let’s see how much you know.

1. Federal and state antitrust laws are designed to:

A. Prevent companies from misleading the public in their advertising.
B. Protect competition.
C. Limit competition.
D. Regulate trust funds.

Answer: B. The nature of the real estate brokerage—characterized by vigorous competition for listings and cooperation in sales—makes real estate brokers particularly susceptible to antitrust challenges. Therefore, it’s imperative to understand what actions might constitute a potential violation.

2. Under Section 1 of the federal Sherman Antitrust Act, there are two basic elements of any violation: There must be a (1) ____________ that (2) unreasonably restrains trade.

A. Contract, combination, or conspiracy
B. Rumor, falsehood, or threat
C. Rule, signage, or physical barrier
D. Person, place, or thing

Answer: A. The conspiracy element is satisfied when two or more persons or entities carry out a common scheme or plan. If that can be shown, the remaining issue is whether or not the effect was an unreasonable restraint of trade.

3. Courts apply one of two analytical standards to antitrust cases: the per se rule and _______.

A. The rule of threes
B. The rule markets
C. The rule of reason
D. The rule of thumb

Answer: C. The per se standard in restraint of trade cases is applied to practices deemed so inherently anticompetitive under Section 1 that their effects on trade are presumed to restrain trade. Under the rule of reason, the court weighs the pro-competitive and anticompetitive aspects of a practice. Conduct challenged as unlawful under this standard may escape condemnation if the pro-competitive benefits outweigh the anticompetitve implications.

4. Brokers are in violation of antitrust law if they

A. Join with other brokers to shut out a competitor.
B. Fail to keep escrow money separate from personal money.
C. Lie about a competitor publicly.
D. Charge one seller a higher commission than another seller.

Answer: A. Group boycotts, or concerted refusals to deal with another competitor or a supplier, and conspiracies to fix prices, such as real estate commission rates, are examples of unlawful per se restraints. (As for the other choices, state license law governs the proper use of escrow accounts; disparaging a fellow REALTOR® by using false or misleading language could result in an ethics complaint; and all commissions are negotiable!).

5. To avoid antitrust problems, your brokerage firm should

A. Adopt and rigorously apply a written officewide antitrust compliance program.
B. Review their antitrust compliance policy with every staff member and independent contractor.
C. Instruct sales agents to report to the broker any suggestions by sales agents from other firms that could be interpreted as an invitation to fix commissions or boycott a competitor.
D. Identify legal counsel to be consulted when antitrust issues arise.

Answer: A. Answer: All of the above. An antitrust compliance policy is a business necessity since brokers are responsible for the conduct of their staff and salespeople. Source: Real Estate Brokerage Essentials, Fourth Edition

How Did You Do?

Five correct answers. Maybe it’s time to open your own brokerage.

Three to four. You get it, but keep your knowledge fresh with the Antitrust Compliance Guide for REALTORS®, a pocket guide from store.realtor(link is external) (member price: $6.95).

Fewer than three. Break out the books—specifically, Real Estate Brokerage Essentials, Fourth Edition, by NAR’s legal team. The book provides clear explanations, sample documents, case law, and training materials on a range of legal matters.

©National Association of REALTORS®
Reprinted with permission

Things to know about sale-leasebacks, using recording devices, and conducting criminal background checks.

Sale-leasebacks

When home sellers need to retain possession of the home for a few days— or longer—after the closing:

1. Put it in writing. Buyers shouldn’t let sellers retain possession of a home for any amount of time without an agreement in place that lays out all the conditions.
2. Check insurance coverage. Generally, as the new homeowner, buyers are responsible for any damage after closing, but sellers aren’t off the hook and should convert their homeowners policy into a rental policy for the duration of their post-closing possession.
3. Get the lender’s approval. Many lenders won’t accept leaseback agreements that are longer than 60 days, at which point the home could be classified as an investment property.

Use of Recording Devices

If your sellers use audio or video recording in the course of a home sale:

1. Know your state’s law. Most allow video surveillance without consent, but hidden cameras may require notice; some states require the consent of all parties for audio recording.
2. Address it in the listing agreement. Require sellers to disclose any devices, warn them of the legal risks of using surveillance devices, and require indemnification for any unlawful surveillance.
3. Disclose it in the listing. Note in the MLS any known property surveillance

Use of Criminal Background Checks

If you do criminal background checks on prospective tenants:

1. Know your liability risk. Housing providers risk liability if their policies predictably would result in negative impact on groups protected under federal fair housing law.
2. Have a written criminal history policy. Apply it consistently, don’t ask about or consider arrests without convictions, and avoid blanket bans on applicants with a criminal conviction.
3. Document housing decisions. If you reject an applicant and your decision is called into question, you should have a record showing why the decision is consistent with your policy.

©National Association of REALTORS®
Reprinted with permission

Understand the letter of the law when it comes to teaming with allied businesses.

The Real Estate Settlement Procedures Act is a federal law designed to protect consumers in the settlement of real estate transactions. Before you get involved in any business-building partnership with allied professionals, be sure you know what is and isn’t allowed under RESPA.

1. RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider. The law applies equally to all settlement service providers, which goes beyond title insurance, loan origination, and real estate brokerage to include property surveys, credit reports or appraisals, pest and fungus inspections, home warranty companies, and more. Furthermore, a “thing of value” need not be expensive to lead to a RESPA violation. Anything provided in exchange for a referral of business can violate the law.
2. The law doesn’t prohibit real estate brokers from setting up marketing service agreements, or MSAs, with other settlement service providers, but such agreements should be reviewed to ensure that any payment is for marketing services, not referrals, and that the payments made for these services represent fair value for the services provided.
3. A referral is an action directed to a person to influence the person’s selection of a settlement service provider, whereas marketing is directed to a wider audience. Handing someone a brochure is a referral; displaying a brochure in the office lobby is marketing. A referral arrangement need not be written or oral to violate RESPA; a violation can be established by a practice, pattern, or course of conduct.
4. RESPA regulations provide an exception for normal promotional and educational activities that are not conditioned on the referral of business and don’t defray expenses that the real estate professional would otherwise incur.

Learn more at nar.realtor/respa.

©National Association of REALTORS®
Reprinted with permission

Three years ago, in March 2019, the National Association of REALTORS® and four corporate defendants were sued in class-action lawsuits filed in Missouri and Illinois alleging that home sellers have been damaged because their listing broker compensates the buyer’s representative. These lawsuits claim that various NAR rules and members’ adherence to those rules have led to artificially fixed and inflated commissions being paid to real estate professionals.

Class-action litigation is long and arduous, and NAR has been keeping you and your associations updated on relevant milestones as they have transpired over the years. NAR has also been asking you to do what you can to help the association prevail in the court of public opinion. Now it is time for another update and another ask.

The Update

Last Friday, a federal judge in Missouri granted class certification. This is not a victory for the plaintiffs and does not change the facts of the case. The ruling was only procedural and now allows others who have allegedly been impacted to join the litigation as plaintiffs. The process is expected to be lengthy before the case is fully resolved.

NAR is extremely disappointed in the decision, believes it was wrongly decided, and plans to appeal. NAR continues to believe the pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers. Sellers making offers of compensation to buyer brokers also gives all home buyers a better shot at affording a home and professional representation. It’s only the free market that organically establishes commission costs within local real estate markets based on service, consumer preference, and what the market can bear.

The Ask

This decision does not require any action or comments on the part of members; NAR will keep you informed of any notable litigation milestones. But there is something you can do to help the association prevail in the court of public opinion. Please review the new competition.realtor website, which provides a comprehensive overview of how REALTORS® and the local MLS broker marketplaces benefit consumers.

• Use this information to tell your customers the value you bring to the transaction, what they can expect from your services, and how you will be compensated.
• Use this information to start an education campaign or publish articles (like this one) in your local media outlets.
• Use this information to show why the American real estate system that honors cooperation amongst professionals serves the best interest of home buyers and sellers alike.

The page will continually be updated with new developments, information, and materials, so we want members to consider it their go-to resource. In addition, we highly encourage the continued use of Buyer Representation Agreements(link is external) in order to formalize your professional working relationship with clients as well as detail what services consumers are entitled to and what the buyer agent expects from their client in return.

In Other Antitrust Litigation News

NAR received a disappointing opinion this week from the 9th Circuit Court of Appeals reversing a lower court’s decision granting our motion to dismiss a lawsuit challenging the Clear Cooperation Policy. This too only addresses a procedural issue in the litigation and does not address the merits of the underlying challenge. While we are disappointed in this decision, we will continue to defend the lawsuit, as we firmly believe that the Clear Cooperation Policy advances equal opportunity in housing by ensuring listings are widely available and accessible to all. Without the protections from the CCP, consumers would be disadvantaged because agents could refuse to give them or their representatives access to those listings. We look forward to the next stage of this case, in which we will show the CCP is pro-competitive, pro-consumer, and consistent with all laws and regulations.

It’s been quite a week in litigation to be sure. As we look forward to the future, let us remember to take time each day to tell the world who we are.

©National Association of REALTORS®
Reprinted with permission

The National Association of REALTORS® and realtor.com® on Wednesday honored the four inaugural winners of the Fair Housing Champion Awards during NAR’s Fair Housing Month event, “What Will it Take to Close the Racial Homeownership Gap?” Honorees were recognized for making a significant impact on efforts to advance fair housing and expand homeownership to traditionally underserved communities, either through their business or as a volunteer or advocate.

This year’s winners are as follows:

Harrison Beacher is the managing partner of the Coalition Properties Group team at Keller Williams Capital Properties in Washington, D.C. He serves as the 2022 president of the Greater Capital Area Association of REALTORS®, and he’s an at-large director for the District of Columbia Association of REALTORS®. Many of Beacher’s clients are first-time buyers, and he helps them succeed by connecting them with down payment assistance programs and other resources.

Sabrina Brown, ABR, SRS, is broker-owner of Brown and Brown Real Estate in Fresno, Calif. She’s a director at her local and state associations, the Madera Association of REALTORS® and the California Association of REALTORS®. Brown regularly holds workshops that connect first-time buyers with programs to help them achieve homeownership and invest in real estate, with an emphasis on outreach to people of color.

Bobbi Howe, CRS, is a second-generation real estate professional with more than 24 years of experience in the field. Howe currently serves as the treasurer-elect for Missouri REALTORS®, and she says she is dedicated to using her platform to spread the word and educate colleagues and consumers about systemic racism in real estate. She works to expand opportunities for Black real estate investors in the Kansas City area.

Rafael Perez has extensive experience as a mortgage banker, lender, and educator. Perez serves on NAR’s Fair Housing Policy Committee and is a member and past president of the San Diego chapter of the National Association of Hispanic Real Estate Professionals. He continues his eight-plus years of service as a commissioner for the City of San Diego on the Citizens’ Equal Opportunity Commission. Perez is passionate about helping families create household wealth through homeownership. He also helps San Diego residents who have been displaced by development to move back into their old neighborhoods.

“NAR is committed to helping build thriving, inclusive communities in every ZIP code in America,” NAR President Leslie Rouda Smith said in a statement. “I am so proud of all the work our winners have done to increase access to homeownership and hope their leadership can serve as an example to inspire others into action.” The Fair Housing Champion Awards, sponsored by realtor.com®, provide a $4,000 prize to each winner that they can dedicate to a housing-related nonprofit organization of their choice.

©National Association of REALTORS®
Reprinted with permission