Title: National Association of Realtors and Brokerages Ordered to Pay $1.78 Billion in Damages for Inflated Commissions
In a landmark ruling, a federal jury in Kansas City, Missouri, has held the National Association of Realtors (NAR) and prominent residential brokerages, including Berkshire Hathaway, liable for conspiring to artificially inflate commissions on home sales. The jury has ordered them to pay a staggering $1.78 billion in damages, potentially disrupting decades-long practices that have contributed to higher housing transaction costs for consumers.
The class-action lawsuit, which spanned from 2015 to 2022, involved sellers of over 260,000 homes in Missouri, Kansas, and Illinois. These sellers strongly objected to the commissions they were obligated to pay to buyers’ brokers. The defendants in the case included Berkshire’s HomeServices of America, two of its subsidiaries, and realty company Keller Williams.
The jury’s decision is particularly impactful as U.S. antitrust law allows for the tripled damages, potentially exceeding $5.3 billion. However, the NAR has already announced its intention to appeal the verdict and request a reduction in damages. HomeServices, expressing disappointment, plans to follow suit and appeal the ruling, while Keller Williams is also considering its options, making it clear that they believe this is not the end of the legal battle.
At the center of the lawsuit was the traditional broker compensation model, which typically amounted to 5% to 6% of a home’s sales price, with half of the commission allocated to the buyer’s broker. Sellers argued that this framework hindered competition, as commissions for buyer brokers remained around 2.5% to 3% despite their diminishing role and the abundance of online resources available to buyers.
Despite the verdict against them, defendants, including the NAR, denied any wrongdoing and asserted that there was no evidence of agents being obligated to offer compensation or stabilize commissions. However, Re/Max and Anywhere Real Estate, which encompasses Century 21, Coldwell Banker, and Corcoran, decided to settle prior to the trial, with Re/Max paying $55 million and Anywhere paying $83.5 million as a resolution.
In response to the verdict, shares of various real estate brokerages not involving the lawsuit, including Re/Max, Anywhere, Zillow Group, and Redfin, experienced a decline in their stock prices.
In a separate development, the U.S. Department of Justice continues efforts to revive an antitrust investigation into the NAR’s practices, indicating further scrutiny of the real estate industry and its commission structures.
The court’s ruling carries significant implications for the future of real estate transactions and the role of real estate agents. As the legal battle wages on through the appeals process and the potential for reduced damages, industry participants eagerly await the final outcome, hoping for clarity and potentially reimagined commission models that align with evolving market dynamics.
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