Real Estate Companies Ordered to Pay $1.8 Billion in Damages for Inflating Brokerage Commissions
The National Association of Realtors (NAR) and several real estate companies have been ordered to pay $1.8 billion in damages after a federal jury in Missouri ruled that they conspired to artificially inflate brokerage commissions. The verdict, which came after a two-week trial in federal court in Kansas City, has the potential to change how Americans buy homes.
The defendants in the case include Keller Williams, Berkshire Hathaway’s HomeService of America, and two of its subsidiaries. The plaintiffs claimed that the association and other defendants colluded to drive up the commission that sellers pay to brokers representing homebuyers. The class members include the sellers of hundreds of thousands of homes in Missouri and parts of Illinois and Kansas between 2015 and 2022.
Michael Ketchmark, the lead attorney for the plaintiffs, expects the jury award to be tripled under U.S. antitrust law to more than $5 billion. He stated, “Today was a day of accountability – for the longest time the NAR has used its market power to get a stranglehold grip on homeownership.”
The case revolves around the commissions home sellers make to a buyer’s realtor. NAR rules mandate that sellers include a fee offer to the buyer’s agent in listing property. However, the buyer’s agents are often unaware of the amounts offered, leading them to steer buyers into deals that maximize their own commissions.
This ruling comes at a time when the U.S. real estate market is struggling, with home sales down 15% from last year and mortgage rates nearing 8%. The inflated commissions have been cited as one of the reasons why it costs two to three times as much to sell a house in the United States compared to other industrialized countries.
Two other brokerages, Re/Max and Anywhere Real Estate, had previously settled with the plaintiffs, paying a combined $138.5 million and agreeing to no longer require that agents belong to the NAR.
HomeServices expressed disappointment with the ruling and vowed to appeal, stating that it would make the real estate market even more challenging for buyers and sellers. Keller Williams also expressed its intention to consider its options, including an appeal.
Following the ruling, shares of real estate companies not identified in the lawsuit fell, with Zillow dropping 7% and Redfin ending the session nearly 6% lower. The repercussions of this case are expected to continue affecting the real estate industry, with uncertainty surrounding industry practices.
The NAR has vowed to appeal the liability finding and will ask the court to reduce the damages awarded by the jury. Industry experts and stakeholders will be closely following the developments of this case as it may have significant implications for the future of real estate in the United States.
In related news, home prices and mortgage rates remain high, further adding to the challenges faced by buyers and sellers in the current market conditions.