Major Real Estate Industry Players Found Liable for $1.8 Billion in Damages
In a groundbreaking verdict, the National Association of Realtors (NAR), Homeservices of America, and Keller Williams Realty have been found liable for $1.8 billion in damages by a Missouri court. The ruling comes as a result of allegations that the organizations conspired to keep real estate commissions artificially high. Two other firms named in the lawsuit, Re/Max and Anywhere Real Estate (formerly known as Realogy), settled out of court for a combined $140 million.
The verdict is a significant blow to NAR, the largest professional organization in America, and a major lobbying group for the real estate industry. NAR has been able to largely avoid disruption in the digital age due to its influential position, but this ruling may mark the beginning of a massive shift in how homes are bought and sold.
The plaintiffs in the case argued that NAR is forcing sellers to pay inflated commissions that are then split between their agent and the buyer’s agent. They claimed that this practice is unfair and artificially drives up costs for buyers. Typically, the commission for a home sale is around 6% of the sale price, with a 3% split between the buyer’s and seller’s agent.
While NAR and the other defendants argued that their commissions are negotiable, the plaintiffs contended that the system of commission sharing keeps prices uniform and prevents competitive pricing. The jury sided with the plaintiffs and quickly reached a decision after deliberating for only a few hours.
Consumer advocates have hailed the verdict as a victory for buyers and sellers, hoping that it will lead to changes in how commissions are structured in the real estate industry. The judge’s decisions on injunctive relief could further impact the industry, potentially resulting in a total award of $5 billion.
Real estate agents believe that there won’t be immediate changes in how commissions are set, but the longer-term impact could be the separation of buyer’s agent commission and seller’s agent commission. If commissions become more negotiable or reduced, Keefe, Bruyette & Woods analysts predict that home prices could ultimately drop as well.
NAR and the other defendants plan to appeal the verdict, meaning that the issue of real estate commissions will continue to be debated in the coming years. However, this ruling represents a significant setback for NAR, particularly as it faces scrutiny from the US Department of Justice and continues to grapple with allegations of anti-competitive practices.