The National Association of Realtors and several real estate companies were ordered to pay $1.8 billion in damages after a federal jury in Missouri ruled Tuesday that they conspired to artificially inflate brokerage commissions.
Aside from the Realtors Association, the defendants in the case are Keller Williams, Berkshire Hathaway HomeService of America and two of its subsidiaries. The ruling, which came after a two-week trial in federal court in Kansas City, is a potential game-changer for how Americans buy homes. It also comes at a time when the US real estate market is at a standstill, with mortgage rates approaching 8% and existing home sales down 10% compared to last year.
The case centers on commissions made by home sellers to the buyer’s realtor. These payments are governed in part by NAR rules, which require sellers to include a buyer’s agent fee offer in listing the property. The offer is known by the real estate agents representing potential buyers, but the latter are usually not aware of these amounts. This can lead to agents directing buyers to deals to maximize their commissions.
Prosecutors alleged that the association and other defendants colluded to increase the commission paid by sellers to brokers representing homebuyers. Class members include sellers of hundreds of thousands of homes in Missouri and parts of Illinois and Kansas between 2015 and 2022.
Michael Ketchmark, lead attorney for the plaintiffs, told CBS MoneyWatch that he expects the jury’s award to triple under U.S. antitrust law to more than $5 billion.
“Today was a day of accountability — and for the longest time NAR has used its market power to clamp down on homeownership,” Ketchmark told CBS MoneyWatch.
“It costs two to three times as much to sell a home in the United States as it does in other industrialized countries,” the attorney said, citing practices identified during the trial that force sellers to pay brokerage commissions of up to 6%. . .
Two other brokerages, Re/Max and Anywhere Real Estate, settled with plaintiffs earlier this year, paying a combined $138.5 million and agreeing to no longer require agents to belong to NAR.
HomeServices expressed disappointment with the ruling and vowed to appeal.
“Today’s decision means buyers will face more hurdles in an already challenging real estate market, and sellers will have more difficulty realizing the value of their homes. This decision may also force homebuyers to forego professional help during what is likely to be the most complex and difficult time around,” a spokesperson said. “The subsequent financial transactions they will make in their lives,” the company said in an email to CBS MoneyWatch. “Collaborative Compensation helps ensure millions of people achieve the American dream of homeownership with the help of real estate professionals.”
Keller Williams said she will consider her options, including appealing. “This is not the end,” a company spokesperson said in an email.
in mail On social media, NAR vowed to appeal the liability decision. “We remain optimistic that we will prevail in the end,” NAR President Tracy Casper said in a statement. “In the meantime, we will ask the court to reduce the damages awarded by the jury.”
Shares of real estate companies not identified in the lawsuit fell after the ruling in a case that challenged broad industry practices, with Zillow down 7% and Redfin ending Tuesday’s session down nearly 6%. The decline continued Wednesday, with Zillow shares down nearly 2% in early trading.
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