November 1, 2023
US Jury Finds Realtors Liable For Inflating Commissions, Awards $1.78 Bln Damages
*Originally Reported by Reuters
Oct 31 (Reuters) – A U.S. jury on Tuesday found the National Association of Realtors and some residential brokerages, including units of Warren Buffett’s Berkshire Hathaway (BRKa.N), liable to pay $1.78 billion in damages for conspiring to artificially inflate commissions for home sales.
The verdict by a federal jury in Kansas City, Missouri, could upend decades-old practices that have allowed real estate agents to boost commissions as home prices and mortgage rates rise, hurting consumers by making housing transactions more expensive.
Plaintiffs in the class action included sellers of more than 260,000 homes in Missouri, Kansas and Illinois between 2015 and 2022, who objected to the commissions they were obligated to pay buyers’ brokers.
The verdict followed a two-week trial, and the damages award can be tripled under U.S. antitrust law to more than $5.3 billion.
“Today was a day of accountability,” said Michael Ketchmark, the lead lawyer for the plaintiffs.
The defendants included Berkshire-owned HomeServices of America and two subsidiaries, as well as the realty Keller Williams.
NAR spokesperson Mantill Williams said the trade group plans to appeal, and seek reduced damages.
HomeServices said it was disappointed in the verdict and planned to appeal, while Keller Williams spokesperson Darryl Frost said the realty company would consider its options for an appeal. “This is not the end,” Frost said.
Broker compensation in the U.S. has typically been about 5% to 6% of a home’s sales price, with about half paid to a buyer’s broker.
Home sellers complained that this model suppressed competition by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers’ diminishing role, with many buyers able to find homes independently online.
Sellers said the arrangement had “severe anticompetitive effects” and made “no economic sense, except for the buyer broker.”
The defendants denied wrongdoing, with the NAR saying there was no evidence agents were required to “make offers of compensation at all, let alone at amounts that stabilize, fix, or raise commissions.”
Re/Max (RMAX.N) and Anywhere Real Estate (HOUS.N), whose brands include Century 21, Coldwell Banker and Corcoran, had been defendants but settled before trial, with Re/Max paying $55 million and Anywhere paying $83.5 million, without admitting liability.
Shares of real estate brokerages not involved in the verdict closed lower.
The U.S. Department of Justice is separately asking a federal appeals court in Washington to let it revive an antitrust probe into the NAR’s practices.
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