Jury Finds Realtor Groups Liable for $1.78 Billion in Damages Over Commission Practices

Emma Grant

A federal jury in Kansas City, Missouri dealt a major blow to the real estate industry on Tuesday, finding the National Association of Realtors (NAR) and several major brokerages liable for antitrust violations related to their commission practices.

After a two-week trial, the jury awarded $1.78 billion in damages to home sellers who claimed they were forced to pay artificially inflated commissions.

Background of the Lawsuit

The class action lawsuit was brought by plaintiffs representing over 260,000 home sellers in Missouri, Kansas, and Illinois between 2015 and 2022. They alleged that NAR practices suppressed competition and kept commission rates for buyers’ brokers artificially high at around 2.5-3% of the home sales price.

This model has been standard practice for decades, with total commissions split between the buyers’ and sellers’ brokers at around 5-6% of the sale price.

The plaintiffs argued this structure had severe anticompetitive effects and made no economic sense except to benefit buyer brokers. They claimed sellers were forced to pay inflated commissions even as the role of buyers’ brokers has diminished in the internet age, with many homebuyers now able to independently find properties online.

Key Defendants Found Liable

The NAR, the largest real estate trade group in the country, was a major defendant in the case. Major brokerages found liable included units of Warren Buffett’s Berkshire Hathaway, HomeServices of America and subsidiaries, and Keller Williams. These groups denied any wrongdoing, arguing there was no evidence of required commission levels.

Other major realty brands like Re/Max and Anywhere Real Estate, parent of Century 21, Coldwell Banker, and Corcoran, were originally part of the lawsuit but settled separately before the trial. Re/Max paid $55 million and Anywhere paid $83.5 million in their settlements.

Impact and Damages

With the jury verdict imposing liability, total damages could reach over $5 billion after tripling under antitrust law. The substantial damages reflect the enormous volume of home sales covered under the class action, which included sellers from 2015 to 2022 in three states. If upheld, the outcome could significantly disrupt longstanding real estate commission models.

Attorneys for the plaintiffs hailed the verdict as a major victory for accountability. Meanwhile, the defendants indicated plans to appeal and seek reduced damages. The case will likely continue playing out for some time in the court system.

Broader Implications

While focused on just three states currently, the lawsuit has garnered national attention as a potential blow to the brokerage industry. Real estate professionals around the country are watching closely, as the case could precipitate changes to agent commission structures.

The verdict comes as the Justice Department has also opened a separate probe into NAR practices, demonstrating wider scrutiny of real estate agent commissions. Additional legal challenges could arise in other states targeting commission policies.

Meanwhile, the rise of non-traditional real estate models like flat-fee listing services has already begun disrupting the prevailing system. If commissions are forced lower by legal actions, it could advantage these lower-cost alternatives.

Market Reaction

Unsurprisingly, shares of major real estate brokerages not involved in the lawsuit fell following the verdict announcement. Re/Max stock dropped 4.4%, Anywhere Real Estate fell 2.7%, and online-focused brokers Zillow and Redfin saw declines of 6.9% and 5.7% respectively. Investors are factoring in the potential implications if the jury award leads to broader commission structure changes.

What Comes Next

The real estate groups found liable plan to appeal the jury verdict and seek to reduce the substantial damages. But this legal battle has likely just begun, as plaintiffs will fight to uphold the outcome.

If commissions are lowered, it could save home sellers billions in transaction fees. But critics argue it could also limit services provided by real estate agents. This debate will continue in the courts, state legislatures, and marketplace in the years ahead.

Either way, this lawsuit has shaken up the real estate sector and underscored intensifying pressure to rethink longstanding industry practices.

Article Sources:

Share This Article
Emma Grant is a highly regarded legal news expert with a deep understanding of constitutional law and its implications in contemporary society. With her extensive background in legal journalism and analysis, Emma Grant has established herself as a trusted authority on the intersection of law, policy, and society.