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.
Beyond the Association of Realtors, defendants in the case include Keller Williams, Berkshire Hathaway’s HomeService of America and two of its subsidiaries. The verdict, delivered after a two-week trial in federal court in Kansas City, could be a game-changer in how Americans buy homes. It also comes at a time when the U.S. housing market is at a standstill, with mortgage rates near 8% and existing home sales down double digits from a year ago.
The case focuses on commissions that home sellers pay to the buyer’s real estate agent. These payments are partially governed by the NAR rules, which require sellers to include a fee offer to the buyer’s agent when listing the property. The offer is known to the real estate agents representing the potential buyers, but the latter are generally in the dark about these amounts. This can lead agents to steer buyers into deals to maximize their own commissions.
The plaintiffs alleged that the association and other defendants colluded to increase the commission that sellers pay to brokers representing home buyers. Class members include 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, told CBS MoneyWatch that he expects the jury award to be tripled under U.S. antitrust law, to more than $5 billion.
“Today was a day of accountability — for a very long time, the NAR used its market power to control homeownership,” Ketchmark told CBS MoneyWatch.
“It costs two to three times more to sell a house in the United States than in other industrialized countries,” the lawyer said, citing practices described in the trial that require the seller to pay brokerage commissions ranging up to 6%. .
Two other brokerages, Re/Max and Anywhere Real Estate, settled with the plaintiffs earlier this year, paying a total of $138.5 million and agreeing to no longer require agents to belong to NAR.
HomeServices expressed disappointment with the decision and promised to appeal.
“Today’s decision means buyers will face even more obstacles in an already difficult housing market, and sellers will have a harder time realizing the value of their home. It could also force buyers to forgo professional help during what is likely the most complex and difficult time. financial transaction they will make in their lifetime,” a spokesperson said in an email to CBS MoneyWatch. “Cooperative compensation allows millions of people to realize the American dream of homeownership with ‘help from real estate professionals.’
Keller Williams said he would consider his options, including an appeal. “This is not the end,” a spokesperson said in an email.
In a job on social media, the NAR pledged to appeal the liability ruling. “We remain optimistic that we will win. In the meantime, we will ask the court to reduce the damages awarded by the jury,” NAR President Tracy Kasper said in a statement.
Shares of real estate companies not named in the lawsuit plunged following the ruling in a case that challenged widespread industry practices, with Zillow falling 7% and Redfin ending Tuesday’s session down nearly 6%. The slide continued Wednesday, with Zillow shares down nearly 2% in early trading.