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 on Tuesday that they conspired to artificially inflate brokerage commissions.
In addition to the Realtor association, the defendants in the case include Keller Williams, Berkshire Hathaway’s HomeService of America and two of its subsidiaries. The verdict, which came after a two-week trial in federal court in Kansas City, is a potential game-changer for the way Americans buy homes. It also comes at a time when the US housing market has stalled, with mortgage rates approaching 8% and existing home sales down by double digits from a year ago.
The case centres on the commissions that home sellers pay to a buyer’s agent. These payments are governed in part by NAR rules that require sellers to include a fee offer to the buyer’s agent when listing a property. The offer is known to real estate agents representing prospective buyers, but they are usually in the dark about the amounts. This can lead agents to steer buyers into transactions in order to maximise their own commissions.
The plaintiffs alleged that the association and other defendants conspired to inflate the commissions that sellers pay to agents 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, the lead attorney for the plaintiffs, said he expects the jury’s award under US antitrust law to triple to more than $5 billion.
“Today was a day of accountability – for the longest time, NAR has used its market power to keep a stranglehold on home ownership,” Ketchmark said.
“It costs two to three times as much to sell a house in the United States as it does in other industrialised countries,” the lawyer said, citing practices outlined 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 the plaintiffs earlier this year, paying a total of $138.5 million and agreeing to stop requiring agents to belong to the NAR.
HomeServices expressed its disappointment at the ruling and vowed to appeal.
“Today’s decision means that buyers will face even more obstacles in an already difficult property market, and sellers will find it harder to realise the value of their homes. It could also force homebuyers to forgo professional help with what is likely the most complex and consequential financial transaction they’ll make in their lifetime,” a spokesperson said in an email to CBS MoneyWatch. “Cooperative compensation helps ensure that millions of people can achieve the American dream of homeownership with the help of real estate professionals.”
Keller Williams said it would consider its options, including an appeal. “This is not the end,” a spokesman said in an email.
In a social media post, the NAR vowed to appeal the liability finding. “We remain optimistic that we will ultimately prevail. 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 after the verdict in a case that challenged widespread industry practices, with Zillow falling 7% and Redfin ending Tuesday’s session down nearly 6%. The fall continued on Wednesday, with Zillow shares down nearly 2% in early trading.
