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The National Association of Realtors has reached a settlement in a series of lawsuits brought by home sellers claiming that the trade group conspired to inflate agents’ commissions, it said Friday, in an agreement that will reshape the way homes are sold in the US.
Should the deal be approved by a federal court, the politically influential association would pay $418mn in damages to home sellers and agree to changes to its rules that are likely to slash the commission fees that supply the bulk of its 1.6mn members’ income.
Home sellers had filed lawsuits challenging decades-old rules that maintained commissions of 6 per cent on most residential property sales — far above the rate charged in many other countries. That is equal to almost $23,000 for the median existing US home price of $379,100.
The system de facto forced sellers to hire realtors in order to expose their homes to buyers and to be advertised on multiple listing services, which are central databases of properties, thus violating antitrust laws, the plaintiffs said. The NAR denied wrongdoing.
But starting in July, the listing services will no longer disclose commissions, opening the door for buyers and sellers to hire agents for reduced services or forgo them altogether. The NAR will also begin mandating that agents have their clients sign representation agreements outlining their fees and services.
Economists estimate that the changes could cut the $100bn Americans pay annually in real estate fees by as much as 30 per cent. The new commission structure could also affect housing values overall, as the cost is typically baked into a property’s price.
The residential real estate brokerage industry has been in crisis for months, as higher mortgage rates dramatically slow down transaction volumes and class action lawsuits threatened the commission pool. Home sellers in Missouri won the first major case against the NAR and several large brokerages in a jury trial last October, obtaining nearly $1.8bn in damages. The settlement announced on Friday will release NAR from that verdict.
Shares of publicly traded brokerages fell after the settlement was announced: Compass was down 7.5 per cent, Redfin dropped 4.9 per cent and Anywhere Real Estate — whose brands include Century 21, Coldwell Banker and Sotheby’s International Realty — lost 8.3 per cent. Zillow, the online real estate portal, sank 13.4 per cent.
The settlement leaves Berkshire Hathaway’s HomeServices as the only large broker that has not yet come to a deal in the litigation.
The Berkshire subsidiary, which had already been found liable for damages in the Missouri trial, was added to a national class-action lawsuit earlier this year.
Lawyers for the homeowners contended that price-fixing had cost clients that worked with HomeServices roughly $4.2bn just in 2023.
Lawyers have focused their recent efforts around HomeServices in part because its parent, Berkshire Hathaway, has far deeper pockets than any of its rivals. The company, run by billionaire Warren Buffett, is worth roughly $875bn, a sum that includes a record $167.6bn cash pile.
HomeServices declined to comment.
