Jury Rules Big Brokers, NAR Conspired To Inflate Commissions, Liable For $1.8B In Damages
A federal jury ruled Tuesday that The National Association of Realtors and several large residential brokers conspired to artificially inflate real estate commissions, putting them on the hook for about $1.8B in damages.
The verdict may lead to a change in decades-old rules that have helped to lock in commission rates even as the price of homes has gone up dramatically, The Wall Street Journal reports. Under U.S. antitrust law, the judge could triple the damages verdict, which would total more than $5B, according to the WSJ.
Other defendants in the case include Keller Williams, Berkshire Hathaway's HomeServices of America and two of its subsidiaries, according to CBS MoneyWatch. The jury reached a verdict after a two-week trial in a Kansas City, Missouri, federal court.
Plaintiffs claimed the defendants colluded to ratchet up the commission sellers pay to brokers representing homebuyers. Class members were made up of the sellers of hundreds of thousands of homes in Missouri and parts of Illinois and Kansas between 2012 and 2015, CBS MoneyWatch reported.
"Today was a day of accountability — for the longest time the NAR has used its market power to get a stranglehold grip on homeownership," Michael Ketchmark, lead attorney for the plaintiffs, told CBS MoneyWatch.
There are nearly 1.6 million Realtors in the U.S., according to the WSJ. The NAR plans to appeal the jury’s verdict, a spokesperson for the association told the WSJ.
With the residential real estate industry facing a potential shake-up in the way it does business, one real estate tech giant is aiming to take advantage.
On an earnings call last week, CoStar Group CEO Andy Florance said the outcome of the trial would likely create rapidly changing conditions that may favor Homes.com, a CoStar subsidiary that isn’t focused on monetizing buyer agent leads.
“We could be seeing the biggest change to the residential real estate industry in recent or even intermediate history or long-term history,” Florance said.
Florance said the business model of Homes.com isn't negatively impacted by the potential end of the buyer-broker commission rule and instead presents an opportunity. As a result, CoStar is accelerating the pace and level of investments into Homes.com, he said.
“As things get turned upside down, if you’re not in the blast radius of that change, you’re much better off to compete the next day,” Florance said.
The ruling comes as NAR faces other headwinds, including the resignation of its former president following sexual harassment allegations and a far larger federal suit against the association and other brokerages that could go to trial next year in Illinois.
It is unclear what, if any, echoes could rock commercial real estate, though its commission system, which some say fosters pay inequality, has also come under the microscope in recent years.
