On Tuesday, the National Association of Realtors (NAR) and several large brokerage firms were found guilty by a federal jury in Missouri of conspiring to intentionally keep real estate agent commissions high, resulting in nearly $1.8 billion in damages, The New York Times reported.
The lawsuit was initiated by nearly 260,000 home sellers in Missouri, Kansas, and Illinois from 2015 to 2022, alleging that the NAR, along with prominent brokerages like Keller Williams, Anywhere, Re/Max, and HomeServices of America, had conspired to inflate the commissions paid to real estate agents, ultimately impacting the cost of home transactions for both sellers and buyers.
The plaintiffs argued that the rules set by NAR, particularly the “cooperative compensation rule,” mandated that a home seller was obliged to pay commissions to the agent representing the buyer, which sellers claimed led to excessive fees for their agents, limited competition, hindered negotiation, and maintained high commission rates.
The defendants are now liable to pay $1.78 billion in damages, with the possibility of the damages being tripled to over $5.3 billion under U.S. antitrust law.
“Today was a day of accountability,” Michael Ketchmark, the lead attorney for the plaintiffs, told Reuters.
The defendants refuted any wrongdoing, with the NAR planning to appeal the verdict.
“We remain confident we will ultimately prevail,” NAR president Tracy Kasper wrote in an internal email to members, obtained by the NYT.
Re/Max and Anywhere Real Estate settled before trial, paying $55 million and $83.5 million, respectively, but without admitting liability, per Reuters.
The verdict could help overhaul the existing real estate system in the U.S., forcing professionals to reevaluate commission structures and foster increased competition, which could benefit consumers by lowering costs.
For example, under the current system set by NAR, a home seller must pay commissions to the agent representing the buyer. However, the verdict changes this by no longer requiring sellers to pay their buyers’ agents, allowing agents to set their rates, potentially reducing them significantly.
“It’s a wake-up call for real estate agents,” Sissy Lappin, the owner of a real-estate brokerage in Houston, told The Wall Street Journal.
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Source: entrepreneur.com