Major Verdict in Real Estate Commission Lawsuit: $1.8 Billion Awarded Against NAR and Brokerages
In a landmark decision that could reshape the real estate industry, a federal jury has ruled against the National Association of Realtors (NAR) and various brokerage firms, finding them guilty of colluding to maintain high commission rates.
The lawsuit, which involved plaintiffs from Kansas, Illinois, and Missouri, concluded with the jury awarding a staggering $1.785 billion in damages to the sellers of hundreds of thousands of homes. This amount could potentially triple, exceeding $5 billion, due to the nature of the case.
The core of the lawsuit revolved around an NAR rule that mandated sellers’ agents to offer a predetermined compensation rate to buyers’ agents when listing properties on Multiple Listing Services (MLS). This practice was challenged by the plaintiffs as evidence of a conspiracy to keep commission rates artificially high.
The verdict, delivered last Tuesday after brief deliberation, has set off a wave of similar lawsuits. It also raises questions about the future structure of real estate commissions, potentially leading to more negotiation flexibility between sellers and agents, or even shifting the commission burden to buyers.
In response to the verdict, the brokerage industry many expect to adapt by emphasizing more competitive policies and transparent discussions about commission rates. Despite NAR’s assertion that commissions are negotiable under its existing rules, a report by the Consumer Federation of America suggests that agents often resist deviating from standard rates.
Regarding the defense’s stance, the NAR has expressed intentions to appeal the decision. Similarly, Keller Williams and HomeServices of America are reportedly considering their appeal options. Notably, RE/MAX and Anywhere (parent company of Sotheby’s, Coldwell Banker, and Century 21) had previously settled in both the Sitzer/Burnett and similar Moehrl lawsuits.
Keller Williams, defending its practices, highlighted its adherence to the law and the longstanding tradition of sellers’ agents offering commissions to buyers’ agents, a practice seen as crucial for attracting buyers through cooperative marketing efforts. This practice, while not mandatory in some regions like the Northwest MLS, continues to be prevalent due to its perceived benefits in the marketing and selling of homes.
