A federal jury ruled that the powerful National Association of Realtors and several large brokerages had conspired to artificially inflate the commissions paid to real estate agents.
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The realtors’ group and brokerages were ordered to pay damages of nearly $1.8 billion. The verdict allows the court to issue treble damages, which means they could swell to more than $5 billion.
It’s a decision that has the potential to rewrite the entire structure of the real estate industry in the United States, lowering the cost of moving homes by reducing commissions.
Under a N.A.R. rule, a home seller is required to pay commissions to the agent representing the buyer, which sellers claimed forced them to pay excessive fees to the agents.
The home sellers said the brokerages collaborated with N.A.R. to enforce what is called the “cooperative compensation rule.”
But under the verdict, the sellers would no longer be required to pay their buyers’ agents, and agents would be free to set their own commission rates, which could be slashed in half or less.
For example, a home seller with a $1 million home can now pay as much as $60,000 in agent commissions $30,000 to their agent and $30,000 to the buyers’ agent.
N.A.R., alongside Keller Williams, Anywhere (formerly, Realogy), Re/Max and HomeServices of America, had been on trial in Kansas City in an antitrust suit brought by nearly half a million Missouri home sellers.
The home sellers asked for damages of $1.78 billion. Before heading to trial, both Re/Max and Anywhere Real Estate opted to settle, with Re/Max paying $55 million and Anywhere Real Estate, whose subsidiaries include Coldwell Banker, Century 21 Real Estate, and Sotheby’s International Realty, paying $83.5 million in damages.
But N.A.R., as well as Keller Williams and HomeServices, headed to trial. And on Tuesday morning, after deliberating for less than three hours, a jury delivered the verdict: There had been a conspiracy, and not only would the defendants be required to pay damages, but those damages could triple.
The Chicago based N.A.R. is the largest professional organization in the United States. It has more than $1 billion in assets and owns the trademark to the word “Realtor,” making a real estate agent’s ability to buy and sell homes contingent upon the payment of membership dues in much of the country. ■