In a significant legal development, a federal jury in Kansas City, Missouri, on Tuesday, delivered a verdict against three huge players in the U.S. residential real estate sector— the National Association of Realtors (NAR), HomeServices of America, and Keller Williams Realty.
They were found guilty of conspiring to keep commission rates high, a practice that violates antitrust laws.
This verdict is the outcome of a class-action lawsuit brought forth on behalf of home-sellers who dealt with these firms between 2015 and 2019 and had to pay the broker commissions in dispute.
After poring over testimonies for more than two weeks, the jury mandated a colossal financial compensation, setting the damages at a whopping $1.78 billion.
The courtroom heard from key individuals like Bob Goldberg, CEO of NAR, Gino Blefari, president and CEO of HomeServices of America, and Gary Keller, co-founder and CEO of Keller Williams Realty.
Their statements were balanced against those from Missouri home-sellers who objected to the high commission rates they were obligated to pay.
The plaintiff’s side argued that the defendants knowingly breached antitrust rules by enforcing home-sellers to pay an inflated commission fee, which usually ranges between five to six percent of the home sale price.
At the heart of this alleged conspiracy is a rule set by NAR, known as the Buyer Broker Commission Rule.
This rule requires a standard, non-negotiable offer of buyer’s broker compensation when a property is listed for sale, essentially forcing home-sellers to propose high commission amounts.
This situation is further complicated as most buyer’s brokers would prioritize homes with higher commission offers to prospective buyers.
According to the plaintiffs, this rule has kept the buyer’s broker commissions high, despite the reduced role of buyer’s brokers as more buyers now search for homes online and only hire brokers after finding the home they wish to buy.
The defendants tried to deny the existence of a standard six percent commission, disproving any conspiracy.
The initial lawsuit, filed in 2019, also named RE/MAX and Anywhere Real Estate as defendants, but both firms settled for $55 million and $83.5 million respectively, before this verdict.
The case now awaits a final ruling from Judge Stephen Bough of the U.S. District Court for the Western District of Missouri.
If confirmed, this ruling could abolish the Buyer Broker Commission Rule, disrupting the established commission structure, and bringing about a significant change in the real estate brokerage arena.
In the wake of this verdict, NAR’s spokesperson, Mantill Williams expressed their plan to appeal, stating, “We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information…,” reiterating their ongoing advocacy for homeownership.
HomeServices and Keller Williams, also disappointed by the verdict, announced their plans to appeal.
Darryl Frost, a spokesperson for Keller Williams, highlighted their concern over certain “crucial evidence” being omitted during the trial, and confirmed their determination to assess all options, including appealing the verdict.