Berkshire Hathaway’s real estate firm to pay $250 million to settle real estate commission lawsuits
LOS ANGELES — A real estate company owned by Warren Buffett’s Berkshire Hathaway has agreed to pay $250 million to settle lawsuits across the country alleging that longstanding practices by real estate agents forced American homeowners to pay artificially inflated real estate agent commissions when they sold their homes.
HomeServices of America said Friday that the proposed settlement would protect its 51 brands, nearly 70,000 real estate agents and more than 300 franchisees from similar lawsuits.
The real estate company received a big boost after several other major brokerages, including Keller Williams Realty, Re/Max, Compass and Anywhere Real Estate, agreed to settle. Last month, the National Association of Realtors agreed to pay $418 million.
“While we have always had confidence in the legality and ethics of our business practices, the decision to settle was driven by a desire to remove the uncertainty posed by the lengthy appeals and litigation process,” it said company in a statement.
HomeServices said the proposed settlement payout represents a current after-tax accounting charge of approximately $140 million, although it will have four years to pay the full amount. The real estate company also noted that its parent company is not part of the settlement.
Buffett said in his annual letter to shareholders in February that Berkshire had $167.6 billion in cash on hand at the end of last year. That makes Omaha, Nebraska-based Berkshire an attractive target for lawsuits, but the company largely allows its subsidiaries to run itself and does not intervene directly in lawsuits involving its many companies, including Geico Insurance, BNSF Railway and See’s Candy. .
Including HomeServices’ proposed payout, the real estate industry has now agreed to pay more than $943 million to resolve the lawsuits.
“This is another important settlement for America’s home sellers who have been saddled with paying billions in unnecessary commission fees,” Benjamin Brown, managing partner at one of the law firms that represented plaintiffs in a case filed in Illinois, said in a statement.
The central claim of the lawsuits is that the nation’s largest real estate brokers and the NAR violated antitrust laws by engaging in business practices that required home sellers to pay fees for the broker who represented the buyer.
Attorneys representing home sellers in multiple states argued that homeowners who listed a property for sale in real estate industry databases were required to include a compensation offer to an agent representing a buyer. And that failure to include such “cooperative compensation” offers could result in a buyer’s agent steering their client away from a seller’s offer that did not include such an offer.
In October, a federal jury in Missouri ordered HomeServices, the National Association of Realtors and several other major real estate brokers to pay nearly $1.8 billion in damages. The defendants could have to pay more than $5 billion if treble damages were awarded.
The verdict in that case, filed in 2019 on behalf of 500,000 home sellers in Missouri and elsewhere, led to several similar lawsuits against the real estate brokerage.
The major brokers who settled in these cases have also agreed to change their business practices to ensure that homebuyers and sellers can more easily understand how brokers and agents are compensated for their services, and that brokers and agents who home buyers must make this public immediately. any offer of compensation by the broker representing a seller.
HomeServices said it also agreed to implement “substantially similar new or modified business practice changes contained in the other business settlement agreements with Defendants,” according to Chris Kelly, a HomeServices spokesman.
NAR also agreed to implement several policy changes, including prohibiting agents listing a home for sale in any of NAR’s affiliated databases from including buyer representative compensation offers. The new rules, which will come into effect in July, represent a major change in the way real estate agents have operated since the 1990s.
While many housing market watchers say it’s too early to tell how the policy changes will affect home sales, they could result in home sellers paying lower commissions for their agent’s services. Buyers, in turn, may have to bear more upfront costs if they hire a real estate agent to represent them.