A Missouri jury has issued a landmark ruling against the National Association of Realtors and several major residential real estate brokers for artificially inflating commissions.
About $1.8 billion, an amount that could rise to $5 billion, will be awarded to homeowners, with the case expected to have significant implications for the real estate sector.
It found that agents were taking advantage of decades-old rules that fixed commission rates even as house prices continued to rise, allowing them to take home ever-increasing amounts of money.
The ruling is the first of two major antitrust lawsuits filed over issues in the industry, including preventing homeowners from lowering costs, even though many people can now find homes online and bypass the need for a real estate agent.
When the decision was announced Tuesday, several major real estate companies, including RE/Max, which had settled before the trial, and Zillow saw their shares fall due to uncertainty about the impact of the case.
A landmark ruling in a Missouri court is expected to trigger an industry-wide change in the way real estate agents charge commissions to home sellers, as a jury awarded at least $1.8 billion.
The ruling is expected to lead to industry-wide policy changes in the way real estate agents interact with homeowners.
In addition to the National Association of Realtors (NRA), which has been accused of inflating commissions for years, the defendants in the case were HomeServices of America and Keller Williams Realty, two of the largest real estate brokerages in America.
But while brokers and shareholders likely didn’t welcome the news, as some companies saw a noticeable stock drop when the ruling was handed down, a packed courtroom in Kansas City, Missouri, saw homeowners and their attorneys embrace and cheer as the case was decided. the Wall Street Journal.
The case was brought by a group of home sellers in several Midwestern states.
It has been claimed that real estate agents’ commissions on home sales – typically around five percent – have systematically stifled competition by making it increasingly difficult for home buyers and sellers to negotiate a lower price.
“NAR and real estate companies have had a hold on the real estate commissions for too long,” plaintiffs’ attorney Michael Ketchmark told reporters outside the courthouse after the ruling was announced.
The staggering $1.8 billion awarded in the case on Tuesday could also rise to more than $5 billion under antitrust rules that allow the presiding judge to triple damages.
In addition to seeking damages, the plaintiffs in the case also called for significant changes in the way the real estate industry operates.
While the verdict is being hailed by some as a milestone in the ongoing accusations against the industry, the NAR has said it is preparing an appeal.
“This case is not close to finality as we will appeal the jury’s verdict,” an NAR spokesperson said Tuesday.
While HomeServices of America and Keller Williams Realty were defendants in the case, two other major brokerages, RE/Max Holdings and Anywhere Real Estate, settled before trial for combined damages of nearly $140 million.
After the ruling was announced, shares of RE/Max Holdings took a big hit before recovering slightly to end the day down -4.36 percent.
A similar effect occurred in Zillow stock, which was not named in the case, which closed at -6.98 percent on Tuesday.
Zillow, which was not named in the case, saw its stock take a significant hit after the ruling was handed down on Tuesday.
After the ruling was announced, shares of RE/Max Holdings fell dramatically before recovering slightly to end the day with a loss of -4.36 percent
A spokesperson for HomeServices of America, owned by Warren Buffett’s Berkshire Hathaway firm, also said the company plans to appeal the verdict.
“Today’s decision means buyers will face even more obstacles in an already challenging real estate market and sellers will have a harder time realizing the value of their homes,” the company spokesperson said.
Keller Williams Realty vowed not to appeal but said it will “consider all options.”
In a statement to DailyMail.com, Keller Williams spokesman Darryl Frost said: “We disagree with the verdict, but respect the jurors who decided the case based on the issues before them.
“We are disappointed that before the jury decided this case, the court did not allow them to hear crucial evidence that cooperative compensation is permitted under Missouri law. This is not the end.
“Keller Williams followed the law regarding cooperative compensation and stands by the evidence presented regarding the century-old practice of seller’s agents offering commissions to other agents who help market and sell homes.
“Looking forward, we will consider all options as we review the verdict and trial history, including options for appeal.”