Realtors must pay $1.8 billion for overcharging commissions, jury decides

What the $1.8 billion judgment means for the real estate industry

A federal jury in Missouri on Tuesday found the National Association of Realtors and several real estate companies guilty of conspiring to artificially inflate brokerage commissions. The total damages they are ordered to pay are $1.8 billion. The court's final ruling could be a watershed moment for the U.S. real estate market and the way people buy homes. Moreover, it comes at a time when the U.S. real estate market is stagnant, with mortgage interest rates rising to 8% and double-digit declines in existing home sales from a year ago.

The crux of the matter is,'''what commissions are paid to realtors, real estate sellers, and agents representing buyers. These fees are governed in part by NAR rules that require sellers to offer fees to buyers' agents at the time of listing. Agents representing prospective buyers usually do not know the exact amounts of these fees. This allows agents to steer buyers into transactions, maximizing their commissions. Plaintiffs allege that the association and the other defendants agreed to increase the commissions that sellers pay to brokers who represent buyers. Those representing the plaintiffs include sellers of hundreds of thousands of homes in Missouri, Illinois and Kansas from 2015 through 2022.

The plaintiffs' lead counsel,'''Michael Ketchmark, said in an interview with CBS MoneyWatch that he expects the court to apply the triple damages under U.S. antitrust law and the amount of compensation to exceed $5 billion.

Earlier this year, two other brokers, Re/Max and Anywhere Real Estate, reached a settlement with the plaintiffs, paying a combined 138.5 million''dollars and agreeing to no longer require agents to be members of NAR. HomeServices expressed dissatisfaction with the court's decision and said it would appeal. "Today's decision means that buyers will face more hurdles in an already difficult real estate market, and sellers will have more trouble realizing the value of their homes. It could also force buyers to forgo professional help during what is likely to be the most complex and significant financial transaction of their lives," a spokesperson said.

Keller Williams said they will consider their options, including filing an appeal. "This is not the end,," a company spokesperson said in an email. In its social media post''NAR has promised to appeal the guilty party's conviction. "We remain optimistic and confident that we will ultimately prevail. In the interim, we will ask for a reduction in the amount of damages awarded by the jury," NAR President Tracy Casper said in a statement.