A Kansas City, Missouri, jury has found three of the nation’s largest residential real estate players guilty of conspiring to inflate commissions, and ordered them to pay damages totaling $1.78 billion.
The jury reached its verdict on Tuesday after more than two weeks of hearing testimonies from Bob Goldberg, chief executive of National Association of Realtors (NAR); Gino Blefari, president and chief executive of HomeServices of America; and Gary Keller, co-founder and chief executive of Keller Williams Realty, as well as from Missouri home-sellers who challenged them.
During their testimony, the home-seller plaintiffs and their attorney alleged that NAR and the corporate brokerages knowingly violated antitrust rules and regulations in place by colluding to require home-sellers to pay brokers an inflated fee—which would normally fall in the range of five to six percent of the home sales price, with approximately half of that amount going to the buyer’s broker.
The alleged collusion, according to the plaintiffs, centered around NAR’s adoption and implementation of a mandatory rule, called the Buyer Broker Commission Rule, which requires all brokers to make a blanket, non-negotiable offer of buyer’s broker compensation when listing a property.
With this rule in place, home-sellers would have to offer a high amount when making the mandatory buyer’s broker compensation, since most buyer’s brokers won’t show homes to their clients where the seller is offering a lower buyer’s broker commission, or will show homes with higher commission offers first.
This alleged conspiracy has kept buyer’s broker commissions at an inflated rate, the plaintiffs claimed, even though the role of buyer’s brokers became less important due to buyers independently looking for homes through online services and hiring buyer’s brokers only after they found the home they wanted to buy.
The defendants, meanwhile, tried to convince the jury that there is no such thing as a standard 6 percent commission, and that no conspiracy has taken place.
The class-action lawsuit, filed in 2019 on behalf of all home-sellers who paid a broker commission to the specified companies in the previous four years, originally included RE/MAX and Anywhere Real Estate as defendants. The former settled in September for $55 million. The latter, which owns Century 21, Coldwell Banker, Sotheby’s International, and other large brokerages, settled earlier this month for $83.5 million.
Judge Stephen Bough of the U.S. District Court for the Western District of Missouri still has to issue a final ruling on the case before the verdict is finalized. In the worst case scenario for the defendants, he could ban the Buyer Broker Commission Rule, preventing home sellers and sellers’ brokers from predetermining buyers’ broker commission rates.
Mantill Williams, a spokesperson for the NAR, said the national trade group is going to appeal the verdict.
“We stand by the fact that NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing,” Mr. Williams said in a statement. “We will continue to focus on our mission to advocate for homeownership and always put consumer interests first. It will likely be several years before this case is finally resolved.”
HomeServices liekwise vowed to appeal the jury’s decision.
“Today’s decision means that 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 Minneapolis-headquartered company said. “It could also force homebuyers to forgo professional help during what is likely the most complex and consequential financial transaction they’ll make in their lifetime.”
Darryl Frost, a spokesperson for Keller Williams, claimed that “crucial evidence” was not allowed to be shown to jurors.
“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,” Mr. Frost said in a statement. “We will consider all options as we assess the verdict and trial record, including avenues of appeal.”
