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The National Association of Realtors said Friday it has reached a settlement in a series of lawsuits filed by home sellers claiming the trade group conspired to inflate broker commissions, a deal that will reshape how homes are sold in the United States.
If the deal is approved by a federal court, the politically influential association will pay $418 million in damages to home sellers and agree to changes to its rules that could slash commissions, the bulk of revenue for its 1.6 million members. source.
Home sellers have filed a lawsuit challenging a decades-old rule that keeps commissions on most residential property sales at 6 percent, well above what many other countries charge. This is equivalent to nearly $23,000 of the U.S. median existing home price of $379,100.
The system violates antitrust laws by effectively forcing sellers to hire real estate agents in order to show their homes to buyers and advertise them on multiple listing services, a central database of properties, the plaintiffs say. NAR denies wrongdoing.
But starting in July, listing services will no longer disclose commissions, opening the door for buyers and sellers to hire agents for reduced services or forego them altogether. NAR will also begin forcing agents to have their clients sign agency agreements outlining their fees and services.
Economists estimate the changes could reduce the $100 billion Americans pay in real estate fees each year by as much as 30%. The new commission structure may also affect the overall value of a home, as costs are often built into the property price.
The residential real estate brokerage industry has been in crisis for months, as higher mortgage rates have significantly reduced transaction volumes and class-action lawsuits have threatened commission pools. Last October, Missouri home sellers won the first major lawsuit against NAR and several major brokerage firms in a jury trial, receiving nearly $1.8 billion in damages. The settlement announced Friday will insulate NAR from the impact of the ruling.
Shares of publicly traded brokerages fell after the settlement was announced: Compass closed down 14.3%, Redfin fell 4.9% and Anywhere Real Estate, whose brands include Century 21, Coldwell Banker and Sotheby's International Realty, fell 11.7%. Online real estate portal Zillow fell 13.5%.
The settlement makes Berkshire Hathaway's HomeServices the only major broker that has yet to reach an agreement in the lawsuit.
The Berkshire subsidiary has been found liable for damages in a trial in Missouri and was added to a nationwide class-action lawsuit earlier this year.
Lawyers for homeowners say price fixing cost customers working with HomeServices an estimated $4.2 billion in 2023 alone.
Lawyers have recently focused their efforts on home services, in part because parent company Berkshire Hathaway has deeper pockets than any of its rivals. The company, run by billionaire Warren Buffett, has a market value of about $875 billion, including a record cash hoard of $167.6 billion.
HomeServices declined to comment.
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