A federal jury ruled on Tuesday that the powerful National Association of Realtors and several large brokerages had conspired to artificially inflate the commissions paid to real estate agents, a decision that could radically alter the home-buying process in the United States.
The realtors’ group and brokerages were ordered to pay damages of nearly $1.8 billion. The verdict allows the court to issue treble damages, which means they could swell to more than $5 billion.
It’s a decision that has the potential to rewrite the entire structure of the real estate industry in the United States, lowering the cost of moving homes by reducing commissions. Under a N.A.R. rule, a home seller is required to pay commissions to the agent representing the buyer, which sellers claimed forced them to pay excessive fees to the agents. The home sellers said the brokerages collaborated with N.A.R. to enforce what is called the “cooperative compensation rule.”
But under the verdict, the sellers would no longer be required to pay their buyers’ agents, and agents would be free to set their own commission rates, which could be slashed in half or less. For example, a home seller with a $1 million home can now pay as much as $60,000 in agent commissions — $30,000 to their agent and $30,000 to the buyers’ agent.
N.A.R., alongside Keller Williams, Anywhere (formerly, Realogy), Re/Max and HomeServices of America, had been on trial in Kansas City in an antitrust suit brought by nearly half a million Missouri home sellers.
The home sellers asked for damages of $1.78 billion. Before heading to trial, both Re/Max and Anywhere Real Estate opted to settle, with Re/Max paying $55 million and Anywhere Real Estate, whose subsidiaries include Coldwell Banker, Century 21 Real Estate, and Sotheby’s International Realty, paying $83.5 million in damages.
But N.A.R., as well as Keller Williams and HomeServices, headed to trial. And on Tuesday morning, after deliberating for less than three hours, an eight-person jury delivered the verdict: Yes, there had been a conspiracy, and not only would the defendants be required to pay damages, but those damages could triple.
The Chicago-based N.A.R. is the largest professional organization in the United States. It has more than $1 billion in assets and owns the trademark to the word “Realtor,” making a real estate agent’s ability to buy and sell homes contingent upon the payment of membership dues in much of the country.
N.A.R. said it plans to appeal the verdict, and in an internal memo sent to some members on Tuesday and obtained by The New York Times, the current N.A.R. president, Tracy Kasper wrote, “We remain confident we will ultimately prevail.”
“This verdict does not require a change in our rules,” she continued.
How the ruling plays out remains to be seen, but it’s clear that the verdict — and the size of the damages — point to a shift in the way agent commissions are now paid. Redfin, which earlier this month exited the National Association of Realtors, said that the decision will prompt home buyers and home sellers to now question the standard practice of setting commissions between 5 and 6 percent.
“Traditional brokers will undoubtedly now train their agents to welcome conversations about fees,” said Glenn Kelman, Redfin’s chief executive, in a statement following the verdict. “But it’s also possible that buyers will become the ones who decide how much to pay a buyer’s agent.”
More than 1.5 million real estate agents across the United States pay dues to the organization in order to call themselves Realtors and assure home sellers and home buyers that they are aligned with the organization’s strict policies on ethics and home transactions. But after a series of sexual harassment allegations led to the resignation of the organization’s president this summer, Tuesday’s ruling threatens to further diminish their influence and could, according to some real estate agents, prompt many to abandon them entirely.
“This is an earthquake,” said Jason Haber, a real estate agent with Compass who has been one of the most outspoken critics of N.A.R. in recent months. “I’m disappointed in today’s verdict and I’m even more disappointed in N.A.R. This was their Super Bowl and World Series rolled up into one and not even Taylor Swift could have saved them.”
Mr. Haber, who created a grass-roots organization demanding the resignation of N.A.R.’s top leadership after the sexual harassment allegations came to light this summer, said he believed that there was no conspiracy when it comes to agent commissions, and that N.A.R. had let down its members by failing to present a stronger defense in court.
“As a dues-paying agent, they failed me, they failed all of my colleagues. Had they spent more time focusing on the trial and less time silencing women, maybe the outcome would have been different,” he said.
In an emailed statement, Mantill Williams, a spokesman for N.A.R., said the case will likely not be settled for a long time.
“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,” he said.
Makenzy Mohrman, a financial services analyst at Capstone LLC, said the verdict was just the beginning of changes in the industry, noting the U.S. Department of Justice is likely to pursue a more thorough investigation of how real estate transactions are handled in the United States.
“Antitrust has been a top issue for the administration. This is something that will affect a lot of consumers,” she said in an emailed statement.
“We believe this is a significant hit for real estate brokers, but we don’t think this is over yet at all. There are more battles to be had,” she wrote. “This is the first domino to fall, but the National Association of Realtors is still on the hook.”
Brokerages who chose to settle ahead of the trial said they were pleased with their decision.
“The settlement releases our company, affiliated agents, and franchisees from liability related to these claims. The jury verdict, while disappointing, does not alter our settlement,” said Trey Sarten, a spokesman for Anywhere Real Estate, in an emailed statement.
Those who had lost previous court battles with N.A.R. were celebrating.
Jack Ryan, the chief executive of REX Real Estate, which in August lost an antitrust lawsuit against N.A.R., Zillow and Trulia, has been outspoken about setting commissions lower. In a text message on Tuesday, he hailed the verdict as “extremely good news for Americans.”
If commissions can be lowered, “the price of every home will come down, jobs and wages will go up, tax revenues will increase, people can easily move to better and more fulfilling jobs,” he wrote.
Other lawsuits are now imminent. Within minutes of receiving the verdict on Tuesday, the lawyers for the defendants entered another class-action suit into U.S. District Court in Missouri. That case, filed on behalf of three new home sellers, also claims the practice of having home sellers pay sales commissions to buyers’ agents is a violation of the Sherman Antitrust Act. It names N.A.R. as a defendant, as well as several major brokerages including Compass, eXp World Holdings, Redfin and Douglas Elliman.
The amount realtors get paid to the amount of work they do is crazy. Mine spent like 10 hours showing homes, maybe 2-3 hours on the phone, and then the rest was handled by an admin for handling paperwork and DocuSign. For like 15-20 hours of work she got paid almost $50K.
Aren’t they usually around 6% total commission, split between the selling and purchasing agent? Unless you bought a house that’s north of a million, that’s a bit much.
I’ll say that the real estate agent business isn’t exactly like a normal job. You work for hours, then the client can pull out etc, and you get nothing. Particularly on the buying side when potential buyers can just give up.
But in today’s market, those standards percentages are fucking massive because of housing inflation.
So, it’s definitely broken right now. But it’s also a volatile profession that is subject to high highs and low lows.
She did a great job and recommend her to all my friends, but the amount of hours she put in wasn’t that high for her return. I know I’m paying for knowledge, not hours but it still doesn’t feel right.
Our budget really limited what we could buy. So much of it felt unnecessary, like every house has disclosures but you can’t view them without emailing my realtor. Every offer is the same, waive all contingencies and bid what you think not what it’s listed at. I think realtors are needed in the transaction but the pay isn’t correct.
The other realtors are the ones making it this difficult so that you need realtors though lol.
The house we bought and one one we sold, we had an absolutely fantastic realtor but he also lowered his commission on the sale so that we could still make the numbers we needed to afford everything. He was a great one.
It would be nice if we weren’t literally forced into that though. We wanted to look at a house on Zelle and they assigned this person to us. Like we literally couldn’t look at a house without one. That’s ridiculous. I’m happy with the person we got and he absolutely worked his ass off for what he got but the fact you’re forced into it basically doesn’t sit well with me.
Our realtor was like our best friend for a month while we were looking for houses (not in a creepy way, in a helpful way) and gave us a big wreath when we bought our house. He definitely put the time in.
I’m not saying they are paid perfectly fairly, but the good realtors do a SHITLOAD of work that you aren’t seeing. This argument is no different than “why do we pay IT guys so much”. It’s not because it takes me 3minutes to reboot the computer, it’s because I have years of experience that leads me to that decision quickly. You also sound like an extremely easy client.
And 50k? At a 4/3 which is pretty typical for a buyers agent (at least in my neck of the woods) you bought a 1.5mil house?
Yup, my wife is a realtor. She works her ass off and in our tourism-driven town, it’s feast or famine. Locally the split is 3/3, though the majority of the houses around here are around half a mil. She is constantly keeping an eye out for properties to show her clients, following up on leads, cold calling, and processing escrows. It certainly isn’t work 2 hours a day and make 6 figures.
There are definitely plenty of agents out there that are dishonest and churners, but not every one is like that. Deals fall out of escrow all the time for trivial shit, be it things come up on home inspections, or finances fall apart. An agent can herd a deal almost to the close of escrow, only to have it fall out for something silly, and then they don’t get paid for any of it. It’s huge to note that agents do not get paid any form of salary, it’s all commission from sales that close. And any good agent will make sure that the house you’re buying is right for you and defend from shady buyers/sellers and their agents on the other side of the deal. Realtors definitely provide a valuable service, though there sure are dodgy ones.
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