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How Recent Real Estate Commission Lawsuits Are Transforming the Industry

May 22, 2024

The real estate commission lawsuits have been a seismic event shaking up the industry over the past year. Here’s a comprehensive breakdown of the major recent developments:

In March 2024, the National Association of Realtors (NAR) proposed a massive $418 million settlement “to resolve nationwide litigation over claims from home sellers related to broker commissions,” as discussed in Court Report: Class-Action Lawsuit Settlements Abound. This came after a landmark $1.8 billion verdict against NAR and major brokerages like HomeServices of America in October 2023, which had the potential to balloon to $5 billion according to The Future Of Real Estate Commissions.

As part of the settlement, NAR agreed to implement sweeping changes to its commission policies starting in August 2024:

Key Commission Rule Changes

  • Home sellers will no longer pay the commission for the buyer’s agent, shifting that cost to homebuyers who want representation
  • Commissions must be negotiated and disclosed upfront for both the buyer’s and seller’s agents
  • MLSs can no longer represent the commission as a fixed percentage or single number

These changes aim to increase transparency and allow for more negotiation on commissions, potentially sparking a “price war” as agents compete for clients, as speculated in The Future Of Real Estate Commissions.

While NAR’s settlement received preliminary approval in April 2024, final approval hearings are scheduled for November 2024 “barring intervention by the Department of Justice,” which has pushed for even more aggressive reforms like fully “decoupled” commissions according to Court Report.

In the wake of NAR’s settlement, a flood of other major brokerages have followed suit to resolve their involvement in the lawsuits:

  • Realty ONE Group and the parent company of @properties/Christie’s settled on April 24, 2024, though terms were not disclosed per Court Report
  • Douglas Elliman settled for an undisclosed amount on April 26, 2024 according to the same source
  • Keller Williams previously settled for $70 million in 2023 as mentioned in The Future Of Real Estate Commissions
  • Most recently, HomeServices of America (part of Berkshire Hathaway) settled as the final remaining brokerage defendant for $250 million on April 26, 2024, as reported by Forbes Advisor

However, the legal saga is far from over. A new antitrust lawsuit was filed in New York in late March alleging a “tying arrangement between multiple listing services and brokerage services” according to New Commission Lawsuit In New York May Draw FTC Attention. This suit names NAR, brokerages like Compass and eXp, and could draw scrutiny from the FTC.

Additionally, a federal panel rejected consolidating the remaining commission lawsuits in April, which “could spark more settlements” according to Federal Panel Rejects Combining Commission Lawsuits. Redfin also recently agreed to pay $9.25 million to settle its involvement, as per Redfin to Settle Commission Lawsuits, Paying $9.25 Million.

The commission lawsuits have already transformed the landscape, with NAR facing “unease and unrest in the ranks” as Redfin and others cut ties, and a new trade group called the American Real Estate Association emerging as a competitor according to The Future Of Real Estate Commissions.

While settlements keep rolling in, the battle over realtor compensation is clearly far from settled. The coming months and years will be pivotal in determining just how disruptive this legal saga will be for the industry and homebuyers/sellers. One thing is clear – the way real estate agents get paid is being fundamentally reshaped before our eyes.

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