The National Association of Realtors, as it vows to appeal a multibillion-dollar verdict over agent commissions in Missouri, was hit with a new, larger lawsuit that adds to its challenge of maintaining its members’ longstanding practices for selling homes.
A jury in a federal courtroom in Kansas City reached a nearly $1.8 billion verdict Tuesday against the NAR and two brokerages, Keller Williams and HomeServices of America, over the practice of home sellers paying commissions to buyer and seller brokers in a process that Missouri home sellers argued is anticompetitive and artificially drives up home costs.
Pending appeals that HomeServices said it will pursue and Keller Williams indicated it's considering, those damages would be trebled, or effectively tripled, to almost $5.4 billion because of the antitrust nature of the case. That suit has been closely watched because of its potential to affect the national home market and the broader economy.
Immediately after the verdict was reached in U.S. District Court for the Western District of Missouri, plaintiffs’ attorney Michael Ketchmark filed a new lawsuit that he said could result in hundreds of billions of damages to cover what his clients view as artificially inflated commission payments.
It is a national class-action suit covering home sellers anywhere in the country, significantly widening the case geographically while also naming several new brokerages as defendants.
“What I would tell those defendants is, the day of accountability is here,” Ketchmark told CoStar News.
Ketchmark estimated that homeowners pay $50 billion more than necessary each year to sell homes, “and our goal is to make that stop,” he said after the verdict was reached in Kansas City.
New Legal Action
Defendants named in the subsequent case, filed by a new group of home sellers, are the NAR, Compass, eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate and Douglas Elliman, Ketchmark told CoStar News.
For the NAR, it complicates what already is expected to be a yearslong effort to appeal the initial verdict and defend itself in upcoming cases, including one expected to go to trial next year in another federal courtroom.
Industry professionals had previously predicted the NAR could face more exposure if it doesn’t settle ongoing lawsuits or reach a settlement.
A recent report by Keefer, Bruyette & Woods research analysts heading into the Missouri trial estimated that an expansion of lawsuits throughout the country could up the potential damages against the NAR and other defendants to more than $400 billion.
The NAR and HomeServices said they plan to appeal Tuesday's verdict and Keller Williams is considering it. They also are preparing for a case, Moehrl v. NAR, that's expected to reach a federal court in Chicago next year, with potential damages of about $41 billion.
Two other defendants, Anywhere Real Estate and RE/MAX, previously reached settlement agreements in the cases for more than $138 million combined.
Home sellers in the cases argued that practices by the NAR and its members are anticompetitive because they require all homes to be listed on member-controlled multiple listing services, with broker commissions disclosed ahead of a home going on the market for sale, with few realistic options available for sellers to reduce commission payments below the approximately 6% typically split between buyer and seller brokers.
Weighing Options
“It’s been a long-running effort to have sellers pay buyer brokers, and that’s wrong,” Ketchmark said. “The jury agreed.”
Damages chosen by the jury in the Missouri case are monetary and do not require changes in business practices, Ketchmark said, but he said he planned to seek injunctive relief to change business practices of the NAR and major brokerages.
The NAR vowed in a statement to CoStar News to appeal soon after the verdict was announced.
Later, the Chicago-based organization commented on the new class-action lawsuit: "We are currently reviewing the new filing, and it appears to be a copycat lawsuit. We continue to assert that the practice of listing brokers making offers of compensation to buyer brokers is best for consumers. It gives the greatest number of buyers a chance to afford a home and professional representation, while also giving sellers access to the greatest number of buyers."
Compass, Howard Hanna and Douglas Elliman declined to comment on the lawsuit to CoStar News. The other defendants did not immediately respond to requests to comment on the newly filed lawsuit, which was previously reported by Inman.
"While we are still studying the formal complaint, we have been closely observing the ongoing antitrust litigation against our competitors in recent years," eXp Realty said in a statement to CoStar News. "We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions. Our agile business model allows us to make adjustments seamlessly and effectively, no matter the jurisdiction."
In a blog post that followed Tuesday's developments, Redfin CEO Glenn Kelman said, "Traditional brokers will undoubtedly now train their agents to welcome conversations about fees, just as Redfin has been doing for years, especially when advising a seller on what fee to offer to buyers’ agents. Rather than saying that a fee for the buyers’ agent of 2% or 3% is customary or recommended, agents will say that a buyers’ agent fee, if one is offered at all, is entirely up to the seller. This is as it should be."