Federal jury finds major real estate organizations inflated broker commission rates

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A federal jury in Kansas City awarded nearly $1.79 billion in a class-action lawsuit against the real estate industry.

In an Oct. 31 verdict, jurors found the National Association of Realtors and several major real estate companies had engaged in a conspiracy that “had the purpose or effect of raising, inflating or stabilizing broker commission rates paid by home sellers” and that their actions caused the plaintiffs “to pay more for real estate brokerage services when selling their homes than they would have paid absent the conspiracy.”

Michael Ketchmark of Ketchmark & McCreight, who led the team of Kansas City attorneys for the class, said federal antitrust law permits the plaintiffs to recover treble damages, which would put the final judgment at about $5.4 billion.

In addition, immediately after the verdict Ketchmark filed an additional suit making the same claims on behalf of a nationwide class, which he said has the potential to yield damages of more than $100 billion.

“We view this as a tremendous day of accountability,” he said.

The defendants have vowed to seek a reduction of the damages and to appeal the verdict. In a statement, Mantill Williams, vice president of communications for the National Association of Realtors, said the organization’s rules “prioritize consumers, support market-driven pricing and promote business competition.”

“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,” he said in an email. “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.”

The verdict came at the end of a two-week trial in U.S. District Court for the Western District of Missouri. The case attacked the standard requirement that home sellers pay a 6% commission that is split between their own agent and that of the buyer.

The suit alleges that compliance with the Realtors association’s rule is required for properties to be listed on the Multiple Listing Service, or MLS, which are regional databases of properties through which nearly all homes are sold, constituting a restraint on competition.

Other defendants named on the verdict include HomeServices of America, Keller Williams Realty, Anywhere Real Estate and RE/MAX. However, Anywhere and RE/MAX reached settlements of $83.5 million and $55 million prior to trial. Those settlements have not been approved yet by Judge Stephen Bough, who oversaw the trial.

Both settlements also addressed claims in a similar suit in the Northern District of Illinois, which has not yet gone to trial.

Ketchmark said an economist calculated the precise award of $1,785,310,872 based on sales data for 265,000 homeowners in the Kansas City region during the seven-year period covered by the suit.

“They awarded every penny we asked for,” he said, adding that the non-settling defendants will be jointly and severally liable for the damages.