Real Estate

HomeServices settles commission lawsuits for $250M

Deal comes days after federal judge approved settlement agreements between plaintiffs and NAR

HomeServices of America, the last remaining brokerage defendant in the landmark Sitzer/Burnett antitrust commission case, has agreed to pay $250 million in damages to settle lawsuits that will change agent compensation across America.

The New York Times first reported news of the settlement.

The deal comes just days after the federal judge overseeing the commission case in Missouri approved a preliminary settlement that will see the National Association of Realtors and multiple other residential brokerages collectively pay hundreds of millions of dollars in damages and make large-scale changes to longstanding commission policies.

NAR, the industry’s de facto trade association, earlier this month agreed to pay $418 million over five years to settle the claims. HomeServices, owned by Berkshire Hathaway Energy, resisted settling the case and will pay far more than its large brokerage contemporaries, most of which are paying between $50 million and $90 million to settle claims.

The proposed agreement with HomeServices brings the total pending settlements north of $940 million. Other defendants in the Sitzer/Burnett case, Anywhere Real Estate, RE/MAX and Keller Williams, settled for a combined $209 million.

“This is another significant settlement for American home sellers who have been saddled with paying billions in unnecessary commission costs.  This brings us a step closer to resolving this long-running case involving the industry-wide brokers’ commission scheme,” said Benjamin Brown, managing partner of Cohen Milstein Sellers & Toll, which was among the law firms that represented the plaintiffs.

In a statement sent to HousingWire on Friday, Chris Kelly, HomeServices EVP said that the settlement, which is subject to court approval, will “protect our nearly 70,000 agents, 51 brands and over 300 franchisees and licensees from related lawsuits.”

The financial terms of the settlement represent a sole obligation of HomeServices, with no participation by any parent entity, to effectively conclude the antitrust litigation. (HomeServices’ parent company was named as a defendant in a separate commission lawsuit known as Gibson, and plaintiff lawyers said they would continue to pursue that case.)  

“While we have always been confident in the legality and ethics of our business practices, the decision to settle was driven by a desire to eliminate the uncertainty brought by the protracted appellate and litigation process,” Kelly said. “This resolution allows us to concentrate on our primary goal: delivering unparalleled value in the real estate market and serving home buyers and sellers with the highest standards of service.” 

In October, a jury in Kansas City, Missouri determined that NAR and the brokerages conspired to inflate or stabilize commissions via NAR’s Participation Rule, which required listing agents to make an offer of compensation to a buyer’s agent. The jury verdict came to $1.76 billion, which would have been trebled to $5.4 billion in damages. It spurred dozens of copycat cases filed in other states and resulted in a series of settlements in the winter and spring.

Earlier this week, Judge Stephen Bough, who is overseeing Sitzer/Burnett and several other related commission cases, preliminarily approved the settlements, which are expected to go into effect in mid-July.

The settlement agreement no longer requires agent participants be members of the NAR. It also stipulates that listings agents can no longer display buyer agent commissions in the MLS but can put it on their brokerage’s website or elsewhere, a major change in policy.

The NAR settlement protects brokerages that had $2 billion or less in sales volume in 2022; it did not include roughly 85 brokerages that did more than $2 billion that year, and they’ll have to reach separate settlements with the plaintiff’s attorneys.

The Department of Justice has also taken an interest in the Sitzer/Burnett case and may attempt to convince Judge Bough to change the terms of the settlement. The DOJ may also file charges separately to prevent any display of buyer agent commissions on any platform.

HomeServices of America is the third-largest brokerage in the country by transaction sides at 235,861 in 2023, according to the latest RealTrends rankings. The Minnesota-headquartered firm had $133.8 billion in sales volume in 2023, behind only Compass, Anywhere Advisors and eXp Realty.

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