How Recent Class Action Suits Could Reshape the Real Estate Industry

April 9, 2024

The real estate industry is currently facing significant legal challenges due to a series of class action lawsuits. These lawsuits allege that major U.S. real estate brokerages have been involved in practices that artificially inflate sales commissions, thereby violating U.S. antitrust laws. A notable verdict in Kansas City federal court awarded home sellers $1.8 billion, asserting that sales commissions were artificially inflated. This has set a precedent, prompting additional lawsuits in various states, including Illinois and Missouri, targeting companies like Douglas Elliman, Compass, eXp World Holdings, and Redfin​​¹.

In a separate case, Re/Max, Anywhere, and Keller Williams, among others, have reached settlement agreements totaling $208.5 million in class action lawsuits related to real estate commission practices. These settlements pertain to accusations similar to those in the Missouri case, where the companies were alleged to conspire to force home sellers to pay the buyer brokers' commissions, thus inflating the costs²​​.

These lawsuits challenge the long-standing practice in the real estate industry where sellers are required to pay the commission to the buyer's brokers, which can range from 5% to 6% of the home sale price³​​. The plaintiffs argue that this practice is anti-competitive and violates antitrust laws, as it restricts the ability of sellers to negotiate lower commission rates and limits competition among real estate brokers​​​​.

The National Association of Realtors (NAR) is also a defendant in these cases and has expressed its intention to continue defending its practices. NAR argues that the current system is pro-competitive and beneficial for both buyers and sellers, asserting that it ensures transparency and efficient market operation⁴​​.

Overall, these legal battles are significant as they could lead to substantial changes in how real estate commissions are structured, potentially affecting the entire industry's operation and impacting how home buyers and sellers engage with real estate professionals.