After a series of lawsuits nationwide claiming that real estate brokerages engaged in practices that forced homeowners to pay artificially inflated broker commissions, a real estate company owned by Warren Buffett’s Berkshire Hathaway has agreed to a settlement of $250 million. HomeServices of America, which is part of Berkshire Hathaway, stated that the settlement would protect its brands, agents, and franchisees from similar litigation. This comes after other major brokerage operators, such as Keller Williams Realty and Re/Max, also settled similar lawsuits. The National Association of Realtors previously agreed to pay $418 million in a separate settlement. The decision to settle was driven by a desire to eliminate uncertainty brought by ongoing legal processes.
The $250 million settlement payout by HomeServices represents an after-tax charge of about $140 million, with a four-year timeline to pay the full amount. The parent company, Berkshire Hathaway, is not part of the settlement. Despite having significant cash reserves, Buffett’s conglomerate largely allows its subsidiaries to handle legal matters on their own. Including HomeServices’ settlement, the real estate industry has now agreed to pay over $943 million to resolve these lawsuits. This settlement is seen as a win for American home sellers who have been burdened with unnecessary commission costs, according to Benjamin Brown, managing partner at a law firm representing plaintiffs.
The lawsuits against major real estate brokerages and the NAR alleged violations of antitrust laws by requiring home sellers to pay fees for the broker representing the buyer. Plaintiffs argued that listing a property on industry databases required the inclusion of a compensation offer for a buyer’s agent, potentially causing bias towards listings with such offers. A federal jury in Missouri previously ordered HomeServices, NAR, and other brokerages to pay nearly $1.8 billion in damages. This verdict led to similar lawsuits being filed across the industry. The settlements include changes to business practices to ensure transparency and disclosure of compensation offers for homebuyers and sellers.
As a result of the settlements, real estate brokerages have agreed to implement new business practices to clarify how brokers and agents are compensated. NAR has also agreed to policy changes, including prohibiting offers of compensation for a buyer’s representative on certain databases. These changes are set to take effect in July and represent a significant shift in the industry’s operations since the 1990s. While the impact of these policy changes on the housing market is uncertain, they could potentially lead to lower commissions for home sellers and higher upfront costs for buyers when hiring an agent. It remains to be seen how these changes will shape the future of real estate transactions in the United States.
