HomeServices of America, the largest residential real estate brokerage in the United States and owned by Warren E. Buffett’s Berkshire Hathaway Energy, has agreed to settle a series of lawsuits that could change the way commissions are paid to real estate agents.
On Thursday, the brokerage signed off on adding $250 million to the mounting pile of damages won by home sellers who have successfully sued several brokerages and the National Association of Realtors over what they described as inflated commissions. The New York Times obtained a copy of the signed agreement.
Industry insiders have been anticipating the HomeServices settlement since March 15, when N.A.R., an influential trade group with 1.5 million members, agreed to settle the lawsuits that claimed the group had violated antitrust laws and had conspired to fix the rates that real estate agents charge their clients. That settlement received preliminary approval from a federal judge on Tuesday, and now N.A.R. will pay $418 million in damages and significantly change its rules on agent commissions and the databases, accessible only by those who hold membership to N.A.R. subsidiary groups, where homes are listed for sale. N.A.R. argued in court that it never operated a conspiracy around commissions, and continues to say that the home sellers’ allegations that the organization’s rules effectively set commission rates are unfounded.
The settlement will introduce competition to the market for real estate commissions, driving down the fees that consumers are required to pay when selling a home and eventually lowering home prices across the board as a result, some industry analysts say.
For more than a century, N.A.R. has been an indomitable force in the real estate industry. But the group had been under pressure to settle legal claims since October, when a jury in Missouri sided with a group of home sellers who argued they had been forced to pay their real estate agents exorbitant fees. That verdict included an order for damages of at least $1.8 billion. U.S. antitrust law allows plaintiffs to seek treble damages, which means that amount potentially stood to be tripled to $5.4 billion. More than a dozen additional claims from home sellers across the country have also been filed against the group.
But N.A.R. was not the only entity named in the lawsuits. Anywhere Real Estate, RE/MAX and Keller Williams all hatched their own settlement deals, for a total of $208.5 million, before N.A.R. inked its agreement. A number of additional plaintiffs have also settled, in several deals that have not been publicly disclosed, attorneys for the plaintiffs say. With Thursday’s settlement deal, the total amount of damages now set to be awarded in commission lawsuits in the United States is past the $1 billion mark.
Michael Ketchmark, the lawyer on the Missouri case who has been leading settlement negotiations, hailed the deal but signaled that he planned to continue to pursue legal claims against HomeServices’ parent company, Berkshire Hathaway Energy, a path that is carved out in the language of the settlement.
“The long-entrenched mandatory compensation rule is finally dead,” he said in a text message. “A jury of ordinary Missourians spoke, and the industry heard their voice. This settlement allows us to continue to pursue our nationwide case against Berkshire Hathaway Energy and a handful of large corporate brokers.”
HomeServices was the last brokerage named as a defendant in the Missouri case and still vowing to fight the claims, and in a motion filed March 18, attorneys for the plaintiffs asked that it pay $4.7 billion — triple the awarded damages, minus the settlement amounts of N.A.R. and the other brokerages.
“The decision to settle was driven by a desire to eliminate the uncertainty brought by the protracted appellate and litigation process. 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,” said Chris Kelly, executive vice president of HomeServices, in an emailed statement. The settlement, he added, “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 commitment by HomeServices, independent of any parent entity participation, to effectively conclude our involvement in the anti-trust litigation.”
The agreement, which is still subject to court approval, does not close the door on Mr. Buffett’s legal tussles within the real estate industry. HomeServices’ parent company, Berkshire Hathaway Energy, remains ensnared in a separate, and potentially more sweeping, lawsuit over real estate commissions.
Last month, three home sellers who filed a nationwide antitrust lawsuit in October amended their complaint to add Berkshire Hathaway Energy, the unit that controls HomeServices of America, to its string of defendants that include Compass, eXp World Holdings, Douglas Elliman and Redfin. Compass settled for nearly $58 million last month, but the other brokerages have yet to make a move.
And as part of Mr. Buffett’s multibillion-dollar empire, Berkshire Hathaway Energy is by far the biggest target.
The suit alleges that Berkshire Hathaway Energy played upon Mr. Buffett’s reputation to lure in customers and bolster business, and claims that home sellers working with representatives of Berkshire Hathaway were defrauded by as much as $4.2 billion in 2023.
N.A.R.’s legal battles are not resolved, either. This month, a three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled that the Justice Department can reopen an antitrust investigation into the powerful group, presenting the government with an opportunity to scrutinize the rules on agent compensation that N.A.R. has long enforced over the industry.
With the flurry of settlements, “there’s an implicit recognition that these were not pro-consumer rules,” said Randy Airst, chief executive of the real estate analysis firm Exceedant.
Because HomeServices is part of Mr. Buffett’s empire, it did not face the same financial constraints as the other brokerages involved in the lawsuits, Mr. Airst said, so it was not under the same pressure to settle. The agreement, he added, points to a shift in public sentiment over commissions.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
