A Tectonic Shift in the Real Estate Industry: Examining the Federal Verdict Against the National Association of Realtors and Brokerages 

Nov 30, 2023 | Real Estate Law, Smith + Malek

Earlier this month, the federal jury verdict against the National Association of Realtors (NAR) and various large residential brokerages held the NAR and the brokerages involved liable for $1.8 billion in damages for conspiring to keep home sale commissions artificially high. This verdict is seismic for the real estate industry, potentially dismantling long-standing industry norms and leading to significant changes affecting both professionals and consumers.

A Resounding Verdict . . .

The decision marks the culmination of allegations that NAR and big brokerages have maintained a grip on commission rates, stifling competition and depriving consumers of lower-cost options. With the possibility of the damages tripling to over $5 billion under antitrust rules, and plaintiffs seeking further operational changes, the stakes are extraordinarily high.

Unsurprisingly, the share prices of brokerages like HomeServices of America, Keller Williams Realty, eXp World Holdings, and Redfin took an immediate hit after the verdict. Brokerages are likely contemplating changes in business models and legal strategies in the wake of this setback.

. . . With Ripple Effects on Home Prices and Consumer Behavior

It’s possible we will see home prices drop as a result of commission rate structure change, providing some relief in an era of spiraling costs. Commissions are often embedded in listing prices; a lowered rate may benefit both buyers and sellers.

As technology continues to evolve and more people are finding homes online, it’s possible this decision may motivate buyers and sellers to bypass agents altogether, which would be a significant change to the traditional real estate transaction process. 

Legal Aftermath and Ongoing Cases

The Justice Department, which has a keen interest in the case, may see this verdict as an opportunity to press for further industry reforms, especially given previous failed attempts to secure operational changes from NAR.

NAR intends to appeal, and this verdict comes as the opening salvo in a series of anti-trust lawsuits. A larger suit involving 20 markets could go to trial next year with estimated damages exceeding $40 billion.

As the legal battles start to unfold, one thing is clear: this decision marks a potential watershed moment for the real estate industry, affecting real estate transactions, agent roles, and even property prices for years to come. Real estate professionals and consumers would be wise to brace for change and prepare for a landscape where the old rules may no longer apply. 

If you would like to consult an attorney about how these and future updates may affect you, please contact us.