Realtor Influencers Are Freaking Out After $1.8 Billion Conspiracy Lawsuit

A new $1.8 billion settlement in a class action lawsuit alleging that the country’s largest real estate brokers illegally conspired to create a system that’s more expensive for home sellers could lead to seismic changes in the industry, and realty influencers are already freaking out. 

The lawsuit was filed in the Western District of Missouri Western Division in 2019 and became a class action in May 2022, naming the National Association of Realtors (NAR), Realogy Holdings Corp, Homeservices of America, RE/MAX LLC, and more, as defendants. It alleged that the companies illegally kept a system in place that forced people selling their homes to pay brokers for both the seller and buyer. The lawsuit was specific to Missouri and alleged that the companies were violating both the Sherman Act and Missouri antitrust law. On October 31, NAR and two large broker firms were found liable and forced to pay damages and the judge’s final verdict could eliminate the practice altogether, according to HousingWire.

Moments after, the same group of attorneys filed another class action against NAR and another group of large brokerage firms, including Redfin and Compass, leading their stocks to fall. NAR CEO Bob Goldberg announced he would be retiring early after the verdict came down.

In the U.S., home sellers typically have to pay 3 percent of the sales price for their own broker and 3 percent for the buyer’s broker, which the lawsuit refers to as the “Adversary Commision Rule” but which NAR calls the “cooperative compensation rule.” NAR, which owns the copyright to the word “realtor,” effectively forced every realtor in the country to play by these rules, collaborating with the largest brokerage firms, effectively locking homeowners into this system.

But a jury decided last week that this amounted to an illegal conspiracy in violation of the Sherman Act, and NAR and two large brokerages that did not already opt for a settlement—Keller Williams and Home Services of America, owned by Berkshire Hathaway—would have to pay up. The Department of Justice’s Antitrust Division was already investigating the practice of realtor compensation prior to the class action. 

Realtor influencers immediately reacted to the news on TikTok and YouTube. One Real Estate influencer on YouTube, Real Estate Ninja, said he was already seeing real estate agents quitting. “It’s insane,” he said. “There [are] a ton of attorneys right now figuring out how to build cases against the NAR now that there’s been some precedent set.” 

But people in the comments shared their anger about the compensation that brokers receive in general, relative to the role they play in the home buying process. 

“​​To me it seems like most people find what they want to look at by themselves now and just need an agent to do the paperwork. The days of the agents only knowing what is for sale and then driving you around to look at homes for days on end is over. Most of them now will just meet you at the house you want to look at and then just open the door for you,” one commenter said.

One real estate influencer on TikTok predicted it would “change the market and make it even worse” because seller’s agents will cut out buyer’s agents altogether. She also guessed that fewer buyers would be able to qualify for new homes because the costs of the buyer’s agent would be passed to them.

“It’s not winning anybody anything, it’s just making attorneys get paid,” said broker Julia Hurley on TikTok. She said it’s a good thing that brokers are leaving NAR, but criticized people who think real estate agents are overpaid. “Oh sure, show yourself houses for hours and hours and hours,” she said. “You could do that full time because you don’t have a real job, right?” she said sarcastically.

She predicted that sellers would contractually agree to pay buyers’ brokers even if the NAR no longer mandates it because buyers would not be able to afford homes otherwise.

“There’s no way that Millenials and Gen Z who are buying these houses right now with 8 percent interest rates, barely making $100,00 a year with a two-person household are going to come up with an extra 3 percent or any percent for that matter,” Hurley said.

Another realtor on TikTok said that the “hate for real estate agents has been nonstop” since the verdict, but defended the NAR’s practice, saying, “the way the current system works is what’s best for the consumer.” He said that in Australia and Europe, where sellers don’t pay the buyer’s broker fees, fewer people own homes and “no one creates wealth for themselves.”

NAR published a blog post after the verdict attributed to current president Tracy Kasper. “This matter is not close to being final. We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition. We remain optimistic we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury,” Kasper wrote. Using the trademark NAR owns, Kasper wrote,  “REALTORS® are everyday working Americans who are experts at helping consumers navigate the complexities of home purchases and advocates for fair housing and wealth building for all.”

After the verdict, Redfin published a blog post written by CEO Glenn Kelman claiming it was “on the right side of history” and calling the new lawsuit a “copycat lawsuit.” Redfin left NAR earlier this month, citing the practices laid out in the lawsuit as well as accusations of sexual harassment made against former NAR President Kenny Parcell. Kelmanguessed that “Traditional brokers will undoubtedly now train their agents to welcome conversations about fees.”

The complaint filed in May 2022 alleged the compensation rule resulted in a “unilateral and effectively nonnegotiable offer of buyer broker compensation.” Because NAR owns the rights to the word “Realtor,” individual brokers and home owners had to use the system, as “otherwise these parties would not receive the benefit of the Corporate Defendants’ branding, brokerage infrastructure, and other support.”

Antitrust lawsuits typically have to prove some kind of harm to consumers, and the complaint argued that the NAR rules were raising broker fees above what the market would dictate by “precluding competition from innovative or lower-priced alternatives.”

“Defendants’ conspiracy forces home sellers to pay a cost that, in a competitive market and were it not for Defendants’ anticompetitive restraint, would be paid by the buyer,” the complaint said. The plaintiff’s attorneys wrote that in Australia and countries in Europe that don’t have similar rules, the average total commission ranges between 1 and 3 percent.

The national lawsuit filed on October 31—the same day as the settlement, by the same attorneys—also targets NAR, as well as large brokerages Compass, Redfin, Douglas Elliman and more. The argument is virtually identical to the previous class action, with only the list of plaintiffs changing.

The real estate market is in a transitional period right now, with interest rates driving up mortgages, home sale prices remaining high and the volume of real estate transactions decreasing. More lawsuits have been tackling the role that the real estate industry plays in setting prices, including several rent price-fixing lawsuits filed last year and this year.

While the NAR decision may wind its way through the appeals process for months or years, it’s a sign that aspects of the real estate industry that became normalized during decades of relaxed antitrust scrutiny at the federal level are going to have to change. NAR claims to have 1.5 million members, which, if accurate, would mean .44 percent of everyone in the United States is a realtor. Yet most real estate viewing now takes place online. 

As home prices rise, it makes sense that both buyers and sellers have become skeptical about how, why, and to whom they are paying so much money. Brokers may be worried about job loss or pay cuts, and first-time homeowners may fear costs being offloaded to them, but the days of one private company dictating how much people pay to sell off their homes seem numbered.