One of the nation’s largest real estate brokerages has agreed to pay $70 million as part of a proposed settlement to resolve more than a dozen lawsuits across the country over agent commissions.
The agreement, filed Thursday with federal courts overseeing lawsuits in Illinois and Missouri, also calls on Keller Williams Realty Inc. to take several steps aimed at providing homebuyers and sellers with more transparency over the commissions paid to real estate agents.
“We think it’s a tremendous victory for homeowners and homebuyers across the country,” said Michael Ketchmark, one of the attorneys representing the plaintiffs in the lawsuits.
The central claim put forth in the lawsuits is that the country’s biggest real estate brokerages engage in practices that unfairly force homeowners to pay artificially inflated agent commissions when they sell their home.
In October, a federal jury in Missouri found that the National Association of Realtors and several large real estate brokerages, including Keller Williams, conspired to require that home sellers pay homebuyers’ agent commission in violation of federal antitrust law.
The jury ordered the defendants to pay almost $1.8 billion in damages. If treble damages — which allows plaintiffs to potentially receive up to three times actual or compensatory damages — are awarded, then the defendants may have to pay more than $5 billion.
More than a dozen similar lawsuits are pending against the real estate brokerage industry.
Moving Keller Williams out from under that cloud of litigation and uncertainty motivated the company to pursue the proposed settlement, which would release the company, its franchisees and agents from similar agent commission lawsuits nationwide. The company based in Austin, Texas, operates more than 1,100 offices with some 180,000 agents.
“We came to the decision to settle with careful consideration for the immediate and long-term well-being of our agents, our franchisees and the business models they depend on,” Gary Keller, the company’s executive chairman, wrote in a companywide email Thursday. “It was a decision to bring stability, relief and the freedom for us all to focus on our mission without distractions.”
Among the terms of its proposed settlement, Keller Williams agreed to make clear that its agents let clients know that commissions are negotiable, and that there isn’t a set minimum that clients are required to pay, nor one set by law.
The company also agreed to make certain that agents who work with prospective homebuyers disclose their compensation structure, including any “cooperative compensation,” which is when a seller’s agent offers to compensate the agent that represents a buyer for their services.
As part of the settlement, which must be approved by the court, Keller Williams agents will no longer be required to be members of the National Association of Realtors or follow the trade association’s guidelines.
Two other large real estate brokerages agreed to similar settlement terms last year. In their respective pacts, Anywhere Real Estate Inc. agreed to pay $83.5 million, while Re/Max agreed to pay $55 million.