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Berkshire Hathaway’s HomeServices of America, the largest U.S. residential real estate brokerage, has joined its rivals in agreeing to settle litigation that challenges longstanding fee agreements in the industry.
HomeServices would pay $250 million over four years, Executive Vice President Chris Kelly said in a statement. If approved by the court, the settlement would resolve claims that the company colluded with competitors and the industry’s main trade group to artificially prop up sales commissions.
The brokerage, a subsidiary of Warren Buffett’s Berkshire Hathaway, was the last remaining defendant in cases in which the National Association of Realtors trade group agreed to a $418 million settlement in March. The settlements with the plaintiffs are expected to change business practices that have left most sales commissions frozen at nearly 6 percent of the home price.
“While we have always been confident in the legality and ethics of our business practices, the decision to settle was based on a desire to eliminate the uncertainty inherent in the lengthy appeals and trial process,” Kelly said.
The settlement will end the second of three major legal entanglements for Berkshire over the past year and resolve an issue that the company warned could weigh on its balance sheet. Earlier this year, the company also settled a dispute over its $11 billion acquisition of Pilot Flying J, a truck stop chain.
Berkshire shareholders are still awaiting the outcome of litigation over wildfires allegedly caused by the company’s utility PacifiCorp in 2020 and 2022. Buffett could be asked about the handling of the various lawsuits during Berkshire’s annual meeting next week.
In October, home sellers in Missouri won nearly $1.8 billion in damages from the NAR and several major brokerage firms in a jury trial. The plaintiffs asked the judge to triple that amount to $4.7 billion.
If approved, the settlement would free HomeServices from the previous jury verdict and protect its 70,000 agents and 300 franchisees from a series of copycat lawsuits filed across the country, HomeServices said.
The amount to be paid by firms including Anywhere Real Estate, Re/Max, Keller Williams and Compass to a class of 50 million home sellers under the settlements now totals $943.3 million. Dollar.
Lawyers representing the home sellers said commissions were kept high by a decades-old system that required sellers to hire agents to list their property in databases known as multiple listing services. These databases now also support search websites like Zillow.
The commission system cost HomeServices customers $4.2 billion in excess fees in 2023 alone, they claimed.
Starting in July, listing services will no longer disclose commissions under the NAR agreement, making it easier for buyers and sellers to hire agents for reduced services and fees or forego them altogether.
Economists estimate that the change could reduce commissions by up to 30 percent.
The lawsuits specifically targeted HomeServices because Berkshire has financial resources of $167.6 billion in cash, far more than independent brokers.
However, Kelly said the settlement was “a sole commitment by HomeServices without involvement of any parent company.”
Cohen Milstein, a law firm for the plaintiffs, said the settlement resolved claims against HomeServices but did not relieve Berkshire Hathaway of claims or liabilities.
Additional reporting by Eric Platt in New York