A real estate company owned by Warren Buffett’s Berkshire Hathaway has reached a settlement of $250 million to resolve lawsuits across the country. These lawsuits alleged that certain practices by real estate brokerages resulted in inflated broker commissions for homeowners when they sold their properties.
On Friday, HomeServices of America announced that the proposed settlement would provide protection for its 51 brands, nearly 70,000 real estate agents, and over 300 franchisees against potential legal action.
The real estate company had been one of the last to reach a settlement, following several other big brokerage operators. Last month, the National Association of Realtors reached a settlement of $418 million.
The company stated that their decision to settle was motivated by a desire to remove the uncertainty caused by the lengthy legal process, although they have always been confident in the legality and ethics of their business practices.
HomeServices announced a proposed settlement payout that will require a current after-tax accounting charge of approximately $140 million. However, the company will have a four-year period to fully pay off the amount. The real estate company also mentioned that its parent company is not involved in the settlement.
In his annual letter to shareholders, Buffett mentioned that Berkshire had $167.6 billion cash on hand at the end of last year. Berkshire, headquartered in Omaha, Nebraska, is seen as an appealing target for litigation. However, the company generally allows its subsidiaries to operate independently and does not directly involve itself in legal matters concerning its various businesses, such as Geico insurance, BNSF railroad, and See’s Candy.
The real estate industry has now agreed to pay over $943 million to resolve the lawsuits, including HomeServices’ proposed payout.
According to a statement from Benjamin Brown, managing partner at one of the law firms that represented plaintiffs in a case filed in Illinois, this settlement is seen as a major victory for American home sellers who have been burdened with paying excessive commission costs.
The lawsuits allege that major real estate brokerages and the NAR have violated antitrust laws through their business practices, which allegedly mandate that home sellers cover the fees for the broker representing the buyer.
Lawyers representing home sellers in various states have contended that individuals who listed their properties for sale on real estate industry databases had an obligation to include a compensation offer for an agent representing a buyer. Furthermore, the absence of “cooperative compensation” offers could potentially influence a buyer’s agent to discourage their client from considering any seller’s listing that does not include such an offer.
In October, a federal jury in Missouri issued a verdict that required HomeServices, the National Association of Realtors, and several other major real estate brokerages to pay nearly $1.8 billion in damages. The defendants were at risk of being required to pay over $5 billion, if treble damages were granted.
The outcome of that case, which was initiated in 2019 on behalf of 500,000 home sellers in Missouri and other locations, resulted in numerous additional lawsuits being filed against the real estate brokerage industry.
The brokerages involved in these cases have agreed to implement changes in their business practices. These changes aim to enhance transparency for homebuyers and sellers, making it easier for them to comprehend how brokers and agents are compensated for their services. Additionally, brokers and agents representing homebuyers are now required to promptly disclose any offer of compensation made by the broker representing a seller.
According to Chris Kelly, a spokesperson for HomeServices, the company has also agreed to implement similar changes to its business practices as the other corporate defendants in the settlement agreements.
Experts in the housing market are cautious about predicting the impact of recent policy changes on home sales. However, one potential outcome is that home sellers may end up paying reduced commissions for their broker’s services. Buyers, on the other hand, might find themselves responsible for additional initial expenses when they enlist the services of a representative.
Reference: AP News
