Warren Buffett’s Real Estate Company Settles $250 Million Lawsuit Regarding Broker Commissions
Warren Buffett’s real estate company, HomeServices of America, has agreed to pay a hefty sum of $250 million to settle lawsuits across the nation alleging that real estate brokerages had forced U.S. homeowners to pay inflated broker commissions when selling their homes. This settlement, which shields HomeServices’ 51 brands, 70,000 agents, and 300 franchisees from further litigation, comes after other major brokerage operators, including Keller Williams Realty and Re/Max, also settled similar lawsuits.
The proposed settlement payout, representing a $140 million after-tax charge for HomeServices, will be paid over four years. Despite the settlement, Berkshire Hathaway, the parent company of HomeServices, is not part of the agreement. Berkshire Hathaway, with a whopping $167.6 billion in cash reserves, largely allows its subsidiaries to handle legal matters independently.
With the addition of HomeServices’ settlement, the real estate industry has now collectively agreed to pay over $943 million to resolve these lawsuits. Benjamin Brown, managing partner at a law firm representing plaintiffs in Illinois, hailed the settlement as a win for American home sellers who have been burdened with excessive commission costs.
The lawsuits alleged that major real estate brokerages and the National Association of Realtors violated antitrust laws by obligating home sellers to pay fees for the buyer’s representation. The lawsuits also highlighted the lack of transparency in compensation offers for buyer agents on industry databases, leading to potential steering of clients away from listings without such offers.
In response to the lawsuits, major brokerages have not only agreed to financial settlements but also to change their business practices to ensure clearer disclosure of agent compensation. The NAR, for instance, has implemented new rules prohibiting brokers from including buyer representation compensation in listings on NAR-affiliated databases starting in July.
While the impact of these policy changes on the housing market remains uncertain, they could potentially lead to lower commissions for sellers and increased upfront costs for buyers when hiring an agent. With these changes aimed at promoting transparency and fairness in real estate transactions, the industry is poised for significant shifts in the way agents are compensated and represented.
