An enormous nationwide lawsuit has caused several brokerages, including one owned by Warren Buffet’s Berkshire Hathaway, to cough up hundreds of millions.
$250 Million Settlement
A property brokerage owned by billionaire investor Warren Buffet will pay $250 million as part of a lawsuit settlement over coercive real estate agent commissions.
Owned by Berkshire Hathaway
The lawsuit against HomeServices of America (HOA), which is owned by Buffet’s company Berkshire Hathaway, alleged that the company forced homeowners across the US to pay artificially inflated fees to their real estate agents.
Many Brokerages Involved
Homeowners across the country filed a lawsuit against HOA and a number of other brokerages who were all accused of the same illegal practices.
Forced to Pay Inflated Fees
The lawsuit alleged that these homeowners were coerced into paying inflated fees by these brokerage companies for both their own agents and the agents of the homebuyers.
Saving Money for Buyers and Sellers
It argued that buyers should only be required to pay agents directly instead of through the brokerage, as it would reduce commission costs and save money for homeowners and buyers.
Four Year Payout
HOA and other brokerages were then found guilty of raising commission fees to higher rates than was necessary, leading HOA to settle with a separate $250 million sum paid out over four years.
Many Choose to Settle
It was far from the only brokerage involved to do so. The National Association of Realtors, Anywhere Real Estate, Re/Max Holdings, and Keller Williams all chose to settle at earlier dates.
National Association of Realtors
The National Association of Realtors’ settlement was approved in federal court earlier this week, where they agreed to pay a $418 million settlement over a similar four-year period.
$943 Million All Up
Altogether, involved real estate brokerages in America have collectively paid more than $943 million in settlements to bring the case to a close.
One of the Last
However, HOA was one of the last and most major brokerages to hold out from settling before the decision was announced. Its decision was made solely to avoid any further litigation, though it continued to deny any wrongdoing.
“A Desire to Eliminate Uncertainty”
“While we have always been confident in the legality and ethics of our business practices, the decision to settle was driven by a desire to eliminate the uncertainty brought by the protracted appellate and litigation process,” a company statement read.
Protecting Their Brands
Doing so would protect the 51 brands, 300 franchisees, and approximately 70,000 real estate agents that operate under the HOA umbrella from being implicated in more cases of a similar nature.
Comparatively Small Price to Pay
The $250 million sum is technically a small price to pay when compared to the $4.7 billion it could have been charged if it had failed to reach a settlement.
Berkshire Hathaway Not Involved
HOA also sought to clarify that the settlement and prior allegations had nothing to do with its parent company Berkshire Hathaway.
“No Participation by Parent Entity”
“The financial terms of the settlement represent a sole obligation of HomeServices, with no participation by any parent entity, to effectively conclude our involvement in the antitrust litigation,” said spokesperson Chris Kelly, clarifying that the settlement covered all litigation nationwide.
HOA Remains Steadfast
“As we move beyond this settlement, our focus remains steadfast on ethical operations, industry integrity, and delivering value,” Kelly continued. “Our long-standing principle of helping agents build careers that positively impact the communities and consumers they serve continues.”
Buffet Keeps His Distance
The multinational conglomerate, which has $167.6 billion liquid cash according to last year’s shareholders letter from Buffet, has a number of large companies under its umbrella but is rarely involved in litigation brought against them.
“A Significant Settlement for American Homesellers”
“This is another significant settlement for American home sellers who have been saddled with paying billions in unnecessary commission costs,” said Benjamin Brown, a partner at one of the firms representing a case in Illinois.
One Step Closer
“This brings us a step closer to resolving this long-running case involving the industry-wide brokers’ commission scheme,” he concluded.
A Change to the System
Now that these settlements have been approved, new changes can be made to brokerage rules and the system through which real estate agents, buyers, and sellers are required to communicate and make transitions.
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