Redfin’s $9.25 Million Agreement Ends Legal Battle Over Inflated Commissions – Forbes Advisor


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Redfin has agreed to pay $9.25 million to settle a series of lawsuits alleging that U.S. homeowners were forced to pay inflated broker commissions when selling their homes.

Redfin, an online brokerage and real estate services company, disclosed the proposed deal Monday in a regulatory filing with the Securities and Exchange Commission. The agreement aims to resolve pending class action lawsuits filed in federal court in Missouri.

Details on any potential changes to business practices were not provided in the filing.

Last month, a federal judge gave preliminary approval to a $418 million settlement between home sellers and the National Association of Realtors, or NAR.

Several major brokerages named in the lawsuits have also agreed to settlements that could change the way real estate agents are paid. That may result in lower fees, potentially saving money for home buyers and sellers.

Redfin publicly ended its association with the NAR in October and lowered commission rates, but still found itself entangled in the class action litigation.

“Redfin never belonged in this litigation, and we’re glad to have settled it,” the company said in a statement.

“We always have been, and always will be…broadly publishing commission data so consumers understand how much they are paying,” Redfin added.

Lawsuits Focused on Real Estate Commissions

Back in 2019, groups of home sellers took legal action, alleging that they were charged unfairly high commissions when their homes were listed on NAR’s multiple listing service (MLS).

The dispute was over a longstanding practice in which both the seller’s and buyer’s broker received a commission—usually totaling 6%—paid by the seller. This commission was typically factored into the sales price and, consequently, rolled into the buyer’s mortgage.

In October 2023, a jury ruled in favor of the sellers, awarding damages of $1.8 billion. Under antitrust law, this figure could have been tripled.

Last year, Anywhere Real Estate and RE/MAX Holdings settled for $83.5 million and $55 million, respectively. Keller Williams reached a settlement worth $70 million in February 2024, and Home Services of America announced a $250 million agreement last week.

In reaching the settlements, the NAR and the real estate firms maintain that they have done nothing wrong.

Be Prepared When Buying or Selling Your Home

Although the lawsuit settlements are not final, the NAR is making changes to its rules.

Beginning in July 2024, brokers will not be allowed to advertise compensation on the MLS. Commission agreements will have to be negotiated off the platform and can’t be included in the listing price. In addition, agents who participate in the MLS must have a written agreement with a buyer before showing any homes.

It’s not yet clear how this will affect real estate commissions, but both buyers and sellers should consider these tips before entering the market:

  • Find the right real estate agent for you. Shop around and be sure to ask questions about experience, certifications, skills and availability.
  • Think about fees. Buyers may now have to pay their agent’s commission. That can add thousands of dollars to your closing costs. For example, a 3% commission on a $400,000 house is $12,000.
  • Consider going it alone. It’s possible to sell or buy a home without the services of a licensed real estate agent. But be aware that home sales have legal requirements. Make sure you know the law, or work with someone who does, to avoid a potential lawsuit later.

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