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This settlement adds to the increasing number of big brokerages that have also agreed to pay. This agreement is being reached one week after the National Association of Realtors (NAR) made a historic settlement of $418 million public.
Compass’s settlement has contributed to the industry’s overall payout in these antitrust actions, which now stands at around $684 million. Additional significant urban areas are RE/MAX’s $55 million investment, Anywhere’s $83.5 million contribution, and Keller Williams’ $70 million expenditure.
SUMMARY
– Compass has agreed to settle antitrust lawsuits alleging inflated commission rates for $57.5 million, joining NAR and other brokerages in reaching settlements.
– The industry settlement total now is approximately $684 million, including RE/MAX, Anywhere, and Keller Williams.
– Compass will implement business practice changes, such as prohibiting claims of free buyer agent services and requiring disclosure of compensation offers.
– The settlements are expected to impact commission structures, client relationships, and mortgage partner agent programs.
– A new trade organization is reportedly in the works in response to dissatisfaction with NAR’s handling of the lawsuits, led by The Agency’s Mauricio Umansky and Compass agent Jasx
The Compass settlement includes the Umpa v. NAR and Gibson v. NAR lawsuits. The cases also named eXp World Holdings, Redfin, Weichert Realtors, United Real Estate, Howard Hanna Real Estate, Douglas Elliman, NAR, Keller Williams, HomeServices of America, HomeSmart International, and the Real Brokerage as defendants.
As per the settlement agreement, Compass will transfer 50% of the settlement sum into a designated settlement fund within 30 days of receiving court approval, which is anticipated in the second quarter of 2024. The outstanding balance will be settled within a year after receiving court permission.
In addition to the financial settlement, Compass has agreed to implement changes to its business practices. Emphasizing to brokerages and agents that remuneration offers are optional and not obligatory. Mandating that brokers and agents inform clients that legal regulations do not determine commissions. Disallowing brokerages and agents from asserting that buyer agent services come at no cost. Mandating brokerages and agents to quickly disclose the remuneration offer made by the listing agent to potential buyer agents. Disallowing the option to arrange listings by compensation offer unless specifically requested by the client. All brokers and agents are reminded of their duty to display homes, regardless of the payment for buyers’ agents.
“I am pleased to share that Compass has settled all nationwide claims in the Gibson and Umpa class action seller lawsuits, agreeing to practice changes consistent with what other settling brokerages have agreed to. The settlement payment and other agreements resolve all nationwide claims home sellers made against Compass and we do not expect this to have any impact on our ability to serve you. By settling, Compass is not saying that we did anything wrong. The reason we have chosen to settle is so we can minimize distractions and focus on serving you and your clients.”
Robert Reffkin, CEO, COMPASS
As of its fourth-quarter 2023 earnings report, Compass had $166.9 million in cash and cash equivalents available to close out the year. The firm was the largest residential real estate brokerage in the U.S. by sales volume in 2022, with approximately $228 billion in transactions, according to RealTrends. In 2023, Compass’s sales volume reached $184 billion, solidifying its position as the industry leader.
If approved, the $418 million settlement proposed by NAR would protect almost 1 million agents and brokers, safeguarding them against approximately two dozen lawsuits brought by home sellers throughout the United States. The predicted repercussions of the industry-wide settlements and ongoing lawsuits are expected to have extensive implications for the real estate sector. Possible consequences include commission arrangement modifications, client relationship alterations, and ramifications for mortgage partner agent programs.
According to reports, a new trade organization is being developed in reaction to the apparent displeasure with how NAR handled the cases. The organization is said to be managed by Mauricio Umansky from The Agency and Jason Haber, an agent from Compass.
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By Ravi Kumar
