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One week after the National Association of Realtors’ settlement was announced, Compass has now also agreed to settle in its commission lawsuits for $57.5 million, per a recent filing with the Securities and Exchange Commission.
Compass is now the fourth major entity to reach a settlement. The settlement follows NAR’s whopping $418 million settlement last week, as well as RE/MAX’s $55 million settlement, Anywhere’s $83.5 million settlement and Keller Williams’ $70 million settlement.
In total, the industry has now racked up about $684 million in settlements for the antitrust cases that claimed commissions were kept artificially high.
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The Compass settlement covers the Umpa v. NAR and Gibson v. NAR cases. Other defendants in those suits included 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 well as others.
If the remaining brokerages that have not yet settled do not reach their own deals, they may join NAR’s settlement by paying into the settlement fund through a formula based on their sales volume.
The SEC filing states that 50 percent of the settlement amount will be deposited into a settlement fund within 30 days of the court’s preliminary approval of the agreement, which is expected to come in Q2 2024. Compass would pay the remaining amount within one year of the court’s preliminary approval.
Compass also agreed to make some business practice changes as part of the settlement, including reminding brokerages and agents that there is no rule requiring agents to make or accept compensation offers and requiring brokers and agents to disclose to clients that commissions are not set by law.
The company also said its owned brokerages and agents would be prohibited from claiming buyer agent services are free, and brokerages and agents would be required to include the listing agent’s compensation offer for prospective buyer agents as soon as possible.
Brokerages and agents would be prohibited from sorting listings by offer of compensation unless requested by the client, and all brokers and agents would be reminded of their obligation to show properties regardless of compensation 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,” Compass CEO Robert Reffkin said in a statement emailed to Inman. “The settlement payment and other agreements resolve all nationwide claims homesellers 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.”
As of its Q4 2023 earnings, Compass had $166.9 million available in cash and cash equivalents to close out 2023. The firm was the largest residential real estate brokerage in the U.S. by sales volume in 2022, with roughly $228 billion, according to RealTrends. The firm closed $184 billion in sales volume in 2023, retaining its No. 1 ranking by sales volume.
NAR’s $418 million settlement, if approved, would protect roughly 1 million agents and brokers from about two dozen lawsuits filed by homesellers in the U.S.
The lawsuits and settlements are poised to have far-reaching consequences across the industry, impacting commission structures and client relationships but also, potentially, mortgage partner agent programs and much more. In addition, a new trade organization is currently in the works, headed by The Agency’s Mauricio Umansky and Compass agent Jason Haber, in part in response to dissatisfaction with NAR’s handling of the lawsuits.
All settlements put forth in the commission lawsuits thus far are still subject to final court approval. Those from RE/MAX and Anywhere are scheduled for their final court approval hearing in May 2024.
The U.S. Department of Justice has been keeping a close eye on the industry for a while now, and may become an even “bigger problem” for real estate professionals than the commission lawsuits, NAR President Kevin Sears suggested during a conference in Boston in February. An appellate court in Washington, D.C., is in the midst of determining whether or not the DOJ can reopen a previous investigation into the buyer broker commissions at the heart of the lawsuits.
This story is developing. Check back for more details.
