![How Will $1.8Bn U.s. Legal Case Impact Uk Estate Agents? 2 Paul Smith](https://propertyindustryeye.com/wp-content/uploads/2023/08/Paul-Smith-336x228.jpg)
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You may not be aware of it, but across the ocean, real estate agents are bracing for the fallout from a massive $1.8 billion lawsuit over the amount of fees they’ve been charging vendors for years.
It all hinged on a complex legal battle over allegations that US real estate agents conspired to fix commissions – a charge that was denied and has now resulted in the National Association of Realtors (NAR) and some of the country’s largest real estate brokers, including some based in the UK, paying multimillion-dollar settlements.
Hardest hit was Keller Williams, which agreed to pay a massive $70 million, while Anywhere Real Estate, which owns brands such as Century 21 and Sotheby’s International Realty in the UK, settled the case for a massive $83.5 million.
eXp Realty and eXp World said in March that the cases were still in litigation, but eXp World Holdings said in its first-quarter 2024 earnings call that it had tentatively set aside $16 million for the antitrust litigation, but that this could change depending on how the litigation progresses.
Such a settlement would undoubtedly have serious knock-on effects on their UK operations. How would they absorb these costs? Would they still want investment in the UK?
This is a case worthy of a Hollywood blockbuster movie, and it’s not over yet: Similar “copycat” lawsuits have been filed in other states, causing chaos among buyers and sellers who want to know if the fees they pay and the way their real estate transactions are handled will change soon.
The UK has always charged some of the lowest commission in the world and has always been the envy of US estate agents who charge 6%. This commission has never been challenged. The average US seller expects their estate agent to charge around 6% and NAR has recommended this as the standard through its Multiple Listing Service.
When I spoke to people I know in the US, their opinions ranged from “nothing will change” to “the model will fundamentally change.” Buyer’s agents may disappear, and the blocking of digital agents to some portals must stop.
I have heard that in American political circles, NAR is considered a powerful union with a good lobbying record, and this fine has shattered NAR’s dominance in the agency sector.
The new regulations are due to be introduced in the coming months, and we will all be watching closely to see how they affect people with interests in the UK.
I’ve seen reports that some real estate agents are worried that as a result of this lawsuit, their revenues could plummet by a quarter or a fifth, forcing hundreds of thousands of agents out of business. Agents will have to do a better job of explaining why the fees they are charging are worth it.
This got me thinking about how we operate in the UK, the fees we charge sellers and the need to do a better job of explaining our value to customers. This race to free has caused huge damage to our industry and led to a serious decline in customer service.
Perhaps it’s time for a coordinated campaign between traditional agencies to demonstrate the true value we provide.
It also makes one wonder how many agents in this town, or even self-employed agents within a franchise model, will be accused of colluding over fees as has happened in the past. The Competition and Markets Authority (CMA) is sure to be keeping a close eye on the fees agents charge, and any breaches in the UK could result in very heavy fines.
The events unfolding in the US are a stark reminder that being transparent as a real estate agent and justifying your value is not just an issue abroad, it is also an important consideration at home.
Paul Smith is chairman of Spicer Hart.