Commission Conspiracy

November 02, 2023

THE BIG SPLASH

Commission Conspiracy

What you can’t miss today

In a surprising twist of real estate drama, a federal jury has slapped the National Association of Realtors and several residential brokerages with a whopping $1.78 billion in damages for conspiring to inflate commissions on home sales, leaving us all wondering, "Is the real estate market finally getting a reality check?"

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  • The guilty parties include the National Association of Realtors and a variety of residential brokerages.

  • The plaintiffs? Over 260,000 home sellers from Missouri, Kansas, and Illinois, who sold their homes between 2015 and 2022.

  • The main gripe: These sellers were not happy about the commissions they had to pay to the buyers’ brokers, arguing that the commission model suppressed competition and kept broker commissions artificially high.

  • The juicy part: The damages could potentially be tripled to over $5.3 billion under U.S. antitrust law, though the ruling is still subject to appeal.

  • The defense: The National Association of Realtors is standing its ground, denying any wrongdoing and vowing to appeal the decision.

  • Other players in the drama: Berkshire-owned HomeServices of America, Keller Williams, and others, with some choosing to settle before trial and others gearing up to appeal.

In the midst of all this, the U.S. Department of Justice is conducting its own antitrust probe into the National Association of Realtors’ practices. It seems like the real estate world just got a whole lot more interesting!

A SCOOP OF MARKET DATA

The number you should know

1980

Wells Fargo is waving a big red flag, predicting a housing market nosedive reminiscent of the 1980s, all thanks to stubbornly high mortgage rates that just won't quit.

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  • The housing market is throwing a tantrum, freezing up in some areas, and Wells Fargo is the concerned parent predicting a full-blown recession if mortgage rates don’t take a chill pill.

  • Borrowing costs are through the roof, and if they stay up there, we’re looking at a housing hiccup that could make the 1980s blush.

  • The bank is throwing some serious shade, saying prospects for a "housing rebound" are dimming faster than a cheap light bulb.

  • And just when you thought it couldn’t get worse, the economists at Wells Fargo are serving up a reality check, reminding us that home prices have ballooned over 40% since the pandemic started.

A SCOOP OF INSIGHTS

Something you’ll learn

Joe Gebbia, the co-founder of Airbnb, has raised a cool $41 million for his startup Samara, aiming to revolutionize the housing market with its tiny, pre-fabricated houses.

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  • Samara, spun out of Airbnb in 2022, is Gebbia’s brainchild in collaboration with former Flex CEO Mike McNamara.

  • The startup has meticulously designed small houses, available in studio to two-bedroom configurations, ready to be ordered online and installed on your property.

  • With prices ranging from $269,000 to $369,000, these houses are not just a drop in the real estate ocean.

  • The Series A funding round, led by Thrive Capital, saw participation from a variety of investors including Airbnb itself, and even Michael Dell.

  • The funds are earmarked for scaling operations, including manufacturing, marketing, and R&D, as Samara aims to make a splash in the housing market.

  • The houses, technically known as ADUs (Accessory Dwelling Units), are part of a grand plan to mass produce and simplify the addition of living spaces to properties, bypassing the usual contractor and permitting headaches.

  • California’s housing shortage and favorable ADU laws provide a ripe market for Samara, with the startup already eyeing expansion across the U.S.

A SCOOP OF CONTROVERSY

Everyone will talk about it

RealPage and 14 major landlords in Washington D.C. are facing a lawsuit for allegedly conspiring to jack up rents in a scheme that smells fishier than a week-old tuna sandwich.

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  • The District of Columbia Attorney General, Brian Schwalb, is leading the charge, accusing the landlords and RealPage, a property management software company, of colluding to artificially inflate rents for over 50,000 apartments.

  • The lawsuit claims that the landlords shared their rental data with RealPage, which then used its algorithmic wizardry to suggest higher prices, costing renters millions in what the AG’s office is calling illegal rent hikes.

  • The named defendants include some big players in real estate, such as AvalonBay Communities, Equity Residential, and UDR.

  • RealPage, no stranger to legal drama, has faced similar lawsuits in California and Tennessee, with renters accusing it of rent-fixing.

  • The AG’s office is not just seeking damages; they want a corporate babysitter to ensure these companies play nice in the future and stop any alleged anti-competitive shenanigans.

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