New York-based brokerage Compass is the latest real estate company to settle in a series of U.S. lawsuits targeting agent commissions. In a Securities and Exchange Commission (SEC) filing on Mar. 22, the brokerage agreed to pay $57.5 million U.S. and make several policy changes. 

Among other things, the brokerage agreed to require its brokers and agents to:

  • Disclose to clients that commissions are not set by law and are fully negotiable
  • Not claim buyer agent services are free
  • Disclose to prospective buyers as soon as possible any offer of compensation by listing brokers 
  • Not sort listings by offers of compensation, unless requested by the client

The proposed settlement comes exactly one week after the National Association of Realtors (NAR) agreed to settle for $418 million. Other major brokerages to have settled include Keller Williams, Anywhere, and RE/MAX.

Compass agreed to pay half of the settlement amount within 30 days of the court’s preliminary approval, which it expects to be in Q2 2024. The other half will be paid within one year from then. 

In a statement reported by the Wall Street Journal, Compass co-founder and CEO Robert Reffkin said, “The reason we have chosen to settle is so we can minimize distractions.” He added that the company was not admitting any wrongdoing. 

Still, the settlement adds growing pressure on other affected brokerages to settle and gives them an idea of how much they can expect to pay. 

At the heart of the lawsuits against brokerages and real estate companies is “cooperative compensation,” an industry-wide practice by which listing agents agree to compensate buyer agents. Critics claim it unfairly inflates agent commissions and ultimately amounts to price fixing. 

Time will tell how the lawsuits pan out, but a Kansas City jury already delivered a $1.8 billion verdict against NAR and major brokerages in October last year.

For marketplaces, it’s still too early to tell what the final impact of a change in agent commission practices will be. However, if buyer agents can no longer rely on offers of compensation from the seller agent, their overall pay may come under downward pressure, and marketplaces would do well to focus on monetizing the listing side of the transaction.

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