Warren Buffett's Real Estate Firm Coughs Up $250M To Avoid Bigger Payout Over Commissions

HomeServices of America, the real estate firm owned by Warren Buffett, has agreed to pay $250 million to settle a nationwide antitrust lawsuit. The settlement could potentially transform the way real estate agents are compensated.

What Happened: According to a report by the New York Post, HomeServices of America, a subsidiary of Berkshire Hathaway (NYSE: BRK-A), was the last defendant in a case against the National Association of Realtors (NAR) and four brokerages.

After a jury verdict in Kansas City, Missouri, in October, the settlement aims to preempt a potentially larger payout. The verdict sided with home sellers who alleged that the industry had artificially inflated real estate commissions.

The jury awarded damages of $1.78 billion. HomeServices's settlement, which still requires court approval, follows the NAR's $418 million settlement last month.

Analysts suggest that the agreed-upon changes could reduce commissions by at least 25%.

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With this latest settlement, the NAR and the brokerages, including HomeServices and Re/Max, will pay over $943 million to resolve antitrust claims.

HomeServices' settlement will result in a $140 million after-tax accounting charge, according to spokesperson Chris Kelly, who emphasized that the settlement is "a sole obligation of HomeServices, with no participation by any parent entity."

Why It Matters: This settlement comes after Berkshire Hathaway missed several opportunities, including the sale of its shares in Costco Wholesale Corporation COST during 2020, which resulted in a potential loss of approximately $1.5 billion in gains.

Berkshire Hathaway, led by Warren Buffett, has been known for its savvy investments and strategic moves, such as the $3 billion investment in Dow Chemical during the 2008 financial crisis, which ultimately doubled the firm's money.

The latest settlement, however, could potentially alter the landscape of real estate commissions, impacting real estate agents' earnings and home sellers' costs. It also underscores the legal challenges large corporations face in their business operations.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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