Warren Buffet company named in commissions suit

Home sellers taking their commissions fight nationwide are dragging Warren Buffet into the fray, accusing his real estate businesses of making billions of dollars in ill-gotten gains.

Plaintiffs this week added Berkshire Hathaway Energy, which owns HomeServices of America, to another commissions lawsuit targeting six leading brokerages. The case, known in Missouri federal court as Gibson v. National Association of Realtors, expands the scope of home sellers' $1.78 billion dollar victory against real estate players last October.

"Berkshire Hathaway Energy has intentionally undercapitalized HomeServices," attorneys wrote in an amended complaint filed Monday. "Rather than ensure that HomeServices can return its ill-gotten home equity and/or pay the Burnett judgment, it accepts the profits of the conspiracy rather than leave the profits at the HomeServices level."

The suit also accuses BHE of touting the "halo effect" in using the brand's association with Berkshire Hathaway CEO Warren Buffett to foster consumer trust. It also names Greg Abel,  Berkshire Energy chair and Buffet's planned successor, although he's not a defendant.

Daniel Acker/Bloomberg

Given HomeServices' $168 billion in sales volume last year, plaintiffs estimate an overpayment of $4.2 billion in commissions considering a 2.5% average buyer agent fee. BHE oversees almost 100,000 real estate agents under its dozens of brands and approximately 300 franchisees, according to the lawsuit.

The Gibson case, which purports to represent a class of consumers nationwide who've sold a home since October 2019, targets Compass, Douglas Elliman, EXP Realty, Redfin, Weichert and United Real Estate.

Neither a representative for BHE nor attorneys for plaintiffs responded to requests for comment Thursday.

Marty Green, a principal with Polunsky Beitel Green and a 25-year veteran of the mortgage space, suggested plaintiffs added BHE to skirt any roadblocks with arbitration provisions and for a larger possibility of securing a settlement with the deep-pocketed firm.

"My sense has been for some time that these cases would resolve themselves, particularly after we saw what the jury did in the first case that was tried over Kansas City," he said.

Jurors in Kansas City last fall ruled that HomeServices, NAR and Keller Williams conspired in Missouri to inflate commissions under the structure in which sellers pay for the buyer broker. Keller Williams last month agreed to a $70 million settlement to skirt the massive damages, joining RE/MAX and Anywhere Real Estate which settled before the October trial. 

Plaintiffs in the Gibson case, in addition to unspecified damages that could be tripled upon judgment, are seeking a permanent injunction preventing brokerages from requiring sellers to pay buyer brokers.

Numerous other lawsuits targeting Multiple Listing Services and brokerages over commissions are pending. The Department of Justice intervened in a Massachusetts case and suggested "decoupling" commissions, and feds also awaiting a U.S. Circuit Court of Appeals ruling on whether they can reopen a probe into NAR.

Lenders are already seeing and asking legal counsel questions about changes in sales contracts, Green said. While NAR has made slight adjustments to its guidelines, RE/MAX and Anywhere expect to implement commissions rule changes as part of their settlements, scheduled to be finalized in a May hearing.

Industry experts have offered varying opinions on how decoupling could impact originators. Green said lenders should pay attention to how underwriting may be affected, especially in the case of first-time homebuyers depending on sellers covering commissions.

"Some lenders might feel compelled to treat that as a seller concession as opposed to it just being a cost of the transaction where it's been done in the past," said Green. "So that could really impact affordability for first time homebuyers."