RE/MAX chairman on his 8th housing recession and settling out of the $1.8 billion antitrust verdict: ‘I’ve never seen this before in my career’

When Dave Liniger and his wife Gail cofounded RE/MAX in 1973, his business model was revolutionary and controversial—allowing real-estate agents to keep the maximum amount of their commissions in return for sharing in office overhead and paying a management fee. In an interview with Fortune, the RE/MAX chairman compared it to a group of lawyers sharing the expenses of running an operation and keeping the majority of their earnings to themselves. It took him about three years to get a foothold in their homebase of Denver, then they started to franchise and expand internationally, and “the rest is history,” says Liniger, who served as a long-time CEO, as RE/MAX became one of the top real-estate franchisors nationwide, which is how it found itself as one of the five defendants in a lawsuit that became a $1.8 billion verdict that rocked the industry.

The Missouri jury struck a huge blow against the National Association of Realtors and RE/MAX’s peers in the real-estate space, finding they were part of a national antitrust conspiracy to gouge buyers and sellers. Good thing Liniger settled in September for $55 million before the trial started—and good thing that settlement applies to a separate class-action antitrust lawsuit that hasn’t even gone to trial yet. Liniger says he would have rolled the dice and gone to trial if it were just his future on the line. But he said he and his leadership team did the best thing for all their members. “Those franchisees invested their life with us.” 

The jury’s finding that NAR and several major brokerages conspired to artificially inflate home sale commissions paid to real estate agents could even be tripled to over $5 billion at the court’s discretion under antitrust law. 

Liniger says the settlement, which has been granted preliminary approval, will eat up about half of the company’s existing cash. As of the third quarter of this year, RE/MAX reported that its total revenue had decreased 8.7% to $81.2 million as it posted a net loss of $59.5 million. He says if the settlement amount were even a bit higher, it might have been easier to go to trial, file for bankruptcy, and reorganize. 

The company continues to deny the allegations made in the complaints, and it does not admit liability in its settlement. But in addition to paying $55 million into a settlement fund, the company must commit to making certain adjustments to its business, including making it clear that “broker commissions are not set by law and are negotiable.”

Some analysts say the entire real estate industry will change following the verdict and other impending lawsuits. One research note from Keefe, Bruyette & Woods estimates that it could ultimately result in a 30% reduction in the $100 billion that Americans pay each year in real-estate commissions. 

“I wish I could tell you; I have no idea,” Liniger says, when asked if commissions would really change. “I’ve never seen this before in my career. I’ve been here for 55 years…I think time will tell.” He shared with Fortune what else he makes of the landscape, which by his reckoning is the eighth housing recession since he started RE/MAX.

The eighth recession

While nothing compares to the 2008 housing crisis, Liniger says this particular slowdown is unique because interest rates have gone up so quickly after being relatively low for more than a decade. Those with lower mortgage rates are holding onto their homes; the so-called lock-in effect is exacerbating an already underbuilt market. People still want to buy homes, and that’s fueling bidding wars that only push prices up further. It’s one of the worst markets he’s ever seen—not to mention, it’s been filled with, quite possibly, industry-changing litigation. 

The slowdown has to do with the simple fact that housing has become severely unaffordable, with mortgage rates that reached slightly above 8% and home prices that rose substantially following the pandemic-fueled housing boom. Mortgage rates have come down slightly from that peak, but more and more forecasts are indicating a higher-for-longer rate environment, which has largely frozen existing home sales. It’s unclear how, or whether, the verdict will affect affordability. 

Only time will tell the effect of this unprecedented verdict and the number of lawsuits ahead, but Liniger suspects next year’s housing market could mirror this one, at least for the first six months or so, he says. The latest inflation numbers were encouraging, and another month like that could mean the end of the Federal Reserve’s rate hikes, Liniger says. If that were to happen, he thinks by June or July interest rates would be trending down, which could equate to lower mortgage rates, although likely nowhere near pandemic-lows. 

That said, would-be buyers will have to adjust to the reality of 6% mortgage rates, Liniger says, and then frozen activity can thaw. Still, for the time being, the new home sales market will continue to outperform the existing home sales market because homebuilders can offer incentives, like mortgage rate buydowns, he says. 

In the aftermath of the settlement, and with more lawsuits and a trial underway, RE/MAX recently announced a new chief executive, Erik Carlson, who previously served as the president and CEO at DISH Network. Carlson is charged with leading the company through its next phase. Liniger called him a “very interesting man,” but later said that he has no plans to retire from his chairman role—and it seems neither does Gail, his wife, currently the vice chair emerita and director emerita.

“It’s been our life, and we’re not ready to give that up,” he says. 

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