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Real estate agent-related stocks closed lower Tuesday after a jury struck a blow to the home-selling commission structure. Analysts say the case and others like it could change the way brokers are paid, reduce commissions, and slash agent head count—but this verdict isn’t the final word.
A jury in the Western District of Missouri arrived at a verdict that the rules surrounding the payment of buyers’ agent commissions were anticompetitive. The jury found that the National Association of Realtors and several real estate companies and affiliates had conspired to raise or stabilized broker commission rates paid by sellers, according to court documents filed Tuesday.
HousingWire reported that defendants, including the National Association of Realtors, Keller Williams, and Home Services of America, were ordered to pay $1.78 billion in damages. Two other companies that had been named as defendants, Re/Max and Anywhere, formerly known as
Realogy,
recently entered into settlement agreements.
In a statement to Barron’s, the National Association of Realtors said it would ask the court to reduce awarded damages and appeal the jury’s verdict. “NAR’s guidance for local MLS broker marketplaces ensures consumers get comprehensive, equitable, transparent and reliable home information and that brokerages of any size, service or pricing model get a fair shot at competing,” they said. “It will likely be several years before this case is finally resolved.”
An attorney representing Keller Williams similarly said it would appeal. “We followed the law regarding cooperative compensation,” said Timothy Ray, an attorney with Holland and Knight representing Keller Williams. “Looking forward we will consider our options as we assess the verdict and trial record, including all avenues of appeal.”
Barron’s parent company,
News Corp,
also owns Move, which runs the real-estate listings sites Realtor.com and Move.com.
Commissions paid by sellers in the U.S. are higher than elsewhere, according to a 2019 Brookings Economic Studies report. U.S. sellers in 2015 typically paid 5.5% of the sales price—more than double the 2% rate paid by sellers in countries such as the United Kingdom, Sweden, and Hong Kong, says the report. That amounts to an extra $35,000 in fees on a $1 million house.
Stocks related to real estate agents closed lower on Tuesday. Among those that fell the most were
Redfin,
Compass, and
Zillow,
which closed between 5.7% and 7% lower.
The case and similar lawsuits could create challenges for real estate agents. A team of KBW analysts wrote in early October that the trial and others like it could reduce annual agent commissions by more than 30% over time, and reduce the number of real estate agents by 60%.
Meanwhile, for buyers, the case and lawsuits like it could reduce the commissions paid by sellers and decrease the use of buyers’ agents by those shopping for a home, says Ryan Tomasello, the report’s lead author. Right now, sellers pay the commission for both their agent and the agent representing the buyer.
“In a new market structure, there is still a scenario where a home sellers can still choose to compensate the buyer’s agent,” he says. “But importantly, that decision to pay that buyer’s agent is done on a case-by-case basis, isn’t paid at a rate that was preset weeks or months ago by the listing agent and the seller, and is ultimately negotiated by the buyer and their agent.”
The ruling could be negative for Zillow and Redfin, RBC analysts wrote Tuesday. The decisions “would collapse buyer commissions,” analyst Brad Erickson wrote, adding that “virtually all” of Zillow’s Premier Agent revenue and just over half of Redfin transactions come from buyers agents. Both stocks “partially reflected these risks” following the Re/Max and Anywhere settlements.
Write to Shaina Mishkin at [email protected]
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