(Bloomberg) — Zillow Group Inc. and other real estate stocks experienced a significant drop in value following a Missouri jury’s decision to find the National Association of Realtors and other industry players guilty of colluding to maintain high brokerage commissions.
Shares of Zillow fell 6.4% to $35.70 at 3:12 p.m. New York time and had previously fallen as much as 11%, marking the largest intraday decline since May 2022. Reports of the verdict published by industry publications contributed to this decline. Brokerage stocks, including Compass Inc. and Redfin Corp., also experienced declines of 5.7% and 5.4%, respectively.
While Zillow, Compass Inc., and Redfin Corp. were not named in the lawsuit, the case targeted the Realtors association, Keller Williams, and Berkshire Hathaway’s HomeServices of America. Re/Max and Anywhere Real Estate Inc. had already settled with the plaintiffs earlier this year, agreeing to pay $55 million and $83.5 million, respectively. As part of the settlements, these brokerages are no longer requiring their agents to be members of NAR.
In response to the jury’s decision, NAR and HomeServices expressed their intentions to appeal. Keller Williams stated that they are assessing the verdict and trial record to determine their next steps, including the possibility of an appeal.
HomeServices expressed concern about the implications of the decision, emphasizing the potential obstacles for buyers and the challenge sellers may face in realizing the value of their homes. They stated that the ruling could lead homebuyers to forego professional assistance during a complex and consequential financial transaction.
As part of the case, the jury awarded $1.785 billion in damages. This lawsuit represents one of two legal challenges related to brokerage commission practices. Additionally, the Justice Department is investigating a commission-sharing system that typically results in home sellers paying a 5% to 6% cut of the sale, split between their agent and the buyer’s agent.
Considering all these cases together, it becomes evident that the commission system in the real estate industry is facing scrutiny for being costlier for consumers compared to countries like Australia and the UK. In a worst-case scenario, the federal government might consider banning commission sharing, preventing sellers’ agents from compensating buyers’ agents.
A spokesperson for NAR stated that while they plan to appeal, the resolution of this matter could take several years. In the meantime, they intend to request a reduction in the damages awarded by the jury.
(Updates with additional information on lawsuits beginning in the third paragraph.)
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