Stocks of real estate brokerages fell after the National Association of Realtors agreed to settle litigation over commission rules for US real estate agents, clearing the way for widespread changes in how Americans buy and sell homes.
Zillow Group Inc. shares fell $6.74 to $46.40 a share – 13% – as of 1 p.m. Friday in New York. The company gets the largest share of its revenue by selling leads to buyer’s agents, and lower commissions could mean those representatives have less money to spend on marketing.
Short seller Spruce Point Capital Management has argued that new commission rules could hurt Zillow, but the company has argued it is well-positioned to thrive in a changing industry landscape.
Stocks of real estate brokerages fell, too. Anywhere Real Estate was down 94 cents to $4.97 (off 16%), Compass lost 39 cents to $3.01 (off 11%), and Redfin fell 32 cents to $6 (off 5%).
In a report last year, analysts at Keefe Bruyette & Woods estimated that possible changes to the structure could push the annual commission pool down by more than 30% over time as the market adjusts to a new system. The report also estimated that changes could lead to a 60% to 80% reduction in the number of real estate agents.
The changes will apply to a wide swath of the industry, but not every firm. Berkshire Hathaway Inc.’s HomeServices of America and its related companies are not released under the settlement since the company is still litigating a key case.
For homeowners and buyers, the proposed settlement marks a potentially pivotal change for the industry. The deal would shift the way that agents communicate about commissions, ending the typical setup for a longstanding practice that generally resulted in sellers paying around 6% in fees.
The NAR, a trade group for US real estate agents that counts about 1.5 million members, would pay about $418 million over about four years under the agreement, which is subject to court approval, according to a statement Friday from…
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