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Zillow (Z) stock fell as much as 15% Friday, along with other real estate names, after the National Association of Realtors reached a legal settlement that clears the way for homebuyers and sellers to pay lower commissions. .
NAR announced Friday that it has reached a nationwide settlement alleging the industry colluded to raise agent fees. If the settlement is approved by a federal court, it will likely change the way consumers buy and sell homes. NAR announced it would pay $418 million over the next four years to settle the case.
After NAR’s landmark settlement, real estate names tumbled and investors expected these rules to impact spending and competition for leads. Along with Zillow’s decline, shares of Anywhere Real Estate (HOUS), Compass (COMP), and Redfin (RDFN) fell by 15%, 11%, and 5%, respectively.
Zillow said in a 10-K lawsuit filed last month that “if agent commissions are materially affected, real estate partners’ marketing budgets may be reduced or the number of real estate partners participating in the industry may be reduced. “This may have a negative impact on our financial position.” and the results of the surgery. ”
As part of the settlement, NAR announced that it would “implement a new MLS rule that prohibits offers of broker compensation on the MLS,” effectively eliminating the rule that required sellers to compensate buyers’ agents.
NAR’s MLS (Multiple Listing Service) is a database where 88% of sellers listed their homes last year. Previously, brokers who entered their clients’ properties in their databases had to agree to share their commissions with other MLS participants, which typically amounted to 6%.
From July, agents will also be required to enter into a written contract with the homebuyers they represent.
“It has always been our goal to preserve consumer choice and protect our members as much as possible,” interim CEO Nikia Wright said in a statement.
And at least one Wall Street analyst believes these new rules will result in “fees falling by 25% to 50%.”
In addition to lower fees, the ruling “will benefit online and discount real estate agents,” Jarrett Seiberg, a housing policy analyst at TD Cowen Washington Research Group, said in a note to clients Friday. They will be able to take advantage of the multiple listing service without having to meet previously established fee requirements.”
Seiberg added: “That means we can offer lower commission rates to attract more business. Additionally, the settlement also prohibits buyer agent compensation from being included in listings. ” he added.
In Seiberg’s view, existing homeowners (who will pay fewer fees when they sell their homes) will benefit the most, but first-time buyers and less affluent buyers will benefit the most from the fees they pay when they sell their homes. low rates and the lack of a pre-arranged fee structure, which can have a negative impact. This can hinder agents’ motivation to work with these clients.
The settlement also adds to the financial and operational difficulties NAR has faced in recent months. Former CEO Bob Goldberg resigned last year just days after a $1.8 billion judgment against the organization over fees. Also, former President Tracy Kasper resigned in January after receiving threats over past personal issues.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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