Shares of Zillow (Z) sank as much as 15% Friday alongside other real estate names after the National Association of Realtors reached a legal settlement that paves the way for homebuyers and sellers to pay lower commissions.
The NAR reached a nationwide settlement of claims that the industry conspired to boost agents’ commissions, the organization said on Friday. If approved by a federal court, the settlement will likely usher changes to the way consumers buy and sell homes. The NAR said it will pay $418 million over the next four years to end litigation.
Real estate names slid on the heels of the NAR’s groundbreaking settlement, with investors expecting these rules to impact spending and competition for lead generation. Alongside Zillow’s decline, shares of Anywhere Real Estate (HOUS), Compass (COMP), and Redfin (RDFN) fell as much as 15%, 11%, and 5%, respectively.
In its 10-K filed last month, Zillow noted, “If agent commissions are meaningfully impacted, it could reduce the marketing budgets of real estate partners or reduce the number of real estate partners participating in the industry, which could adversely affect our financial condition and results of operations.”
As part of the settlement, the NAR said it would “put in place a new MLS rule prohibiting offers of broker compensation on the MLS,” ending rules that had effectively required sellers to compensate a buyer’s agent.
The NAR’s MLS, or Multiple Listing Service, is a database where 88% of sellers listed their homes last year. Brokers who list their clients’ properties in the database previously had to agree to share their commissions with other MLS participants, with commissions typically standing at 6%.
Beginning in July, agents will also have to enter into written agreements with homebuyers they represent.
“It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible,” Nykia Wright, interim CEO, said in a statement.
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A “sale pending” sign is posted in front of a home for sale on Nov. 30, 2023, in Larkspur, Calif. (Justin Sullivan/Getty…
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