Resi Brokerage Stocks Sink on NAR Commissions Settlement

Six months after the Sitzer/Burnett verdict sank real estate stocks, a settlement in the case has done it again.

Stocks for Anywhere, Compass, Elliman, Redfin and Zillow plunged Friday when the National Association of Realtors struck a $400 million settlement that resolves four antitrust lawsuits brought forth by home sellers. The settlement, which brings a measure of certainty to NAR and many of its member brokerages but figures to reduce commissions overall, is pending approval from a judge.

Compass stock fell 14 percent, Anywhere’s stock was down nearly 12 percent and Elliman’s had fallen almost 14 percent to a mere $1.70 per share. Redfin stock was down roughly 5 percent and Zillow lost 13.5 percent.

“Today’s National Association of Realtors settlement is merely a next step in what has already been a lengthy and complicated process,” said Zillow representative Will Lemke. “We continue to believe positive changes for consumers also benefit the agents who serve them well — on both sides of the transaction.”

Compass, Anywhere and Elliman declined to comment on the settlement.

In a post on the company website, Redfin CEO Glenn Kelman predicted the ruling would cause buy-side commissions to fall.

“If buyers choose an agent based in part on fees, we expect that the price pressure on buyers’ agents will be even more intense than that on listing agents,” he wrote.

Zillow and Redfin weren’t defendants in the antitrust suits. Anywhere previously settled for $83.5 million. But investors reacted as if they expect the companies will be hurt by the changes in commissions that the settlement will bring.

The agreement stops listing brokers from making commission offers to sell-side agents via the MLS, potentially complicating the compensation process, starting in July. It only shields firms that had less than $2 billion in sales volume in 2022, although brokerages above that level, such as Compass, can settle by paying an amount determined through an undisclosed formula.

Agents were divided on the news. Some took to The Real Deal’s Instagram page to warn that it would incentivize buyers to go right to listing agents, forgoing their own representation.

“Not being able to offer compensation to buyer’s agent on the MLS is insane!!!” said Solution Group Realty. “What happened to being upfront and transparent with commission fees???? Shady back door deals coming right up!!!! #ridiculous.”

NAR had vowed to fight the Sitzer verdict, seeking a new trial three months ago.

“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said interim CEO Nykia Wright in a statement Friday. “It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals.”

Residential brokerage stocks took a similar beating last November when the initial Sitzer/Burnett verdict cast a cloud of uncertainty over the industry and left several defendants facing billions of dollars in damages.

Some brokerages, like Compass, soon found themselves defendants in copycat lawsuits.

Stock prices of most big residential brokerages surged at the start of the year on optimistic outlooks for home sales. But year-to-date, Anywhere stock is down 36 percent, Elliman has fallen 42 percent and Compass has slid 17 percent.

This article has been updated with a comment from Redfin CEO Glenn Kelman.