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IPFS News Link • Housing

Zillow Plunges After Verdict on Real Estate Brokerage Commissions

•, Patrick Clark

The jury awarded nearly $1.8 billion in damages in the case, one of several recent lawsuits concerning how real estate agents are paid. The Justice Department is also scrutinizing the commission-sharing system, which typically puts home sellers on the hook for a 5% to 6% cut of the sale price, split between their agent and the representative for the buyer.

In a worst-case scenario for the industry, the federal government could seek to ban sharing commissions, which would upend how real estate agents have done business for decades. That would be especially bad news at a moment when the US real estate is largely frozen, with mortgage rates approaching 8% and existing home sales nearing lows not seen since the foreclosure crisis.

The verdict Tuesday doesn't directly affect the Justice Department's stance, but the lawsuit, known as "Sitzer/Burnett," revolves around the same set of issues. The DOJ also recently injected itself into a Massachusetts case related to the traditional commissions system, signaling that the watchdog is paying attention, according to analysts at Stephens Inc.

Stocks Drop

Shares of Zillow fell 6.9% Tuesday, the biggest decline since June 2022. While the company doesn't rely on commission income directly, its core business is selling marketing services to buyers' agents. The stock has dropped more than 80% from its peak in February 2021, when it was riding the pandemic housing boom.

Brokerage shares also sank Tuesday, with Compass Inc. falling 6.2% and Redfin Corp. dropping 5.7%.

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