Home Investing.com: Stock Market News Douglas Elliman, Redfin, other realtors fall after $1.78 billion broker commission verdict By Reuters

Douglas Elliman, Redfin, other realtors fall after $1.78 billion broker commission verdict By Reuters

by Hataf Finance
3 minutes read

© Reuters. FILE PHOTO: A man looks at advertisements for luxury apartments and homes in the window of a Douglas Elliman Real Estate sales business in Manhattan’s upper east side neighborhood in New York City, New York, U.S. October 19, 2021. REUTERS/Mike Segar/File

By Chibuike Oguh and Jonathan Stempel

NEW YORK (Reuters) – Shares in Douglas Elliman, Redfin (NASDAQ:), Compass and eXp World Holdings (NASDAQ:) fell on Wednesday after they were sued for allegedly conspiring to artificially inflate their commissions from home sales.

The proposed class action lawsuit was filed on Tuesday in Kansas City, Missouri just hours after a jury there found the National Association of Realtors and other brokerages, including Berkshire Hathaway (NYSE:)’s HomeServices of America, liable to pay $1.78 billion in damages for similar commission practices.

Damages in that first case could be tripled under federal antitrust law to more than $5.3 billion.

The verdict could upend decades-old practices that have allowed real estate agents to boost commissions by forcing sellers to pay commissions to buyers’ real estate brokers. Home sellers complained that this model suppressed competition.

Shares of the new defendants fell between 3% and 7% on Wednesday.

Both suits were filed in the U.S. District Court in Western Missouri by the same lawyer. The first suit was brought on behalf of sellers of more than 260,000 homes in Missouri, Kansas and Illinois between 2015 and 2022. Tuesday’s lawsuit is on behalf of sellers nationwide.

A spokesperson for eXP said the company was still studying the complaint, adding: “We are committed to upholding fair and transparent practices compliant with law and we already have mechanisms and a plan in place that enables buyers and sellers to negotiate commissions.”

Spokespeople for Compass and Douglas Elliman declined to comment. A Redfin spokesperson did not immediately respond to a request for comment.

BTIG analyst Soham Bhonsle in an investor note said the fact that Douglas Elliman, Redfin, Compass and eXp were being sued by the same lawyers was a negative for their stocks.

Shares of Re/Max and Anywhere Real Estate, two other brokerages that had initially been defendants in the first suit but settled prior to trial, were up 4% and down 1.6%, respectively on Wednesday. Both had fallen on Tuesday despite their earlier settlements.

Zillow (NASDAQ:) shares fell 0.33% after brokerage Jefferies cut its price target, citing the impact of Tuesday’s verdict. While Zillow is not a defendant in either lawsuit, Jefferies said Tuesday’s verdict “increases the chances of a ban on commission sharing and Zillow having to pivot the business model.”

On Tuesday, spokespeople for NAR and HomeServices said they planned to appeal.

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