Sector Insights: Anywhere Real Estate, Zillow, Redfin

Credit Research: William Hong Legal Research: Lucas Ballet Companies heavily reliant on commission revenue tied to residential real estate transactions could experience a sharp reduction in revenue if ongoing litigation tied to broker commissions for buying and selling homes leads to a reduction in commissions. Changes to profitability will be dependent on any attached costs and whether brokers are employees or part of separately owned franchises. Anywhere Real Estate appears most exposed to a decline in commissions, holding all else equal, given the size of the company’s exposure to commission based revenue. However, Anywhere’s reported commission percent appears lower than industry average, so the decline might be lower. Companies that rely on fixed fees, or fees largely not dependent on commissions, such as RE/MAX and Zillow, would likely have less of an immediate effect from a drop in commissions, but over time, if the number of brokers and franchises decline from a change in Realtor economics, these companies would likely experience declines in profitability. For each broker, we first identified the percentage of revenue that is directly tied to broker commissions. We then identified the percentage of the commission revenue that is tied to buy-side transactions since some have speculated[...]