"What moron would shoot themselves in the head by doing that?" - CoStar Boss Andy Florance Denies Involvement in Commissions Trials

November 17, 2023
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CoStar CEO Andy Florance says that his company has nothing to do with the ongoing bombshell buyer-side commissions trials currently rocking the U.S. real estate industry.

Asked about his company's possible involvement in the suits by HousingWire at the National Association of Realtors NXT convention in Anaheim, the longtime boss of the Washington-based data giant was effusive in his denial.

“We had zero involvement with that lawsuit. We learned about it from NAR long after it started.”

“We have 189,000 real estate clients who work with us. What moron would shoot themselves in the head by doing that? We had nothing to do with it at all, period. Anyone who says we were funding that is lying. As a public company, we’re a pretty open book.”

Several trials around buyer-side commissions threaten to fundamentally change the U.S. real estate industry and CoStar could perhaps be the biggest beneficiary.

At the end of November, the share prices of real estate portal operators Zillow and Redfin along with the prices of several major brokerages took a big hit as a Kansas City jury ruled that the NAR, HomeServicesofAmerica and Keller Willams were guilty of colluding to fix the commission paid to buyers' agents. CoStar's share price shot up.

In contrast to most markets around the world, for most U.S. property transactions both the seller and the buyer are represented by a real estate agent. Typically the two agents split the commission which is often between five and six percent of the value of the home with the home seller responsible for paying both agents.

The National Association of Realtors (NAR) has a rule that requires all brokers to offer buyer-broker compensation when listing a property on an MLS. The suit claimed this has driven up costs to the seller and stifled competition.

Although there has been talk of an appeal against the Kansas City ruling (known as the Sitzer|Burnett case) there are now several other similar cases being brought against the NAR all while the agent association is going through leadership change.

It's not just the agent association and its members that are at risk from the upshot of any court case. Leading U.S. real estate portal Zillow could see its business model come under significant pressure if a ruling leads to government legislation restricting or banning buyer agent commissions.

Zillow's main Premier Agent product, which generates a very substantial percentage of the Seattle-based company's revenue, sees buyers' agents pay the portal for leads. On the other hand, CoStar's portal Homes.com primarily monetises listings in a similar way to portals in the rest of the world by charging listings agents for increased visibility on its results pages.

The fact that Homes.com's business model would not be affected by any ruling while its main rival's might well be was enough for HousingWire's journalist to at least put the question to Andy Florance.

November 17, 2023
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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