Shares of Re/Max sank Tuesday after Morgan Stanley warned the brokerage agency may very well be in for some rocky instances forward within the wake of a landmark ruling towards realtors and brokerages. The Nationwide Affiliation of Realtors and a few massive residential brokerages final week have been discovered accountable for $1.78 billion in damages for conspiring to maintain commissions excessive. Re/Max had settled the case earlier than trial for $55 million. Morgan Stanley thinks the ruling may enhance the danger of additional litigation and costly settlements. The financial institution downgraded Re/Max to underweight from equal weight and slashed its worth goal to $9 per share from $19.50. The brand new forecast implies draw back of 16%. “The chance of extra litigation and dear settlement has notably elevated in our view and RMAX’s $90mn of money on stability sheet is probably not ample in a extra hostile state of affairs,” analyst Ronald Kamdem wrote in a notice Monday. Shares of Re/Max fell 10% Tuesday. RMAX YTD mountain Re/Max’s year-to-date efficiency Kamdem additionally expects the ruling to weigh on Re/Max’s a number of all through 2024 due to a possible appeals course of and different ongoing litigation. Then there may be the impact on commissions. Sellers usually pay 5% to six% of the sale of a home to realtors, which is cut up between the itemizing and purchaser’s agent. Kamdem mentioned there may very well be downward stress on these commissions, and he expects it to stay an overhang on the a number of of residential brokers. The brokerages usually take a slice of its agent’s earnings. “We see a possible detrimental affect to RMAX’s variable dealer charges — usually ~1% of actual property commissions paid by prospects — in addition to the potential for higher dealer attrition which might affect recurring franchise charges, annual dues, and different revenues,” Kamdem famous. Shares of Re/Max have already misplaced greater than 40% yr to this point. — CNBC’s Michael Bloom contributed reporting.