Fathom Holdings Settles Commission Lawsuits

Rhea-AI Summary

Fathom Realty, a subsidiary of Fathom Holdings Inc. (Nasdaq: FTHM), has reached a nationwide settlement related to claims in the Burnett v. The National Association of Realtors lawsuit. The company will pay a total of $2.95 million in three installments: $500,000 within 5 days of court approval, $500,000 by October 1, 2025, and $1.95 million by October 1, 2026. Fathom Realty has also agreed to adhere to rule changes proposed by the National Association of REALTORS.

CEO Marco Fregenal emphasized that this settlement is not an admission of liability or acknowledgment of claim validity. The company maintains it never participated in any conspiracy to inflate commissions. The settlement aims to avoid ongoing legal fees and allow the executive team to focus on business growth and agent support.

Positive

• Settlement amount considered immaterial in GAAP terms
• Company believes it can generate adequate funds for settlement payments without compromising business
• Settlement allows focus on business growth and agent support
• Avoids ongoing legal fees and executive time demands

Negative

• Total settlement payment of $2.95 million over three years
• Potential impact on short-term cash flow due to settlement payments
• Agreement to adhere to new National Association of REALTORS rule changes

Insights

Legal Expert

The settlement of the commission lawsuit represents a significant development for Fathom Holdings. While the company maintains its innocence, the decision to settle is a strategic move to avoid prolonged litigation costs and distractions. The total settlement amount of $2.95 million, payable in installments, appears manageable for the company. However, investors should note that this could impact short-term cash flow.

The agreement to adhere to NAR's rule changes suggests potential industry-wide shifts in real estate practices. This may require operational adjustments, but Fathom's flat-fee model could position it favorably in a changing landscape. The settlement's impact on Fathom's reputation and market position remains to be seen, but the company's proactive approach in resolving the matter may be viewed positively by stakeholders.

Financial Analyst

From a financial perspective, the settlement's impact appears relatively modest. Fathom's assertion that the amount is immaterial in GAAP terms suggests it won't significantly affect the company's financial health. The staggered payment structure ($500,000 initially, $500,000 in 2025 and $1.95 million in 2026) allows for better cash flow management.

However, investors should monitor how these payments might affect Fathom's growth initiatives and operational expenses. The company's confidence in generating adequate funds for these payments without compromising the business is reassuring, but it's important to watch for any impact on profitability or expansion plans in the coming years. The settlement's resolution could potentially remove a cloud of uncertainty, possibly leading to improved investor sentiment in the long term.

Real Estate Market Analyst

This settlement, part of a broader industry lawsuit, signals potential shifts in the real estate commission structure. Fathom's flat-fee model may actually position it advantageously in this evolving landscape. The agreement to adhere to NAR's rule changes could lead to increased transparency in commission structures across the industry, potentially benefiting consumers.

For Fathom, this could present an opportunity to highlight its existing transparent pricing model as a competitive advantage. However, the broader impact on the real estate market could include changes in how agents and brokers operate, potentially affecting commission rates and service structures. Investors should closely monitor how these industry-wide changes might influence Fathom's market position and growth strategy in the coming years.

CARY, N.C., Sept. 16, 2024 /PRNewswire/ -- Fathom Realty, a wholly owned subsidiary of Fathom Holdings Inc. (Nasdaq: FTHM), a national, technology-driven, end-to-end real estate services platform integrating residential brokerage, mortgage, title, and SaaS offerings for brokerages and agents, today announced that it has reached a nationwide settlement related to claims asserted in Burnett v. The National Association of Realtors., et al.

While we believe the settlement amount is immaterial in GAAP terms, Fathom Holdings is disclosing the details in the spirit of transparency. As part of the settlement, Fathom Realty will pay $500,000 into a settlement fund within 5 days after the settlement is formally approved by the court, $500,000 on or before October 1st, 2025, and $1,950,000 on or before October 1st, 2026. The Company believes that it has, and will generate, adequate funds to make these payments without compromising its business.

Fathom Realty has also agreed to adhere to the rule changes put forth by the National Association of REALTORS.

"Fathom Realty was founded on the principle of delivering unparalleled support to our agents. We believe that this settlement represents the most prudent way forward, enabling our agents to focus on their clients without the distraction of prolonged litigation," stated Fathom Holdings CEO, Marco Fregenal. "Our unwavering commitment to providing excellent service to our agents, clients, and customers remains steadfast. As we proceed, it is important to note that this settlement is not an admission of liability or an acknowledgment of the validity of any claims made against us. We continue to assert that Fathom never participated in any conspiracy to inflate commissions and continue to believe that due to our flat-fee model, there was no incentive to join any such conspiracy. Entering into a settlement now has the benefits of avoiding ongoing legal fees and removing the demand on the executive team's time, allowing us to focus on growing our business and ensuring our agents continue to have the opportunity to excel in their service to clients."

About Fathom Holdings Inc.
Fathom Holdings Inc. is a national, technology-driven, real estate services platform integrating residential brokerage, mortgage, title, and SaaS offerings to brokerages and agents by leveraging its proprietary cloud-based software, intelliAgent. The Company's brands include Fathom Realty, Encompass Lending, intelliAgent, LiveBy, Real Results, and Verus Title. For more information, visit www.FathomInc.com.

Cautionary Note Concerning Forward-Looking Statements
This press release contains "forward-looking statements," made pursuant to the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company, including: liquidity risk and the possibility the Company might have to raise more money; risks related to acquisitions and the integration of acquisition; risks related to general economic conditions, including interest rates; risks in effectively managing rapid growth in our business; reliance on key personnel; competitive risks; and the other risk factors set forth from time to time in our SEC filings, copies of which are available on the SEC's website, www.sec.gov. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Investor Contact:
Matt Glover 
Gateway Group, Inc.
949-574-3860 
FTHM@gateway-grp.com

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SOURCE Fathom Holdings Inc.

FAQ

What is the total settlement amount Fathom Realty (FTHM) agreed to pay in the commission lawsuit?

Fathom Realty agreed to pay a total settlement amount of $2.95 million in three installments over the course of approximately two years.

When will Fathom Realty (FTHM) make the settlement payments?

Fathom Realty will make three payments: $500,000 within 5 days of court approval, $500,000 by October 1, 2025, and $1.95 million by October 1, 2026.

Does the settlement imply Fathom Realty (FTHM) admits to inflating commissions?

No, Fathom Realty states that the settlement is not an admission of liability or acknowledgment of claim validity. They maintain they never participated in any conspiracy to inflate commissions.

How will the settlement affect Fathom Holdings' (FTHM) business operations?

Fathom Holdings believes it can generate adequate funds for the settlement payments without compromising its business operations. The settlement allows the company to focus on growth and avoid ongoing legal fees.