Lots of opinions and stories are flying around Zillow these days in light of its announced entry into the iBuying market.

Here’s another story you may not have heard. The New York Department of State (NYDS) has initiated a review into the legality of Zillow’s business practices.

As it stands right now, Zillow offers a free-to-user website that makes looking for a house comparable to looking for a stock. Zillow has done such a great job making home search so convenient and easy that +85% of all people searching for a home start looking online and most of those lookers start looking on Zillow.

The user gets a twofer when looking at property listings…information about a property they like plus information about a real estate agent(s) who could help them buy that property. Most likely, the agent who pops up first on that property listing is one of Zillow’s Premier Agents. And, also most likely, the listing agent for that property, the agent with whom the owner/seller of that property signed a contract regarding an exclusive representation for that property, who is not a Preferred Agent would not pop up on that specific Zillow listing site at all.

Read that paragraph again because that paragraph is the reason the NYDS is reviewing Zillow’s business practices.

The NYDS is in charge of regulating all local licensed professionals including licensed real estate professionals. Under the umbrella of the NYDS, the Real Estate Board of New York, a Manhattan trade group, is considering whether or not allowing other real estate agents, Zillow’s Premier Agents, to “advertise” on an exclusive listing of another agent is illegal.

Here is the specific wording of the existing regulations. “No property shall be advertised unless a real estate brokerage has obtained authorization (authorization that is a written ‘exclusive’ listing agreement) for such advertisement from the owner of the property or as hereinafter provided.” In other words, to advertise a property on an MLS or a Street Easy (now owned by Zillow) or a Zillow site, the owner of that property must authorize the advertising party to do so (and signed in writing by both parties) and that authorization must be exclusive.

You as real estate agents know that Zillow generated +70% of its +$1B revenue last year from its Premier Agent advertising program. Perhaps you were one of the agents who contributed to that +$1B by paying Zillow so you could pop up as one of its Preferred Agents on a property that has an exclusive agreement with another listing agent?

The issue in question is whether or not Zillow is doing something illegal here by selling advertisements to Premier Agents on listing sites that Zillow may have no right to sell.

And, as I wrote at the top of this post, you likely haven’t heard about this pending regulatory review concerning Zillow’s business practices because Zillow has not yet disclosed anything about this investigation to its shareholders or the investment community despite Forbes.com writing an article about this pending review.

Who knows what might happen here or when. What is quite clear is that however this review turns out in Manhattan, regulators and agents in the state of New York and all other states will likely follow Manhattan’s ruling. If Zillow’s Premier Agent advertising program is disallowed, forget it. If its Premier Agent advertising program survives but with increased click-ability and therefore increased commissions to the listing agent, will any agent (including you) continuing to pay Zillow for being a Premier Agent continue to make sense?

Your opinion is the one that matters here…your opinion and your bottom line, particularly if your bottom line decreases if/when the listing agent (the agent with an exclusive to represent that property) begins to rake in more commissions…commissions that used to be yours before the NYDS began to wonder whether or not Zillow’s business practices, specifically its Premier Agent advertising program, was legal or illegal.






Claim Your FREE Real Estate Treasure Map!