Why REX vs. Zillow Group is flawed

Marketplaces are unable to serve Consumers as Real Estate Brokers, and Real Estate Brokers are unable to serve Consumers as Marketplaces

Forces in collusion can be disrupted more easily because it takes only one party to fall, or to make a mistake. One of my favorite parts of real estate is the diversity of information, and the least favorite is collusion.

Some may say, do not interrupt your enemy when they are making a mistake. True. Do very much interrupt your enemy when it is shown to be in bad collusion — strike hard at its weakest point, and disrupt it with a synergy of network effects and open commerce.

All successful media companies are able to reflect on the way something operates from an outside perspective in our search for the utility of excellent information.

A broker, on the other hand, when searching for a new home listing, will say anything to a consumer. A paper broker who sells a consumer to some other broker for a cut of their commission will say anything too.

It takes a media company to keep the conversation fair and unbalanced. It takes a media company to deliver content against our fair publishing policies and an open marketplace to deliver open e-commerce.

Neither the REX Real Estate, nor Zillow Flex, nor Zillow Offers are media companies. These are all tech-enabled real estate brokers, paper brokers that broker consumers to other brokers, iBuyers that flip homes for profit, mortgage originators, or just plain old brokers of real estate that want to sell you a commission.

Zillow and Trulia, however, also work as MLS Aggregators. As an entity bound into the MLS data, Zillow must abide by local MLS rules and it can place greater quality value on data provided by the MLS ahead of other listings.

Here is why REX Real Estate antitrust action filed against Zillow Group is flawed.

Reason 1: For Sale By Owner listings and other listings an MLS Aggregator may receive from elsewhere are not the same thing. The quality of information is substantially different between each information channel.

Zillow does not allow brokers to post listings, but merely to claim listings that a broker has already posted on their local MLS database. Zillow receives these listings from the MLS databases and pays them a fee for this information.

This claim-vs-post distinction a big difference because REX Real Estate simply cannot post a For Sale By Broker listing on Zillow. REX Real Estate can only use the platform to post For Sale By Owner “on behalf of their client” which is, technically, a violation of Zillow Terms of Service. Even if Zillow allows REX Real Estate to post their listings as a For Sale By Broker, it can still treat MLS-supplied listings as superior because they abide by the local MLS rules and are, therefore, constitute a more accurate and a more reliable data.

REX Real Estate has no claim against Zillow as a listing platform, but it has a claim against it as a competing broker, because Zillow Flex and Zillow Offers are now licensed real estate brokers too. This claim, however, brings out a mere fact of complicity.

Reason 2: Unfortunately for REX Real Estate, it is far from an ideal broker, and its model has serious fair advertising flaws.

First, REX Real Estate makes false claims in their advertising on savings. The buyer side commission (BAC) REX claims to “save” is not the required fee to any transaction. The seller of the home wants their listing to appear on the MLS for greater exposure and chooses to offer the Buyer’s Agent Commission in their quest. This means that REX must compare its listing rate (currently it offers consumers a 2% listing commission fee) to 3% “traditional” listing fee, and not the 6% as “standard.”

The home seller does give up something when they choose not to offer the Buyer’s Agent Commission on the MLS — greater interest in their home listing on the open market. This means that the seller is offering the buyer side commission (BAC) in their interest to attract more buyers.

The BAC fee is competitive because buyers pay all closing costs and can negotiate a rebate with their buyer’s agent (in 40 states) to get this money returned to them tax-free. The buyer’s agent does not get overpaid in this scenario if they are fairly negotiating a refund with their client.

Other brokers offer an option to forgo Buyer Agent Commission entirely, such as Trelora and Homie but they actually advertise this option fairly, as an alternative option a consumer can take if the buyer comes directly to these brokers. These companies do not offer exigent savings by means of removing the BAC, but they offer savings by means of lowering their listing fees to a highly competitive rates.

A fair advertising policy is also correctly adopted by Redfin, for example. Redfin correctly compares their 1% commission offering against the 2.5%-3% listing fees to correctly offer their savings estimates to consumers, and not against the 6% commission.

HomeOpenly, of course, compares all listing savings offered by competitive agents to consumers against a 3% commission as a fair business practice, and not a 6% listing rate. To compare listing savings offered by agents against 6% commission is to substantially overinflate the amount of savings available to the home seller.

REX seems hell-bent on filing cases in search of publicity and as a party that may not have a claim due to culpability and when it claims to offer some new great alternative to the MLS, it really just a broker that posts listings on their own web site, off the MLS.

Any broker can choose to post listing off the MLS, but all such listings receive much less attention because buyer’s agents are motivated to receive a commission. Any homebuyer in 40 states can easily negotiate a rebate with their buyer’s agent, therefore, in these 40 states buying and selling homes via MLS is highly completive, if brokers choose to compete through offering a buyer’s refund to their clients.

If one is to acknowledge the acts of deceit and collusion as their true enemy, she will see their enemies tear themselves apart. This is why a media company in real estate, an Open Marketplace offering as a digital asset, must define ourselves in unbiased information so that we can make proper determinations set aside from pay-to-play bias.

Only by the blunt sheer force of unbiased information, open systems, and antitrust actions by CFPB, the DOJ, and the FTC, is the broken housing sector can align itself into an open market. A broker will say anything to get a home seller’s listing or a homebuyer to represent them. A genuine media company only says things that deliver value on their own.

That same claim Zillow Group has made so many times, and so vividly, in the past “WE ARE NOT A BROKER” is now lost against their original mission, a loss of leadership, a loss of quality e-commerce channel, and, eventually, a loss of a quality digital asset it has built for years as an MLS Aggregator.

HomeOpenly, on the other hand, always remains a media company that delivers an unbiased resource for consumers in an open commerce setting. We will continue to deliver consumers information about genuine savings, and make a note to disrupt any and all overinflated claims made by others.

Author: Litesand

Antitrust, real estate, e-commerce, fintech, proptech, bigtech

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