The real estate landscape is experiencing significant shifts, marked by legal battles and evolving listing practices. Compass Real Estate is in a legal dispute with Zillow over the display of privately marketed listings, while Homes.com emerges as an alternative portal directing inquiries directly to listing agents. This update explores the implications for buyers, sellers, and agents in the current market.
Zillow vs. Compass Lawsuit
Compass Real Estate has initiated a lawsuit against Zillow, challenging Zillow’s policy of not displaying Compass brokerage listings that are marketed privately, outside of the Multiple Listing Service (MLS). Zillow’s stance requires Compass to list all properties through the MLS for them to be featured on Zillow’s platform. Zillow generates revenue by using agent listings to attract potential buyers and then selling these leads back to agents, often through a "contact agent" button. These leads are typically assigned to "Flex agents" who pay Zillow a substantial referral fee, up to 40%, upon closing. Buyers interacting with these Flex agents are often surprised to find they are not dealing with the listing agent and must sign separate agreements. This system can lead to confusion, especially when Flex agents appear at open houses without prior coordination.
Seller and Buyer Concerns
Sellers are reportedly dismayed to discover that when buyers inquire about their homes on Zillow, the leads are not directed to their chosen listing agent. The listing agent possesses intimate knowledge of the property and is motivated to secure a sale. In contrast, Flex agents, while motivated to sell a home, may lack specific knowledge about the property or its neighborhood, potentially impacting the buyer’s experience and the seller’s outcome. The source of these leads becomes unclear to the seller, raising questions about who is truly representing their interests.
Homes.com and Realtor.com
Homes.com is presented as a contrasting real estate portal. Unlike Zillow, it directs home inquiries directly to the listing agent, ensuring buyers connect with someone knowledgeable about the property and local area. Realtor.com also sells leads, but it may not clearly indicate that an agent unrelated to the property might be contacting the buyer. While the listing agent is identified in fine print, the initial contact often goes elsewhere, to agents with no vested interest in selling that specific home. The article suggests sellers inquire if their listings can be promoted on Homes.com, noting that while it incurs a cost for the listing agent, the "free" listings on platforms like Zillow and Realtor.com are not truly free when leads are diverted.
Compass’s Listing Strategy and Industry Reaction
Compass Real Estate faces a dual challenge, not only with the Zillow lawsuit but also with the National Association of Realtors regarding its "clear cooperation" policy. Compass advocates for the ability to market listings outside the MLS, limiting public visibility unless a buyer is working with a Compass agent. This approach has led some sellers to hesitate listing with Compass due to concerns about reduced exposure. Zillow has criticized this strategy as a "Hidden Listing Scheme." While Compass argues this can be in a seller’s best interest in specific scenarios, many experts and the article’s authors view this stance as generally problematic, though they acknowledge sellers and brokerages should retain the right to market as they see fit, allowing consumers to make informed decisions based on their individual circumstances.
Key Takeaways
- Zillow’s lead generation model involves selling leads to "Flex agents" who pay significant referral fees, potentially disconnecting buyers from listing agents.
- Homes.com offers a model where inquiries go directly to the listing agent, fostering a more direct connection.
- Compass Real Estate’s strategy of marketing listings outside the MLS is facing scrutiny and legal challenges.
- Sellers and buyers are encouraged to consider where their inquiries are directed and the potential impact on the transaction process.
The article concludes by posing questions to readers about their preferences as sellers and buyers regarding lead distribution and agent interaction, inviting discussion on these evolving industry practices.