A real-estate startup is suing Seattle-based Zillow, claiming recent changes to Zillow’s home-search website unfairly hide certain listings, shrinking their exposure to potential homebuyers and diminishing competition among real-estate brokers.
The Austin, Texas-based online brokerage Rex filed a complaint Tuesday in federal court in Seattle. The suit accuses Zillow and the National Association of Realtors of violating state and federal antitrust law. The complaint also names Zillow subsidiary Trulia.
Zillow said Tuesday, “We are aware of the lawsuit and believe the claims are without merit and intend to vigorously defend ourselves against it.” A National Association of Realtors spokesperson said the lawsuit “has no legal basis.”
The dispute stems from Zillow’s recent move to go beyond listing homes for sale and create a brokerage to hire agents itself. The company announced last fall it would employ agents for its house-flipping service Zillow Offers in several states and would join the National Association of Realtors.
As part of that move, Zillow changed the way it collects listings of houses for sale. Zillow now gathers listings directly from multiple listing services, the databases of listings provided by real-estate brokers. (The Northwest Multiple Listing Service, for example, catalogues listings across more than two dozen counties in Washington.)
Along with that came the change that hit Rex: Zillow now categorizes listings under two tabs when people search for homes for sale: “agent listings” (where homes listed on multiple listing services show up) and “other listings.” To enforce National Association of Realtors rules, certain multiple listing services require that separation, according to the complaint.
Rex markets homes without listing them in a multiple listing service, which the startup’s website lambastes as “an antiquated tool.”
Instead, the company pitches homes to potential buyers through targeted online ads and by listing on Zillow.
Rex says the shift to a “misleading and unflattering” tab on Zillow’s website has obliterated traffic to its listings and cost the company customers.
Rex argues that the separation will hurt competition and keep real estate commissions high. (While home sellers typically pay a commission of about 5% to 6%, split between the seller’s agent and buyer’s agent, Rex says its clients pay an average of 3.3%.)
“The result is that REX’s listings are losing significant traffic, severely impacting REX’s reputation, and driving consumers away from REX and back into the MLS regime,” the complaint says.
Rex claims the practice violates state and federal laws against the “restraint of trade or commerce” because appearing on Zillow and its subsidiaries is “critical to effective competition in the market.” The new policies amount to an agreement between Zillow and the National Association of Realtors to “boycott and foreclose equal access to Zillow’s prominent residential real estate aggregator sites,” the complaint alleges.
In a statement, Zillow said it is “committed to giving consumers the most up-to-date housing information on the most amount of listings possible on a single platform.”
As part of joining multiple listing services this year, “we were required to make changes to the way some listings appear on the site in order to be compliant with MLS rules,” the statement said.
The “other listings” tab includes “For Sale by Owner listings or Coming Soon listings not on the MLS or, for that matter, on most other real estate sites,” the statement said.
The National Association of Realtors accused Rex of “trying to take benefits of the MLS system without contributing to it.” Spokesperson Mantill Williams said, “It has been long recognized that the MLS system provides considerable pro-consumer, pro-competition value. Rex’s lawsuit seeks to undermine that consumer value—simply for Rex’s own benefit.”
Rex also sued the state of Oregon in December, alleging a ban on rebates for real estate commissions hurts competition. Zillow faced another antitrust lawsuit several years ago over its Zestimate valuation tool, but a federal judge dismissed that case last year.