REX takes aim at Zillow with new lawsuit

After working with the Department of Justice (DOJ) in its lawsuit against the National Association of Realtors (NAR) and suing the state of Oregon, discount real estate brokerage REX has set its sights on Zillow. The company filed Tuesday an anti-trust lawsuit against Zillow, Trulia and NAR.

Jack Ryan | Credit: REX

“REX brings this lawsuit to keep the digital hubs of the real estate economy open so that consumers have the benefit of innovation and cost savings that come from competition,” the complaint reads.

REX was founded to “drastically reduce commissions,” according to the complaint, and one of the methods the company aims to do that is by operating outside of the multiple listing service (MLS), a cooperative data feed often powered by local Realtor associations that allows brokerage sites to more easily and uniformly share real estate listings.

The complaint argues that under NAR — and enforced by MLSs — sellers must pay a buyer broker commission. There are multiple lawsuits currently taking aim at the practice of the seller paying a buyer brokers’ commission.

The complaint brings Zillow, one of the nation’s largest publicly traded real estate companies, into the fold on the heels of a recent back-end switch by Zillow. Previously, the listings on Zillow.com came from a patchwork of thousands of separate feeds through agreements with brokerages and MLSs.

Now the company is powered by an IDX feed, which downshifts the number of feeds flowing into Zillow to approximately 600 from the thousands included at present. The change comes as the company shifts to having employee agents represent it in its iBuyer transactions, forcing the company to get a broker’s license in each state.

By making the switch, Zillow not only populates its site with listings from the MLS, but in turn, sends its own represented listings to members of the MLS. Making the switch bounds Zillow by local MLS rules.

Under the change, Zillow also puts a greater emphasis on agent listings, so those listings being featured more prominently can also give off the perception of fewer listings overall. On the Zillow mobile app, non-agent listings are filtered out as a default, but users can switch between agent and non-agent listings.

“Zillow’s recently implemented website changes make non-MLS listings accessible only via a recessed, obscured, and deceptive tab that consumers do not see, and even professional real estate agents find deceiving,” the complaint reads.

“The result is that REX’s listings are losing significant traffic, severely impacting REX’s reputation, its ability to execute its innovative and disruptive business model, and driving consumers away from REX and back into the MLS regime, ensuring higher commissions that benefit NAR’s members.”

REX has been aggressive in fighting what it calls “anti-competitive practices” in the real estate industry over the past year. The company has tapped Republican political heavyweights Jeb Bush and Chris Christie to help lobby in its fight against “predatory real estate behavior.”

The result of REX — which was founded by former U.S. Senate hopeful Jack Ryan — working with DOJ was a settlement that will force listings to disclose the amount of buyers’ broker compensation.

The settlement also specifically says that MLSs and brokerages must provide consumers “all properties that fit their criteria regardless of compensation offered or the name of the listing brokerage.”

The complaint seeks damages and a preliminary injunction that would remove REX-affiliated listings from the non-agent listings section of the Zillow search portal.

A spokesperson for Zillow told Inman that the company made the required changes to the way some listings appear on the site in order to comply with MLS rules. 

“Zillow is committed to providing consumers with the most complete, up-to-date housing and listing information possible on a single platform,” a spokesperson for Zillow said in a statement. “As part of our switch to MLS Internet Data Exchange (IDX) feeds and becoming formal MLS participants earlier this year, we made required changes to the way some listings appear on the site in order to comply with MLS rules.”

“As a result, when using one of our platforms to search for homes, buyers may see two options to view their search results — “Agent listings” and “Other listings” — which include For Sale by Owner listings and Coming Soon listings not on the MLS or, for that matter, on most other real estate sites.”

At the same time, the spokesperson also told Inman that the company has also been working to change industry display rules.

“As part of our efforts to empower consumers, we have been actively working to update the industry rules, including those around ‘co-mingling,’ to allow a seamless search experience so we can continue to display all types of listings on our platform,” the spokesperson said.

Email Patrick Kearns