Zillow explains that a handful of major multi-listing services are making bids for the nation’s largest brokerages.
That’s according to a lawsuit filed Tuesday by the nation’s largest real estate search platform and the company’s chief industrial development officer, Errol Samuelson.
At the time of Tuesday’s filing of the lawsuit, the three MLSs announced they would secure direct listing feeds from Compass International Holdings, make important rule changes and accept subscribers from anywhere in the country.
By Wednesday, BrightMLS, one of the country’s largest MLSs by number of subscribers, was in fourth place.
After the nationwide rollout, MRED began threatening to cut off Zillow’s access to the listings that underpin the portal. The issue stems from Compass listings in California, Florida, and Georgia that Zillow blocked for violating the portal’s rules.
While Zillow has implemented backup data feeds with some brokerages, a growing wave of MLS rule changes related to listing display poses a growing threat to Zillow’s business model.
Mr. Samuelson spoke exclusively with Mr. Inman on Tuesday to explain the background to this trend and Zillow’s request for a federal court to stop it. The following interview has been edited for length and clarity.
Inman: Some of the details of this lawsuit and complaint help put the MRED and Realtracks announcements into perspective. Are they expanding their reach and rewriting the rules to prevent Zillow from enforcing listing access standards?
Errol Samuelson: The MLS should be a marketplace, a cooperative, where brokers in the marketplace can share listing information, giving sellers maximum exposure and allowing buyers and the brokers representing buyers to see everything that’s available. This is the envy of the world because the North American system is liquid, transparent and fair.
The issue here is that MRED is essentially colluding with the largest market share players, those with seats on the company’s board of directors, to create rules that benefit its brokers. They violate the principle of neutrality.
Inman: In doing so, did MRED prevent Zillow from enforcing the rules in Chicagoland?
Samuelson: With the exception of Chicago, we’ve basically followed that rule throughout the country. And the reason it’s not Chicago is because Chicago changed its rules in October and changed the rules around posting feeds. They said if we implemented our rules in Chicago, they would cut our feed.
This coincidentally happened a few days later. [Compass CEO] Robert Refkin sent a memo to the country’s eight largest MLSs, including Chicago, saying they should reduce their feeds if Zillow implements listing access standards. And lo and behold, MRED does what Compass wants.
Inman: Is Realtracks doing the same thing? Are we ready to change the rules like we did with MRED?
Samuelson: RealTrax in Nashville announced a rule change, but it hasn’t taken effect yet. But essentially, the rule change has the same effect as what MRED did, albeit written slightly differently.
Starting next month, Realtracks says it will reduce its feeds if it implements or continues listing access standards. And, not coincidentally, when they announced the rule changes, they also announced that they would be expanding MLS nationwide. This is the same playbook as MRED. And Compass has announced that it will be a launch partner, or one of the launch partners, for this national expansion. Same strategy as Chicago.
Inman: Do you expect more MLS to follow suit? [Note: BrightMLS followed suit a day after this interview.]
Samuelson: I know in Los Angeles, the Los Angeles area MLS is known as CLAW and basically covers Beverly Hills, Brentwood and some of the nicer neighborhoods there, but they also announced that they’re going to make rule changes and open MLS nationally. Compass encourages agents to join its MLS. I don’t know what’s going to happen in LA, it’s still early days. But the strategy appears to be similar at MRED, Realtracks in Nashville, and CLAW in Los Angeles.
Inman: Right now, Zillow probably can’t afford to lose 28% of its listed properties in Chicago. Right now, we’re looking at markets all over the country. What if I don’t win this lawsuit?
Samuelson: First of all, I think we will prevail in this case because this conduct is so egregious. But here’s the point. Targeting us as broker members and helping the largest brokers compete with other brokers in that market is problematic when it is clear that the nation’s largest brokerage firms, which continue to expand their share by acquiring other brokerages, are colluding with a monopoly, and MRED is a monopoly that controls 98 percent of Chicago’s listed properties. It’s anti-competitive. It’s not just consumers who are being harmed. to the detriment of other brokers who are members of MRED in that market.
Inman: We talked about how we have direct listing agreements, and that’s exactly what’s at stake for MRED right now. They have recently threatened to suppress listings in Boca Raton, Georgia, and California, or enforce their standards, or lose their feeds.
Samuelson: You’re a monopoly in Chicago. Does it matter if California has listing access standards? Unless you’re working with Compass to support their plan. While there is no direct benefit to MRED threatening us over the LA listing, there is certainly benefit to Compass. It’s very clear.
If you’re an agent in Los Angeles, you need access to all Los Angeles listings. You can participate in MRED. [and] You might see a Compass listing there, but you won’t find the rest of the market yet. Therefore, if you are an agent in Los Angeles, it is not legal to leave your local California MLS and join MRED because all other California listings will not be visible. This concept of somehow becoming a dominant force in places like San Francisco or Houston doesn’t make a lot of sense to me.
Inman: This goes hand in hand with Compass championing a three-tiered marketing strategy.
Samuelson: We believe that step one, forcing buyers to work with Compass to access listings, is bad for buyers. We think it’s actually bad for sellers who don’t have legitimate privacy concerns about removing their listings from the MLS.
That said, you’re welcome to think that’s how they want to run their business. All we’ve said so far is simply don’t list them. They can list those properties on Realtor.com, Redfin, or on billboards. We are simply saying that we will not display those listings because we believe this is anti-consumer.
Good for a compass. You can also recruit agents, recruit buyers, and double-end deals. However, that’s bad for both sellers and buyers.
This is, again, what I said at the beginning, North American real estate is so great because it’s transparent and collaborative. This is a very pro-consumer system.
And when big companies start hiding inventory for their own purposes and profits, the market for professional consumers is lost, and you end up with an offshore situation where you as a buyer have to visit seven different companies to see what’s on the market. And if you want to buy any of those properties, you need to work with that company. And you can’t even negotiate fees on the buy side. You will pay a cover charge to join the club.
Inman: The stakes seem high.
Samuelson: There are many well-run, well-functioning MLSs across the country that are transparent and neutral marketplaces. In fact, most of them are. You and I could only come up with three lists. Now, MRED is really, really big, and the other two are pretty big. The rest of MLS is actually working very well.
I think the stakes are high when it comes to the underlying principles. And I think as an industry we need to fight for the principles of transparency and collaboration. Because that’s the question now.
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