A seismic shift is underway in the real estate world, and it all stems from Zillow's new listing standards, initially announced in April. These changes, now in effect, have ignited a fierce debate, even leading to a lawsuit from Compass, a brokerage championing private listings (commonly referred to as Pocket Listings).
As Zillow begins to enforce its ban on publicly marketed listings that aren't widely available to consumers, here are three key takeaways to understand this evolving landscape for the pocket listings debate:
1. Zillow's Ban Targets Listings, Not Homes
It's crucial to grasp that Zillow's new policy directly impacts the listing of a home, not the home itself. If a listing doesn't comply with the new standards, it will be blocked from Zillow.com and Trulia.com, both owned by Zillow Group. However, the good news for sellers is that if a different broker takes on the listing and ensures it adheres to the rules, the same property can reappear on the sites.
Agents whose listings were identified as non-compliant received notifications starting May 28. While initial violations won't lead to immediate removal, a "three-strike" policy is in place. As of June 30, an agent's third non-compliant listing—and any subsequent ones—will be blocked from Zillow and Trulia for the entire duration of the listing agreement between the agent and seller, as stated in a Zillow blog post. Importantly, compliant listings from an agent will remain visible, regardless of past violations.
2. A Battle Raging in Courts and Public Opinion
The contentious nature of these new standards is evident in the legal action taken by Compass. On June 23, Compass filed a lawsuit against Zillow and its listing ban, with CEO Robert Reffkin asserting that Zillow is "abusing its monopoly power to ban homeowners and their agents" for marketing properties elsewhere. Just days later, Compass sought a court injunction to halt Zillow's enforcement until the case is resolved.
Compass is also taking its fight to the public. On June 30, they released the results of a survey of 1,000 homeowners, underscoring their call for "seller choice" and highlighting Zillow's potential impact. The survey revealed compelling insights:
- 90% of homeowners believe sellers should have the option to "pre-market" their home, with 81% expressing interest in pre-marketing if they were selling.
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59% would prefer to work with an agent offering pre-marketing options, while 27% had no preference.
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76% agreed that price reductions can make a seller seem "desperate," and 71% would prefer not to display recent price reductions if they were selling.
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77% would be very or somewhat concerned if Zillow didn't display their home listing, and 69% would choose an agent who could guarantee Zillow placement.
Meanwhile, other industry leaders are weighing in. Glenn Sanford, CEO of eXp, has been closely following the Compass-Zillow lawsuit, particularly as eXp has been described as a "co-conspirator" in advocating for listing transparency. Sanford argues that a private marketplace system stifles innovation and would have prevented companies like eXp from even existing. He emphasized that "The MLS system, despite its flaws, has been the great equalizer. It ensured that a small brokerage in rural America could offer clients access to the same cooperative database as the largest firms in Manhattan."
3. What's Next in the Evolving Real Estate Landscape?
While the Compass-Zillow lawsuit is likely to be a lengthy process, similar listing bans are on the horizon.
Redfin, for instance, has a comparable ban set to take effect in September. Furthermore, by September 30, Multiple Listing Services (MLSs) are mandated to implement the National Association of Realtors' (NAR) delayed listings add-on to the Clear Cooperation Policy. This NAR update aims to provide sellers with more flexibility in delaying the public listing of their homes via MLSs.
Even Zillow's New York City-focused platform, StreetEasy, is adopting a modified version of the policy, which will impact agents by limiting their access to certain tools.
These ongoing developments underscore a significant shift in how real estate listings are managed and accessed. For both buyers and sellers, understanding these changes and their implications will be crucial in navigating the market effectively.
