State AGs Urged to Probe Zillow, Pocket Listings, Referral Fees

Attorneys General from multiple states have been urged to investigate Zillow Group and other real estate industry practices, including pocket listings and referral fees. The call to action comes in a letter sent to the National Association of Attorneys General (NAAG) by the National Association of Realtors (NAR), following a significant settlement between Zillow and the U.S. Department of Justice. This settlement, finalized in November 2023, involved Zillow agreeing to pay $16.5 million to resolve allegations that it engaged in monopolistic practices that harmed competition in the real estate brokerage market. The DOJ's investigation focused on Zillow's alleged efforts to stifle competition from other listing services and brokerages, particularly concerning its acquisition of ShowingTime, a popular showing management software.

The letter to NAAG specifically highlights three areas for potential investigation: Zillow's business practices, the use of "pocket listings," and the structure of agent referral fees. Pocket listings, also known as off-market listings, are properties that are advertised and sold without being publicly listed on the Multiple Listing Service (MLS). Critics argue that this practice can limit buyer access to properties and potentially lead to lower sale prices for sellers. The NAR's letter suggests that these practices may violate antitrust laws and harm consumers by reducing transparency and competition in the housing market. The organization also points to Zillow's "Contact Agent" button, which routes potential buyers to agents who pay Zillow for leads, as a practice that warrants scrutiny.

Furthermore, the letter addresses the complex web of referral fees within the real estate industry. These fees are often paid between agents or brokerages when a client is referred from one party to another. The NAR suggests that these fees, particularly when opaque or mandated, could inflate costs for consumers and create barriers to entry for new agents or brokerages. The attorneys general are being asked to examine whether these referral fee structures are anticompetitive or otherwise harmful to the public interest. The National Association of Realtors, a trade association representing real estate professionals, has been a vocal advocate for transparency and fair competition in the industry, especially in the wake of evolving digital platforms and brokerage models.

The request to state attorneys general follows a period of intense scrutiny for the real estate industry, particularly concerning the business models of large online listing platforms like Zillow. The settlement with the DOJ marked a significant moment, signaling increased regulatory attention to the sector. By urging state-level investigations, the NAR aims to broaden the scope of inquiry beyond federal antitrust concerns and address potential state-specific violations of consumer protection and competition laws. The outcome of these potential investigations could lead to significant changes in how properties are listed, marketed, and sold, impacting agents, brokerages, and consumers alike.