The American discount tech brokerage REX has this week leapt on a piece of research that appears to back up its claim that Zillow and the National Association of Realtors are using anti-competitive practices to maintain their respective positions at the head of the table in the US real estate industry.
The NAR were sued by the federal government with backing from REX late last year over antitrust issues in a case which resulted in a settlement which saw the NAR agree to relax certain rules around transparency. Zillow is now the new entity in the crosshairs of REX and its federal allies as last week saw the real estate portal giant sued in a fresh case centering on Zillow’s positioning of REX’s property listings on its results pages.
New scholarly research recently penned by a federal employee and published in the prestigious UC Berkeley Business Law Journal uses some strong language in claiming that the American real estate game is rigged to favor those traditional brokerages who charge 6% commission. The American MLS system along with the NAR itself take most of the blame in the paper for the anti-competitive state of the industry:
“The problem for those entrants is that the residential real estate industry is structured to require peer cooperation to complete transactions. Thus, innovative entrants offering to compete on price have been stymied by traditional real estate brokers acting as an informal cartel.“
As for Zillow, the paper does highlight the company’s potential to break the status quo regarding commissions, saying that:
“Given the way the internet has reduced agent costs, why aren’t inflation adjusted commissions falling dramatically? Listing agent costs are falling dramatically due to portals like Zillow, paperless platforms for documents and signatures, automated scheduling, and lower cost analyses of home prices.”
The paper’s publication in a prestigious journal would seem to come at the perfect time from the point of view of REX’s PR department which jumped at the chance to publish a press release quoting the scholarly article and publicizing the fact that REX CEO Jack Ryan is due to speak at a forum hosted by the American Antitrust Forum.
On closer inspection, the paper appears to have been at least partly funded by REX itself, a fact that will not have escaped the 100 or so who have so far downloaded the paper, among whom most likely will be members of Zillow’s legal team who are no strangers to fighting legal claims aimed at the proptech disruptor.
Although funded by an interested party, the 90 page paper makes for interesting reading for those in or adjacent to the American real estate industry and could herald the coming of a new government way of thinking about the most crucial part of the real estate transaction value chain.