Zillow Ordered to Hand Over FSBO Data in Latest REX Lawsuit Twist

October 24, 2022
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A federal court judge has ruled that Zillow must hand over data around its for-sale-by-owner (FSBO) listings to REX in a fresh blow to the portal's legal battle against the now-defunct discount brokerage.

REX has argued that if its lawyers were allowed access to Zillow's FSBO listings and the data around them then they could show that the portal's practices are unfair and demonstrate how Zillow contributed to REX's demise.

Judge Thomas Zilly agreed to the request around the portal's FSBO listings saying that the data "is relevant and proportional to the needs of the case”.

The data itself comprises nearly one million listings records and associated interaction and engagement data. Zillow has been given until the 18th of November to provide the data to REX's lawyers. The case continues...

 

Timeline (so far) of REX vs Zillow / NAR lawsuit

January 2021 - Zillow switches from ingesting its listings using many feeds from individual MLSs to using a so-called 'IDX feed'. The IDX feed is a privilege that Zillow has access to thanks to its status as a paid-up brokerage member of MLSs and the National Association of Realtors (NAR).

While the switch to an IDX feed helped Zillow's back-end processes become more efficient it also came with a set of rules that the portal was obliged to adhere to. Sites like Zillow that use the IDX feed must display members' listings separate from non-members' listings.

March 2021 - Fresh from winning an antitrust case targeting its Zestimate tool, Zillow's lawyers are back at work to defend against a suit brought against the portal and the NAR.

The suit comes from Austin, TX-based discount brokerage REX which claims that Zillow's new policy around listing display is stifling competition, preventing home-hunters from seeing all available listings and ultimately driving customers away from REX.

Because REX does not have an MLS membership, its listings are displayed on Zillow's 'other' tab along with FSBO listings. A state of affairs that REX argues led to decreased traffic from the portal and a negative impact on the discount brokerage's bottom line.

March 2021 - 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 favour those traditional brokerages that 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 report, which was partially funded by REX, uses some emphatic language in claiming that...

"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."

June 2021 - REX is ordered to stop referring to Zillow and NAR as a 'cartel' as a judge decreed that the case does not warrant a preliminary injunction which would have essentially handed a victory to REX and forced Zillow to put the brokerage's listings on the main listings tab on its portal.

February 2022 - NAR issues a counterclaim against REX. The complaint alleges that the discount brokerage's claims ultimately "confuse[d] and misle[d] customers into believing that sellers who list their homes for sale with REX do not pay buyer-agent commissions"

May 2022 - REX acquires the services of noted lawyer David Boies despite having seemingly been forced out of business.

The discount brokerage was forced to join MLSs back in October contrary to its core beliefs and value proposition for home sellers, a decision which, along with hefty legal fees, ultimately left the discount brokerage in a tough position.

August 2022 - Zillow asks the judge to allow its lawyers access to laptops kept as severance by former REX employees. The portal claims that former employees may have wiped data from those laptops that might be used as evidence in the trial.

The motion is ultimately granted by the court despite REX's protests. REX's lawyers reply by asking for access to data around Zillow's FSBO listings.

September 2022 - Zillow reaches out to REX to invite the now-defunct brokerage to join forces in challenging the NAR's controversial 'no commingling rule'. Basically, Zillow is now openly saying that when it switched to an IDX feed in 2021 that it did so only to comply with the an NAR rule that it is not in favour of. Zillow's Senior Director of Broker Operations Matt Hendricks said:

“Zillow strongly supports updating policies like these because they empower consumers and provide a more accessible, transparent picture of what is on the market, helping them make better-informed real estate decisions,”

 

Why all this matters

The entangled legal spat between the parties involved in this case is not only important because of the impact on bank balances for the loser. If REX is to prevail then Zillow and other U.S. real estate marketplace sites may be forced to change how they display listings from sources such as discount brokerages and FSBO which do not pay MLS membership fees.

This could lead to increased viability for discount business models such as that of REX and more Americans choosing to forgo the services of an agent and list their home for sale themselves.

In a broader sense, the case also into question the sharing of commission between buyer and seller agents in U.S. real estate. The transparency around the practice has been called into question recently not least by the so-called 'bombshell Moehrl lawsuits' being brought against the NAR.

October 24, 2022
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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