National Association of Realtors Threatened by Tech-Based Brokerages

The National Association of Realtors has long maintained a strangle-hold upon the residential real estate market. It is the nation’s largest trade association for real estate professionals and consists of multiple listing services (MLS), local associations, and over 1.45 million real estate agents. However, this dominant presence is not without its challengers. Over the past several years, many technology companies have seen the residential real estate industry as something worth getting involved in. Many have brought ideas of how best to break through and become a real player in the market, despite the National Association of Realtors holding the great majority of the listings. Until recently, these issues were thought to be insignificant and were likely to never see a meaningful challenge. This changed at the end of 2020 when the Department of Justice withdrew from a settlement negotiated with the National Association of Realtors. The withdrawal of the settlement allows the DOJ more room to investigate the NAR for issues affecting commerce, including those which could lead to antitrust violations. REX – Real Estate Exchange brought such a suit against the NAR and Zillow, a multiple listing service agent. In REX-Real Estate Exchange Inc. v. Zillow Inc., the NAR and Zillow filed a motion to dismiss, but were denied.

The National Association of Realtors has long maintained strangle-hold upon the residential real estate market. . . . However, this dominant presence is not without its challengers.

REX is a licensed broker that employs licensed real estate agents across the country. Neither REX nor its agents are members of the Realtors Association. Because REX is not a part of the NAR, the company is not subject to its rules.  For example, REX is not subject to the Buyer Commission Rule, which requires a seller’s agent to include in any MLS listing a predetermined offer of commission to a buyer’s agent, thereby prohibiting any party from later modifying that commission.  Because of this, REX has saved their customers money, averaging around 3.3 percent total commission per sale compared to the NAR’s 5.5 percent.  

Not being a member of the Association of Realtors, however, is not without its downfalls. One such downfall results from the NAR’s “Segregation Rule” for multiple listing services such as Zillow. This rule requires that member listings that are obtained through MLSs’ internet data exchange (“IDX”) feeds to be displayed separately from listings obtained from other sources. In other words, the rule requires that listings made by members of the Association of Realtors be separated from listings made by companies such as REX.

In the case of REX vs. Zillow, REX alleged an antitrust violation that “Zillow signaled its dedication to . . . inflated commissions—by committing that all Zillow-owned homes will be listed on the MLSs with commissions paid to agents representing buyers.”  This allegation alone would not be enough to meet antitrust scrutiny, as concerted efforts to enforce, rather than just agree upon, are subject to more antitrust scrutiny. However, REX also alleged that Zillow went a step further than just agreement with the NAR and MLSs. They also alleged that Zillow affirmatively redesigning its websites to enforce an allegedly misleading labeling system. The redesign referred to by REX is a product of the segregation rule. In January 2021, Zillow unveiled its newly designed website display to be implemented nationwide on its websites to comply with the NAR and MLS “guidelines” or “rules.” The new display created a separate page or tab for non-member brokerages, called “Other listings,” that is concealed behind the primary results page or tab reserved for NAR listings, called “Agent listings.” This new form of listing has significantly decreased the traffic on non-member listings such as those held by REX.

The NAR has argued that there could not be an unlawful agreement between them and the MLSs such as Zillow, as the rule of segregation is optional. This argument was struck down in part because the Supreme Court has concluded that the interpretation and promotion of a trade association’s “so-called voluntary standards” by the association’s agents and members could be deemed to be “repugnant to the antitrust laws,” and the association “should be encouraged to eliminate the anticompetitive practices of all its agents.”

If, however, REX were to prevail on this issue, the residential real estate market could see large changes in the coming years.

These issues as alleged by REX were found to have an anticompetitive effect on the relevant market of residential real estate. With that portion of the decision mostly coming as a result of the savings that could be available to consumers without the Buyer Commission Rule. Nevertheless, the fight is not over for the NAR. The decision reached on September 2, 2021, was merely reviewed for one aspect of the burden required for the plaintiff REX. REX was able to do enough to get through a motion to dismiss, but more is yet to be decided. If, however, REX were to prevail on this issue, the residential real estate market could see large changes in the coming years. More brokerages like REX will surely come out of the woodwork and the NAR will be in a battle to maintain the influence it has enjoyed up to this point. 

Tyler L. Bennett

Tyler attended Utah Calley University for college and majored in Business Management. In law school, he has been a member of the Transactional and Corporate LAw Association and has taken an interest in property and corporate transactions.