The New Zillow Referral System

05/17/2016
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Zillow has come out with a way to commoditize consumers through their new referral system.  What are your thoughts on it?

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79 thoughts on “The New Zillow Referral System”

  1. I am curious why you are spotlighting when Brokerages do the SAME exact thing! My former Broker charged 25-30% on top of desk fees/office fees. It's not only
    Zillow folks. It's a normal course of business. Right or wrong? Respa violation? I'll be interested to see what CFPB says about this practice? Where's NAR, btw?

  2. George says:

    I believe it is only a RESPA violation if Zillow receives the referral fee, not the agent. Rather humorous that you think this is deceptive and unfair to the buyer…the entire Zillow process is based upon buyers clicking on agent info, when in reality the agent has no relationship to, or knowledge of, that property which is clearly deceptive in the first place.

  3. This is a way for Zillow to through its hat into the real estate brokerage ring. Don't be surprised if you see Zillow, either acquire a real estate brokers license or buy a real estate company already established.

  4. Movoto, located in Calfornia has a high powered national website and has properties listed all across the country. They speak to the lead and then farm out the lead to an agent in the zipcode and collect a 35% fee for the lead if the home closes. Is that a RESPA violation as well?

  5. Reggie Fluker, MBA says:

    Not a RESPA violation. For years, Realtors, have referred POTENTIAL business to each other. RESPA clearly refers to SETTLEMENT (closing) procedures and services. You don’t have a settlement, until you have a transaction to settle; anything prior to that is not affected by RESPA.

  6. Vicki S. says:

    Not completely true, George. It is a RESPA violation for us licensed real estate agents to give a kickback or referral fee from anyone who refers a client to us other than another real estate licensee. To receive a referral fee from a real estate licensee, or to pay a real estate licensee a referral fee is not a RESPA violation. However, when I receive or give a referral, it is to/from someone out of state who actually knows the client and that client has asked for a referral! What Zillow is doing is unknowingly to the client selling client leads from one real estate licensee to another. I don’t see it as a RESPA violation as much as I see it as unethical or on the verge of sleezy.

  7. Jon Sigler says:

    How is this not any different than the referral fee agents pay for relo business or similar?

  8. I think referral arrangements between real estate agents and brokers are exempt from RESPA.

  9. What is the difference in Zillow doing that and a company like Movoto doing the same thing?

  10. carrie says:

    It is common for Brokers to refer clients to other Brokers for a fee. However, having Zillow procure the Clients and then have the Brokers collect a fee? There may be an issue, but it is not identified in RESPA. RESPA is geared towards the Lending institutions. They cannot charge a referral fee to Brokers. Zillow is just trying to wiggle every angle to get Realtors to pay for their leads.

  11. carrie says:

    Furthermore, you need to have a RE License in order to collect a referral fee. I think Zillow is stepping on the line here–but I see it as no more than one of your clients sending his relative to you and you earning a commission as a result. Do we like Zillow –no. Are agents paying them to stick around–yes.

    1. Diane Balsara says:

      I think Zillow is just providing a web service, the agents keep the referral fees. Not sure how that would work but otherwise they are violating State laws everywhere. Why agents pay these people is beyond me. I get some leads in off of Zillow and they are the worst leads as far as quality. I used to tell my buyers I am doing an intervention if they look at Zillow because their info was not refreshed and often outdated. Now my buyers are telling ME Zillow is a poorly run site. So, Zillow has shot itself in the foot as far as credibility of their information.

  12. Douglas Ashley says:

    Hi Frank & Brian … A really BIG thank you for your video ! I really like your approach and very interesting comments ! Could you please take it one step further now ? Please contact the National Association of Realtors for their feedback/opinion and let everyone know. Thank you very much in advance for your help !

  13. Technically they are not… It's just that know one is drawing attention to them with the cfpb.

  14. Flat our wrong information on this video – Read RESPA Section 8 (C) (3) below from http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/resp2607. It's always been legal for real estate brokers to pay each other referral fees.

    8(C) Fees, salaries, compensation, or other payments
    Nothing in this section shall be construed as prohibiting (1) the
    payment of a fee (A) to attorneys at law for services actually rendered
    or (B) by a title company to its duly appointed agent for services
    actually performed in the issuance of a policy of title insurance or (C)
    by a lender to its duly appointed agent for services actually performed
    in the making of a loan, (2) the payment to any person of a bona fide
    salary or compensation or other payment for goods or facilities actually
    furnished or for services actually performed, (3) payments pursuant to
    cooperative brokerage and referral arrangements or agreements between real estate agents and brokers!

  15. Jill Grieco says:

    Not really. Your broker has a real estate lic. Zillow doesn't. Referrals can be exchanged for money if both parties have a real estate lic. Please correct me if I'm wrong.

  16. Jay Emerson says:

    Would it only require an actively licensed broker on the Zillow executive board?

  17. The regulations you mentioned are related to Settlement Procedures, at a closing. There is no relationship to a Broker referring a client to another Broker and a Settlement Process charging a butt load of junk fees without justification. That's the reason RESPA keeps tweeking the process.

  18. Jerry A Cook says:

    Broker to broker referrals are great, Broker to agent referrals are great, independent non real estate broker licensed individuals, not so great…… Just ask those trying to get into the REO business. the hoops that one has to jump through and the services they have to pay for 'up front' just to get a bank owned listing…. is… immoral.

  19. Zillow thinks it's above the law like Google.

  20. Tom Burris says:

    I always thought it was illegal to charge another realtor a fee for a lead.
    I guess NAR has better lobbyists than us lenders.
    I would NEVER ask for a referral fee for a lead. And I give out tons of them yearly.

  21. Zillow is ever self-evolving, continually re-inventing itself, but ultimately, only all-about greed. Greed kills everything – including its host, until it uprises again in some unsuspecting victim. It won't be long before Zillow is a distant memory and its founders are plugged-in somewhere else again. These guys need to hit the lottery big and disappear.

  22. James says:

    Douglas Good idea, how about taking it one step further and asking the CFPB what they think?

  23. Bill Balcer says:

    As an agent or broker, if you have your listings on Zillow and a lead comes into the Zillow site, Zillow sells those leads meant for you to agents willing to pay for those leads and make the fastest phone call……sounds like another respa issue?????. That's a Fact Jack! They all make money off your hard work…..and where is NAR

  24. Steve Lehman says:

    NAR is the 2nd largest lobbing group in DC.

  25. Please read Cliff Freeman's post below. It is spot on. The RESPA refers to settlement procedures. Our Florida Real Estate Commission and all States have clearly defined rules as to who may be given a referral fee. Our State allows licensed agent to licensed agent and licensed agent to licensed agent in any Country or State providing it is legal in that State/Country to receive a referral. I can give a Canadian broker a referral and vice versa. Perhaps a little history here as to why this RESPA ruling came about? Back in the day, early 1990's to be exact, there was a wonderful title company that would give agents hundreds of post cards, stamped and addressed and ready to be mailed as part of a thank you for their business. They literally had their own print shop. Honest. And this was going on all over the country. Free this, free that, just use our services. Then the RESPA ruling came out and that was the end of that. Zillow is making money by the agents signing up for the service. NOT for the referral directly. Kudos to Zillow for their creativity on how to dig deeper into the pockets of the Realtors. And shame on those who let them! No offense but someone on your team needs to re-read the RESPA ruling as this was not very well thought out.

  26. Daniel Magnano No, it's not. Read Cliff Freeman below. Read your state policy on agent to agent referrals. FREC allows licensed agent to licensed agent to give and receive referral fees.

  27. It is not illegal. Read your state laws. They will explicitly address referal fees between licensed agents. Read Cliff Freeman's post below.

  28. Yes they are exempt. Read Cliff Freeman's post above. This RESPA ruling came in the early 90's because of all the freebies the title companies were giving to agents. Like 300 stamped and addressed post cards for marketing.

  29. Tom Acton says:

    Zoolia (as I call them) is not a licensed Broker. Licensed broker to licensed broker referrals are allowed. "Zoolia" ( won't give them credit and use their actual name) is not licensed in my state so this would be a violation in my opinion. I assume they can hide behind that fact for a while. However I see a day that this will come to a head. If they were to aquire a national company it will expose them to all the rules and regulations that we have to follow. I do not see that happening in my lifetime. NAR is quietly working to consolidate all REALTORS at some point. (I wish it was today). This will cause big changes for groups like "Zoolia"

  30. Joe, there is on every State law book governing licensed real estate agents as to whether or not they can give referral fees to others. Look up your State law regarding. In Florida if it's legal in another state or country one can give a referral. Read Cliff Freeman's post above.

  31. I should think if they are just providing a service to sign up for and pay monthly then they are not in violation. As long as they don't receive any portion of the fee.

  32. Ben Prucey says:

    Our offices are meeting with Zillow today. Zillow / Trulia training 101, anxious to see if this is addressed.

  33. Joan Sliker says:

    Alcohol-powered presentation?

  34. I'm totally confused here. When did it become a RESPA violation to send agent-to-agent referrals? Does it matter whether the lead source is Zillow, agent websites, a landing page, etc? And how does this have anything to do with the mortgage process? There's no kickback to the lender on these referrals.

    I also think the practice of referring leads as being "deceptive" is a little dramatic as well. A simple script from the receiving agent that validates why they're contacting the lead should clear it up for the consumer pretty easily.

    Love Brian and Frank, but this just seems like an attempt to bash Zillow and nothing more….

  35. Michele says:

    I suspect as soon as the CFPB targets Zillow this will be a moot point. My Compliance Officer can’t even see how it’s not a violation for lender referrals. This is just going to paint a bigger target on Zillow.

  36. As Realtors, we represent the brokerage, so have no authority to refer to another Realtor without Brokers' involvement. Technically it goes from agency to agency. So if one agent wants to "sell' the lead, doesn't it have to be through the agency? Brokerages do it through legal avenues and, as conractors, we receive those opportunities. Zillow is not a Brokerage, so….

  37. Jay Thompson says:

    Jay from Zillow Group here. This is one of your wilder conspiracy theories yet. As numerous people have noted below, agent-to-agent referrals aren't a RESPA violation. Zillow doesn't set the referral fees, nor do we collect the fees, you do understand that, don't you?

    As several others point out in your comments, you missed the mark, completely, on this one. Your obvious disdain for Zillow is clouding your judgement guys.

  38. Jay Thompson says:

    Zillow isn't setting or collecting referral fees. Agent A (who is licensed) simply agrees with Agent B (also licensed) to pay a referral fee — just like happens every single day between agents all across the country.

  39. Jay Thompson says:

    It's not any different. It's not any different than any agent sneding any other agent a referral. We (Zillow) don't set the referral fee,and we don't collect a dime of it. It's simply two agents working out a referral agreement between them.

  40. Jay Thompson says:

    Daniel – brokerage licenses aren't exactly challenging or difficult to secure. If that was our plan, we'd have done it ten years ago. Why haven't we done it yet? Becuase as had been said countless times, we have no desire or plans to sell real estate. Zillow sells advertising, not property.

  41. Jay Thompson says:

    It's not a RESPA violation. ZIllow isn't setting a referral feee, nor are we collecting any part of it. This is simpley Agent A handing off a contact to Agent B at a referral rate they agree upon — just like happens every single day. Brian and Franks obvious disdain for all things Zillow has resulted in a wholly inaccurate "report," but I have a feeling they aren't overly concerned with accuracy when it comes to yet another Zillow rant.

  42. Turnip Head says:

    You had it right. Nothing is deceptive anymore. Just look at Wall St, our elections, or Representatives. The Criminal Corporate Oligarchs and Criminal Government Oligarchs get to compete to see who can consolidate all the debt paper and human capital wages slaves. The joys of neofeudalism/neofascism.

    Wake up you gotta make money.

  43. Jay Thompson says:

    But that's not what is happening, at all.

  44. Jay Thompson says:

    You're right, Zillow isn't a brokerage. Which is why we aren't setting referral fees, nor are we collecting a dime of them.

  45. Jay Thompson says:

    Zillow doesn't set the referral fee, collect it, facilitate it, or get one nickel of it. It's all between the agents and thier brokers, as it should be.

  46. James says:

    Wow, lots of going back and fourth here.
    I for one don’t like Zillow, I used their services for 6 months and the only leads I reveived were mobilhomes leads or leads on my own listings. After $6k in advertising not one real lead, a joke if you ask me. With that being said, they are not violating any laws. Since they are not collecting any fees, no violations. I truly hope the RE agents/brokers on here posting that this is a violation does not make the same mistakes with their clients and contracts. For the agents / brokers posting on here, you should clearly know this one, if not you need to take another 45 hour brush up. If your a owner of a company then I’m sure your using a referral company for your agents to send and receive out of start referrals. Remember when their fees jumped to 50+% of the referral? Again any time we can find dirt on Zillow and try to get them out of our business I’m in, this one is not one of them. For the two guys doing the show? You guys need a 101 in Real Estate to better understand how our business really works.

  47. Melissa Case says:

    WRONG— Agents can give monies to in referral form to anyone with a Real Estate License. We can also credit our Principles monies on the HUD. I cannot give monies to people that refer me business of their friends, family, and coworkers. (however I do thank them!)

    PS– I LOVE REFERRALS! SEND THEM TO ME!

  48. John Bowen says:

    Your argument makes referral fees illegal accouding to RESPA…unless its a cash deal. How is this any different from a normal referral from one agent to another?

  49. I would be curious to know what legal at Zillow has to say…

  50. Michael says:

    Wow! Okay, let’s get one thing straight. RESPA never regulated broker to broker referral fees between real estate brokers for their referral of a client to another broker. What RESPA did and does do is regulate the UNETHICAL practice of REAL ESTATE Brokers and their REAL ESTATE Agents demanding lenders pay them, the real estate broker or agent, a referral fee to do the loan for the buyer. OR for these same unethical real estate agents demanding referral fees from the Title Companies, Escrow Companies, Appraisers, etc. After 30 years as a lender I still get these same demands from real estate agents!

    Now for the flip side. YES there were and are just as many Lenders, Title Companies, etc., offering to pay these fees for the purpose of locking out their competition from the real estate office. EVERY major bank and many mortgage bankers have been guilty of this practice at one time or another. The so called “marketing agreements” between banks and real estate brokers are a good example of how this is still going on. Unethical?…ABSOLUTELY!; Illegal?…DEFINITLY should be!

  51. Jay Thompson Yes, Donna hits it on the head. Agency to Agency, not real estate saleperson to another licensed alesperson… ask their BROKER(s) it is they who receive and pay commissions. No doubt NREP hates Zillow…but as long as they are not receiving $ for the referral, reap on. My concern is how that LEAD is generated and to whom(s) it is "sold" to. Not being a Zillowite I may be confused but as has been said normally the lead on a home in market A is given, not to the LISTING agent but rather to the Agent willng to PAY the highest possible fee to receive that listings fruit. That said, should that lead not want to purchase that particular home Agent then can sell them another property in market A… but should said lead wish to go to market B, not served by the Agent then Agent via their Broker could refer it out to another Agency whoes Broker would assign a competient Agent in the brokerage best suited for the client…yes, all for a future referral fee if it closes. NO PROBLEM… if that is what happens. While I am not sure that is the TRUE picture. If you want to shine a RESPA light try any number of LENDERS (USAA) who have referral partners in a syndication relationship that are willing to rebate commissions (legally) to their borrowers (Principals to the transaction) As for Zillow… guess I do not fully understand the business model on the consiere level but they have fancy 39th floor lawyers who do.

  52. Terry Hunter says:

    Second what Cliff Freeman says. Don't see the legal problem here. What's the difference if I generate potential clients myself and refer them out, or refer out leads generated by Zillow, long as I am licensed?

  53. Dean says:

    Is it a RESPA violation. Potentially yes. Sure agent to agent referral fees paid thru the brokers have been a long standing practice and don’t violate RESPA. However, in this case the thing to think about is that Zillow say it gets nothing — but it does, because it is premier agent to premier agent and Zillow charges those agents a fee. Just like the crack down on Mortgage offices alledged vioaltion for Rental fees paid to the broker sometimes at other than fair value. Isn’t that what we have here and to the exculsion of other agents who are not premier agents.

  54. Jay Thompson And there is no monthly sign up costs for this referral network? Zillow is doing something for free?

  55. So mortgage license holders can't call another mortgage license holder and get paid a fee for a mortgage referral, but a real estate license holder can call another real estate license holder and get paid a fee for a real estate referral. Real estate license holders are exempt from RESPA? I wonder how that happened. Do you think maybe that its because the National Association of Realtors is the largest trade association in the country with over 1.1million voters (excuse me, I meant to say 1.1 million members).
    Before you get all gnarly on me, I am both a licensed RMLO and a Real Estate Broker.

  56. Jay Thompson I'm sure your business model will change when upstream comes to fruition

  57. I'm sorry Cliff, according to respa it's illegal… It just hasn't been brought to the attention of the cfpb

  58. Mary Seaman says:

    Wrong sweethearts. Love you guys but your starting trouble where none exists. If agents could not refer, we would be dead in the water. We do sometimes get sick, have family issues and, sometimes, just flat out need time off. Referrals from agent/brokerage to agent/brokerage are very important and also a recognized source of income by NAR and by statute here in FL. Need to fix this mistake.

  59. Jay Thompson As a residential Real Estate Appraiser for 20+ years, I have found Zillow to be an obnoxious addition to the Real Estate profession. It may have a place in the market in some way, but certainly not in Real Estate valuation! The proof is in the putting!! I can't tell you how many times there have been issues, in my personal experience, where a home owner uses Zillow as a guideline to determine the value of their property and is grossly misguided by bogus data! They go to refinance only to find out that Zillow was way off base! They go to list their property only to find out that they either listed too high or too low with a Realtor that took the listing based on Zillow. To tell you the truth, I am amazed that Zillow has not gone out of business through these law suits alone! Zillow is dancing with the devil and you have been fortunate (so far) that there are enough uneducated home owners out there to keep you in business.

  60. Jay, tell me something good that Zillow does for the public and not yourself

  61. Enough of the "technicalities" Zillow has no place in the Real Estate valuation business!! I don't give a shit what you say!

  62. Helene Toal says:

    After listening to the segment and reading the comments below, I'm still trying to get my arms around it all. If I'm understanding this correctly, an agent who pays to be on Zillow is referring buyers and sellers to other agents who pay to be on Zillow and ask for a referral fee paid out when the deal closes. The difference being Zillow is the conduit (middle person) to put the two together with NO compensation to Zillow…right? I just see Zillow adding a benefit to their paying community in this case. Or looked at as a networking group. Again, only if I'm understanding this correctly. If so…then that's nothing. I would have a greater issue with the Quicken Loans arm that sends their 'pre-approved' clients to paying real estate companies that refer the customer to their agents at a 35% to 40% fee. I also see it in our industry all the time when we aren't licensed in a state. It's just paid out privately so not publicized. With all this being said, I truly don't think this or the Zillow format puts people/families in a commodity category as described. And shouldn't be a factor in the discussion. The person who has the lead (buyer or seller) and has to pay out the referral would be found out quickly by the client and all would lose. At least I would hope so! Just my thoughts…

  63. Steve Ervin says:

    Daniel Magnano Illegal???? How much clearer does the LAW need to be? As Cliff cited, "Nothing in this section shall be construed as prohibiting…payments pursuant to cooperative brokerage and REFERRAL ARRANGEMENTS or agreements between real estate agents." The KEY here is that it MUST be two REAL ESTATE agents or brokers that are engaging in the referral arrangement for this to be legal. If ne or the other party to the referral agreement is NOT an agent or borker then you are correct it would be a RESPA violation. But it is NOT a RESPA violation of BOTH parties are either agents or brokers.

  64. Steve Ervin says:

    The purpose of RESPA is to eliminate settlement services providers from colluding and steering home buyers and sellers to each other and thus restricting the access to the open market for those services. The Supreme Court clarified this a couple years ago in a decision involving Quicken Loans. In that decision the justices wrote that in order for RESPA to be in effect there must be TWO settlement services providers involved in the transaction.

    If, for example, there is a lead supplier such as the listing aggregator sites like Zillow.com, Realtor.com, Homes.com, etc. who use Realtors' listings to generate leads that are then being sold to settlement services providers such as Realtors or lenders…the sale of those leads does not constitute a RESPA violation because those sites are NOT settlement services providers. There is only ONE settlement service provider involved in the transaction…the Realtor or the lender purchasing the leads.

    On the other hand in the situation discussed in the video ther are TWO settlement services providers (two Realtors) involved in the transaction…so it would appera at first glance to be a clear RESPA violation because one agent (or broker) is receiving a referral fee from the other agent (or borker). But the law clearly defines exceptions to this rule..in Section 8.C. which states, "Nothing in this section shall be construed as prohibiting…payments pursuant to cooperative brokerage and REFERRAL ARRANGEMENTS or agreements between real estate agents." So as long as you are talking SPECIFICALLY about a referral arrangement between two agents or borkers (not an agent and a title company…or an agent and a lender…etc., then ther is no problem with the transaction as described in the video.

  65. Jay Thompson says:

    Jerry Cirafisi – thanks for keeping the conversation professional.

  66. Jay Thompson says:

    It's a Zestimate, Jerry, not a Zappraisal. It never was intended to replace a professional's opinion of value and that is stated literally millions of times of the site. But, as you yourself said in another comment, you "don't give a shit" what I say — so there seems to be zero point in trying to have an adult conversation with you. Have a great and sucessful day, and life.

  67. Jay Thompson says:

    You are undertandng it perfectly, Helene. Agent A has a contact that they refer to Agent B. Those two work out a referral agreement between them, and if the transaction closes, the brokers make the appropriate referral payments to each other. Zillow doesn't the referral rate, we don't collect the referral fee, we don't make a dime of the agent-to-agent referral. It's just like any other referral between agents/brokers that happens every day. This is a complete non-story.

  68. Brian Giersz says:

    Heres a question I have for Zillow and Realtor.Com . How is it that their allowed to have outdated and incorrect information on their sites used for advertising purposes? Mls requires agents to update status changes promptly. How is it a lead is generated on a home already sold or under contract?

  69. Jay, Jay, Jay… You must know that no matter what you "disclose", the average consumer believes what they want to believe. If, for example, a "Zestimate" comes up with a value of $250k and I appraise the property for $200k, guess which one they will believe? I'm not just saying this, appraisers deal with this every day! So, yes, there is zero point in attempting to have an adult conversation because you have obviously been brainwashed and are partial. Good luck with Zillow, but just know that the REAL experts in Real Estate valuation know what a farce Zestimates and, therefore, Zillow are

  70. Sonny Downey says:

    When did it become illegal to send another agent a referral? There's no story here.

  71. Sonny Downey says:

    There's no violation folks, simmer down and relax. Zillow isn't accepting the referral, another brokerage is. When did it become illegal to pay another licensed broker in another state or your market or your office a referral fee? Have you ever tried to call an agent in another market and not have them answer only to call another? If so, we've all committed RESPA violations which isn't the case. Quit believing everything you see on the internet, this video is one sided and clearly made by some "zillow haters".

  72. I have always thought what USAA does is illegal. They take 37% from agents to give them a client.

  73. Commissions (and thus referrals), are paid broker-to-broker. When a referral is done, the brokers on each side sign the referral form agreeing to it and the fee is paid from the sending broker's commission. I it's illegal for an entity to pay the realtor/it's brokerage a referral. That would be the same thing as a title company or lender paying a referral. It's illegal. I said long ago that if we third partied our listings, it could work against us one day by having us buy back our own leads/business. Bravo everyone!

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