Online brokerage REX sues Zillow and NAR – NMP

The legal battle between REX Home Loans (Real Estate Exchange, Inc.), an online brokerage firm, and the National Association of Realtors (NAR) continues to escalate even after REX’s closure, according to multiple media outlets.

In March 2021, REX filed an antitrust lawsuit against NAR, Zillow, and Trulia, asking federal court to force Zillow and its subsidiary Trulia to stop separating homes for sale into two groups. The two groups are those listed by brokers that belong to NAR and those listed by others. However, contractual restrictions force Zillow to separate the listings.

Earlier this year, NAR counter-sued REX, claiming the company made false and misleading advertisements and statements about its services to mislead consumers. The courts, however, dismissed NAR’s counterclaim. In Judge Thomas S. Zilly’s decision, he states that NAR did not allege facts to show how its reputation was specifically and concretely harmed by REX’s allegedly false statements. Zilly shot down several attempts by NAR and Zillow to have the original lawsuit dismissed.

In May 2022, REX filed an answer brief against Zillow and NAR regarding the real estate segregation rule. The brief alleges that Zillow and NAR agreed to separate the listings of large brokers and other members of the association from the listings of technology competitors like REX.

This brief filing comes after REX filed a motion for an injunction restraining Zillow from continuing to separate the listings. Previously, Zillow’s web view aggregated all homes for sale on one web view. The segregation rule was imposed by NAR for the benefit of its former physical member companies. Zillow agreed to follow the segregation rule when the company announced it would become a real estate broker, joining NAR and other broker associations.

After Zillow decided to lock arms with other legacy brokers, its site now places homes listed by Innovators under an “Other Listings” tab, which some consumers refer to as the “Hidden” tab. ZIllow’s new display forces consumers to search for a separate tab to access homes with lower commissions.

“The segregation rule has no place in real estate,” said REX CEO Jack Ryan. “REX is committed to making all ads accessible to all consumers through digital technology and an honest approach to every customer. Zillow and NAR now admit that the segregation rule has no benefit for consumers. REX supports his words of actions. We will always stand together with consumers and deliver the best real estate experience through technology and talent, not by dividing homes and coercing consumers. If Zillow and NAR are unwilling to end the rule of segregation, the court should immediately put an end to this indefensible rule.

REX alleges in the lawsuit and brief filing that the segregation rule was put in place to protect the “shockingly high” commissions brokers collect on homes sold through the traditional mortgage process. Typically, consumers pay 5-6% of the home price in commissions when purchasing homes sold through the traditional process. REX says it leverages digital technology and predictive analytics to reduce commissions to 2% to 2.5%, saving consumers millions of dollars.

The segregation rule bans REX to a hidden tab, so consumers are mostly exposed to ‘extremely expensive’ and ‘outdated’ traditional models that charge homeowners over $40,000 to sell a median-priced home in the area of Seattle, according to REX.

Although REX Home Loans may have ceased operations, the company has retained the services of a high-level attorney to carry them through the litigation process: David Boies, who previously represented Al Gore, Harvey Weinstein and several accusers against Jeffrey Epstein. According to a court filing, Boies asked the court to represent REX in this case.

Highlights of the REX case include:

  • Neither NAR nor Zillow suggests that the segregation rule provides any benefit to the consumer. Zillow admits that ending the rule would improve the consumer experience. This alone establishes continuing harm to consumers and warrants a preliminary injunction.
  • Zillow can’t shirk responsibility by registering his distaste for the segregation rule. As the United States Supreme Court has long held, agreeing to an illegal scheme is as much a violation of federal antitrust law as creating and promoting such a scheme.
  • Zillow’s continued segregation confuses customers who will rarely find homes listed on the separate tab and are pressured into transacting with legacy brokers, many of whom charge 5% to 6% of the home’s value in fees and hidden commissions.
  • The preliminary injunction that REX seeks, if granted, would minimize damages to REX during the pendency of this lawsuit and improve Zillow’s website.

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