Is Zillow a scam?
In the United States, RESPA Section 8 and CFPB Regulation X maintain firm prohibitions against kickbacks and unearned fees, with particular statutory exemptions, with regards to settlement services involving most federally related mortgage loans. This includes services provided by all real estate brokers, real estate agents, and Realtors to homebuyers and home sellers.
'No person shall give, and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.' 12 U.S.C. 2607(a). 'Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.' 12 U.S.C. 2607(d)(1).
There is a narrow exemption to this law, for any: 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' 12 U.S.C. 2607(c)(3). Service provided by a 'real estate broker' is codified under RESPA as a 'settlement service' that is 'provided in connection with a prospective or actual settlement.' 24 C.F.R 3500.2. A mere possession of a 'shell' real estate license does not meet this designation. Zillow is not genuine brokerage acting in a brokerage capacity, but it attempts to meet this exemption as a 'shell' real estate entity.
When Zillow acts as an 'agent-matching service' or a 'referral platform' it may, of course, easily sell customer leads and advertising to real estate brokers. However, under RESPA such sales must never be tied to the outcome of the successful transaction or based on a percentage of brokerages' commissions. The US-CFPB Advisory Opinion issued on February 7, 2023, further confirms that any operator of a 'settlement services' digital comparison-shopping platform receives a prohibited referral fee in violation of RESPA Section 8 when the operator receives a 'thing of value' for referral activity.
Because Zillow does not provide 'service provided in connection with a prospective or actual settlement' when making a referral, the referral is not a bona fide 'settlement service,' and it does not act as a bona fide 'real estate broker,' and it does not meet an exemption for 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' The scheme cardinally, collects RESPA-prohibited 'fee, kickback, or thing of value' codified under 12 U.S.C. 2607(a), subject to $10,000 fine and a year in federal prison - for each violation. There is no such thing as a 'partner agent' under law, anywhere in the United Satates, and 'shell' brokerages making referrals covered by RESPA do not meet 12 U.S.C. 2607(c)(3) exemption. Both, consumers and honest real estate professionals, should avoid Zillow because it is an illegal scam, that integrally degrades value of real estate services and inflates real estate commissions with exigent kickbacks.
FAQ for Zillow
What are the alternatives to Zillow.com?
Zillow.com directly competes with several 'paper' brokers and MLS aggregators, including Redfin.com Partner Agents, RocketHomes.com Partner Agents, Realtor.com Opcity, Opendoor.com Partner Agents, Homes.com, ComeHome.com, HomeSnap.com, and a few others.
Genuine alternatives to Zillow 'paper' brokerage are sellers' agents who offer listing savings and buyers' agents who offer legitimate refunds to consumers.
What are the pros and cons of Zillow.com?
Pros: Zillow has a great wealth of aggregate MLS property information, an easy-to-use interface, valuable neighborhood information, excellent user reviews and a wide array of real estate-related services, articles, and forums.
Cons: there are several main disadvantages to Zillow. First, consumers are allocated to Partner Brokers via Zillow Flex. Second, Zillow argues to cosumers that commisisons are typical, sellers pay commissions, and buyer agents work for free. This is false. Home buyers pay all commissions, and buyer brokers never work for free.
Summary: Zillow Flex cannot legally organize competing brokers into a referral network because consumer allocation between licensed real estate brokers in the United States are prohibited. There are zero disadvantages when entering into a buyer's refund agreement with a motivated buyer agent, but Zillow doesn't want homebuyers to know this. Zillow is silent on buyer rebates because it is built on the myth that buyer brokers work for free.
What is Zillow?
Zillow is an Internet MLS aggregator, empowering consumers with data, inspiration, and knowledge around the place they call home. Zillow aggregates home listing data from thousands of private MLS databases across the United States.
Is Zillow legitimate?
Yes and No. In 2018, Zillow Group began to operate a program called Zillow Flex Program. Anytime consumers use Zillow, their information may be sold for blanket referral fees (approximately 30-35% of gross commissions) to random brokers. Zillow consistently argues for standard commission rates set between 5% and 6% of the home's sale price. In reality, all listing commissions and buyer's rebates are negotiable.