HomeLight Kickbacks and Antitrust
HomeLight referral fees cost consumers Billions and subject all matches to pay-to-play bias.
The Internet is one user at a time. If something works for one person very well, it will likely work for the entire Internet community. If an online product is severely broken for one person, it is likely broken for everyone just the same. I firmly believe that this seemingly all-or-nothing logic separates the next Google from today's Yahoo. The Internet is here to improve our lives in scale, not tax our user experience.
As of 2021, the company collects kickbacks from about 28,000 brokers across real estate transactions originated from "over 1 million homebuyers and sellers in the U.S."
Consumer allocation between licensed real estate brokers is a felony. This illicit practice costs US consumers about $15 billion in overpriced commissions each year. HomeLight alone has collected several billions USD in kickbacks from random Realtors since inception, without helping anyone to sell or buy a single home anywhere. HomeLight is a California real estate broker DRE License 01900940, but it never represents consumers when buying or selling real estate.
Why is broker-to-broker collusion on the Internet prevalent? Mostly because brokers tend to collude with kickbacks rather than to compete for consumers with competitive commissions. Real estate remains one of the most anticompetitive industries, and it is also the largest consumer market in the world.
HomeLight is a hub-and-spoke broker collusion scheme where ALL consumers receive a biased pay-to-play match with a random colluding Realtor accompanied by an overpriced commission, as a matter of fact.
One of the best ways to make home buying more affordable it to eradicate kickbacks and consumer brokering as a quantifiable thing from the US housing sector.
The fact is, HomeLight only works for brokers because it is paid from the broker's commission and it is a licensed real estate broker itself.
HomeLight is not a technology company, it is best described as a hub-and-spoke conspiracy between brokers. The difference is that a technology company must improve user experience over the Internet, but a broker collusion scheme doesn’t have to do that.
As a real estate hub-and-spoke scheme, HomeLight doesn’t have to improve your Internet user experience, it only has to convince you that you should let them tax your transaction.
HomeLight will often buy exposure with technology companies such as Google, Nextdoor, and Facebook, etc. The company actively buys these ads to sell Realtors in exchange for kickbacks. HomeLight also sells private investors (iBuyers) who attempt to make cash offers for homes at severe discounts, typically 70% to 80% of true market value. These investors will later flip a home at a premium, on the open market (and they will not use a HomeLight "partner agent" to do that - they will negotiate a competitive listing commission to make more profit on the flip.) These cash buyers will give HomeLight a hidden commission from a successful sale, typically set at 4% of consumers' home sale. Hence, HomeLight Trade-in and Simple Sale works directly for home flippers, and not for consumers.
In addition to pay-per-click marketing, HomeLight also buys TV ads, a lot of TV ads, claiming that "they will match you with a Realtor who will sell your home for more money."
There is absolutely ZERO evidence that MLS data has enough information distinguish between agents who deliver value and the agents who simply under-price homes for a quick sale, yet HomeLight claims to somehow be able to tell the difference. HomeLight is a product of a false advertisement, paid with kickbacks from the brokers who gladly collude with it.
This conversation may seem like an ongoing battle because it is one. This scheme has been operating for close to a decade. When pressed for a reply from HomeLight on how their service only offers pay-to-play results, the company either ignores me or blocks me. In effect, HomeLight is unable to resolve this issue because it is caught up in pay-to-play and false claims.
HomeLight algorithm is self-proclaimed and, besides suffering from a heavy payment bias, it amounts to completely unfounded results. Because the company operates as a “black box,” there is no way to check their claims. As a consumer, HomeLight is asking you to blindly trust that they match you with a good broker.
Why would anyone trust a collusion scheme?
"HomeLight is 100% free, with no catch. Agents don’t pay us to be listed, so you get the best match." This is a 100% false claim the company knowingly (and purposefully) makes to entice consumers into the scheme.
Interestingly enough, HomeLight has a direct financial incentive to connect consumers with the most expensive brokers locally, because their referral fee amount goes up with a higher-priced commission.
Ask them this question: "If all brokers on HomeLight platform are required to pay a referral fee, how is this service impartial?" In the best case, their staff will attempt to tell you that referral fees are "standard" and that they need to make money from your transaction. In the worst case, they will ignore your request.
HomeLight, as a licensed broker that engages in an antitrust violation known as market and consumer allocation between licensed real estate brokers. Brokers must compete with one another to provide consumers with real estate services, not sell one another as the best match.
As far as getting the best price for your home, a seller can firmly assume that buyers will always make you their best available offer on an open market. Buyers are buying your home, not your agent. To negotiate a great listing rate with a competitive agent will allow you to take an offer from a buyer faster and keep more of your equity. A great buyer's agent may also help your potential buyer with a commission refund that directly lowers the cost of buying a home and gives the buyer an added financial leverage to make a better offer.
While competitive fees leave you with more equity, junk fees reduce your equity. Remember, banks don’t care how a home is sold, only seller’s equity is lost in transaction fees. For economists, it is a proven fact that payment kickbacks result in reverse completion, lower quality of service, and higher costs to consumers. In my humble opinion, an agent who agrees on the back-end to pay a hefty part of a commission you haven’t even agreed to yet simply doesn’t respect you as their client.
Assuming an average referral fee of around $3,500 on a $250,000 home, as of 2019, HomeLight currently claims to have made a successful match for about 1,000,000 people with agents. This is Billions USD in kickbacks paid to HomeLight for what is advertised to you as a 100% free service. Yes, this is a Billion with a “B” problem.
In 2021, the trend is getting much worse. Zillow Group, for example, now aims to bring in Billions each year in referral fees from their new Zillow Flex consumer brokering scheme that, too, operates on a “standard” referral fee basis. HomeLight Simple Sale program suffers from a similar ultra-low success rate. An instant offer is a "bait-and-switch" tactic that 98% of the time aims to sell you an overpriced Realtor, and not buy your home at a fair market value.
What is the alternative to HomeLight?
Competitive agents can help you save tens of thousands in fees, and we don’t compete with them, or charge them - we help them connect with you.
Truly competitive agents will never agree to pay referral fees because they want to work with transparency and pass all savings directly to you. As a savings aggregator, Open Marketplace utilizes the power of network effects from all our users with great leverage. We don’t let any of your savings get eaten up by referral fees.
What makes for a better Internet user experience? Does pay-to-play, or fair-play matter? Answers to these questions will define the way residential real estate markets operate, from top to bottom. Only the right answers, however, will help consumers better manage and to help lower overall cost of homeownership.
Trust shouldn’t be sold for Billions in kickbacks, it should be earned with savings.
As of 2021, broker collusion via the Internet is a winning strategy. These schemes are some of the most profitable and well-funded because they work in a poorly enforced antitrust environment. In effect, until the time when FTC, the DOJ, and CFPB firmly enforce the existing laws against kickbacks and collusion, these schemes will continue to rapidly swallow savings and funnel consumers in exchange for kickbacks. For example, the following is a list of ten similar schemes, all operated under a similar premise:
(1) Realtor.com ReadyConnect Concierge (Opcity) consumer allocation and price-fixing agreements
(2) Zillow Flex Program consumer allocation agreements
(3) Xome Concierge consumer allocation and price-fixing agreements
(4) Blend Realty consumer allocation and price-fixing agreements
(5) Opendoor Brokerage (and Open Listings affiliate) consumer allocation and price-fixing agreements
(6) Rocket Homes (Rocket Companies) consumer allocation agreements
(7) mellohome (loanDepot) consumer allocation agreements
(8) Redfin Partner Program consumer allocation agreements
(9) Better.com Real Estate consumer allocation and price-fixing agreements