Zillow execs imagine a world without buyer’s agency

In addition to discussing Zillow’s financial results and the continual evolution of its Housing Super App vision on its third quarter earnings call, CEO Rich Barton and Zillow executives took time to address the elephant in the room: the verdict of the Sitzer/Burnett commission lawsuit.

While the industry has yet to find out what Judge Stephen Bough’s injunction will say and the three defendants, the National Association of Realtors, Keller Williams and HomeServices of America, have vowed to appeal the decision, Barton believes his firm will thrive regardless the outcome.

In his remarks about the suit, Barton said Zillow is a strong supporter of free, fair and transparent access to real estate information, independent representation, and transparent and negotiable agent commissions.

“From where we stand it seems clear that these principles are in the best interest of mover consumers, agents and the industry as a whole,” Barton said. “We expect industry changes resulting from this lawsuit or ones like it will involve commission transparency and negotiability provisions similar to those seen in several of the settlement the plaintiffs entered into with other real estate franchisors in advance of the trial.”

Barton also told listeners that Zillow believes complete disruption to the existence of buyer’s agents is improbable, as the firm believes it is important for buyers to have someone looking after their interests in the homebuyer transaction. However, if buyer’s agency does disappear, Zillow is considering models where the U.S. market transitions to one where one or two large listing portals offer pay-to-play inclusion on a digital listings marketplace.

“In this scenario, Zillow would be an odds on favorite to become the leading digital listings marketplace, given our brand, traffic, engagement and our unique focus on solving movers real pain points,” Barton said.

Despite what Barton believes would be an advantage for his firm, he said Zillow is not advocating for this to happen.

“We believe the pay-to-play marketplace is a step backwards for consumers and the industry as a whole and we very much like our position and growth plan in a market structure the continually evolves towards our principles of access, independence and transparency,” he said.

Zillow’s financial results

Despite a slower residential housing market environment caused by rising mortgage rates and low housing inventory, Zillow Group still managed to record an annual increase in revenue in the third quarter of 2023.

The real estate behemoth recorded $496 million in revenue, an increase of 3% year over year. The firm’s residential sector was responsible for $392 million of the overall revenue. The sector’s revenue for the quarter was down 3% annually, which Zillow executives were pleased with given the macro environment.

Zillow was also pleased with the performance of its mortgage sector, Zillow Home Loans, which reported an 88% year-over-year increase in purchase loan origination volume for the quarter. Even with this massive increase, Zillow Home Loans still recorded an 8% annual decline in mortgage revenue to just $24 million.

The firm’s mixed bag of revenue results garnered Zillow a net loss of $28 million for the quarter, which represents an improvement over the $53 million net loss it reported in Q3 2022.

“Today we are focused on delivering the Housing Super App, a tech enabled end-to-end platform with products and services that make it easier for people to move,” Barton told investors and analysts listening to the firm’s Q3 2023 earnings call Wednesday evening. “You’ve heard me say many times that 2023 is crucial for Zillow. It’s a year of execution as we prepare to scale in 2024 and 2025. We are very pleased with what we’ve accomplished today.”

While much of the call was given over to discussion of the Sitzer/Burnett suit, to which Zillow is not a party, none of the call featured discussions of the REX Real Estate false advertising lawsuit, in which Zillow, the only defendant, emerged triumphantly less than a month ago.

Originally filed by REX in March 2021, against Zillow and NAR, the lawsuit alleged that changes made to Zillow’s website “unfairly hides certain listings, shrinking their exposure and diminishing competition among real estate brokers.”

Despite the verdict, it does not appear that Zillow’s legal battle with REX is over. On Tuesday, the now defunct discount brokerage, filed a motion seeking a new trial.

In the motion, REX claimed that during the initial trial the court “gave an improper and case dispositive affirmative defense instruction on REX’s claim under the Washington Consumer Protection Act.”

REX claims that this enabled Zillow to “improperly escape liability for knowingly creating a deceptive and unfair web site by simply convincing the jury that it benefitted from doing so.”