WRITTEN BY SHARON CURRIE NOT AI
Today I read about Senators Cory Booker and Elizabeth Warren petitioning the FTC to look into the trade practices of “dominant online real estate platforms” for “undisclosed commission-sharing arrangements,” which is Realtor speak for when an agent has a financial arrangement to receive online buyer and seller leads, i.e., Zillow, Realtor.com, and many other smaller providers.
This is not a new thing, but due to the housing affordability crisis in our country, the real estate business is coming under the harsh lens of scrutiny. Also mentioned in their petition is mortgage steering (already an ongoing lawsuit you can read about here) and the current conflict over brokerage private listings, which you can read about by clicking here.
The crux of the commission-sharing matter is the issue of undisclosed fees. You will remember the huge NAR case in 2024, where full disclosure of commissions was the issue, and many millions, some say nudging a billion, were paid out to settle that class action suit. In this new FTC petition, the point is the same: nondisclosure.
Buyers and sellers who are referred to participating agents via these online real estate platforms are not aware of the financial arrangement between the lead provider and agent. The fee to the lead provider can be a percentage of the closed sale, a flat fee, or a monthly payment for a block of leads. Those fees are not, at this time, disclosed to the client, but maybe they will be soon. As of now, the legality of this arrangement has been perfectly legal.
If referral fees weren’t packed into the price of doing business, perhaps agents could charge less for their services, and the property could therefore be sold for less…which I believe is actually the point of the scrutiny.
Should these fees be disclosed? On the one hand, the relationship between the lead provider and agent is between them, so why does the client need to be aware? On the other hand, our business is built on trust and accountability, neither of which can exist without full disclosure. Personally I believe the fees should be disclosed, just as we are now required to do with other referral souce fees as a result of the 2024 NAR suit. That being said, I don’t pay for referrals from big online providers so perhaps my opinion is myopic.
Will the FTC launch a probe? This has been picked up by the media so I’m not sure how they could avoid it. I do not believe anything nefarious is going on here but rather us learning about what, where and if this type of disclosure should also become part of the standards we operate under.
You can follow this link to Senator Booker’s page.
I’ll be interested to see how this all plays out, but like many legal struggles, it could take a very long time.
Written by a human.