UPDATED: Monday, May 7, 5:05 p.m.: StreetEasy’s highly profitable Premier Agent program violates New York state advertising laws, according to regulators.
Sources said the New York Department of State, which has been looking into the agent advertising program since last year, shared its position with stakeholders — including StreetEasy parent Zillow Group — in recent weeks in advance of issuing formal guidance on the topic.
State law says that real estate agents cannot advertise on a property that’s the subject of another agent’s exclusive. According to sources, DOS officials have determined that lead generation programs like Premier Agent are a form of advertising, and that although StreetEasy isn’t a licensed broker, it needs to comply with the state law, as do agents who buy into the program. Regulators are currently negotiating with StreetEasy to come up with a workaround — including more prominent placement of the listing agent’s name.
Although Premier Agent was the impetus for the state’s review, the final guidance will apply to any website that promotes real estate listings, such as Realtor.com and brokerages’ own websites.
The DOS’ interpretation of current advertising laws could pose a challenge to Zillow, which debuted Premier Agent in New York City last March. The program — which lets buy-side agents advertise on other agents’ listings — is a cash cow for the company. Nationally, Premier Agent accounted for 70 percent of Zillow’s $1.077 billion in revenue last year. An August report by Deutsche Bank projected that StreetEasy’s Premier Agent would generate up to $86 million in revenue for Zillow over two years.
A StreetEasy spokesperson confirmed that it has held talks with DOS officials.
“It’s important to us that brokers and agents are able to comply with state law when using our sites, so we’re absolutely engaged in the process,” the spokesperson said.
It’s unclear when DOS plans to issue its formal guidance, and a spokesperson for the agency declined to comment other than to confirm that the issue is “under review.”
Premier Agent rocked the residential brokerage world last year, with some firms initially calling for a boycott of the portal. In a pair of letters to the DOS, the Real Estate Board of New York said the program had caused a “maelstrom of consumer confusion” and asked regulators to weigh in on its legality.
On Monday, REBNY declined to comment and referred questions to the letters it sent to the DOS in 2017. In one, REBNY said Premier Agent was no different than an agent purchasing a billboard and using it to advertise another firm’s listing.
After several of the city’s top firms came down hard on Premier Agent, some of the biggest brokerages — including the Corcoran Group and Douglas Elliman — have signed on to participate in “Premier Broker,” a version of Premier Agent that lets the firms buy leads in bulk. Agents have also flocked to the program, sending auction-based prices skyrocketing.
In January, Zillow CEO Spencer Rascoff traveled to New York and sat down with senior REBNY officials, including president John Banks, signaling a thaw in relations. In addition to the issue of Premier Agent, StreetEasy has not accepted REBNY’s syndicated listings feed, which debuted last summer.