UPDATE Thursday September 19, 2019, 12:31 p.m.: StreetEasy is reforming its “Building Expert” program effective Thursday, but lack of transparency over fees is causing concern and confusion.
The controversial pay-to-play program launched in 2015 under the premise that participating agents would pay a fee to have their contact information displayed alongside building descriptions where they’d done transactions. To qualify as an expert, agents must have closed at least one deal at the property in the past five years.
The program, dubbed StreetEasy Experts, will allow participating agents to have their contact information appear on all listings at the building and, most crucially, agents will only pay a “success fee” if they close a deal from a lead generated through the program. But StreetEasy’s not willing to publicly disclose how much that fee will cost agents.
After publication, the company clarified that agents can only participate in the Expert program if their brokerage enters a participation agreement with StreetEasy, which entails reporting closed sales that come through a lead generated in the program. A source said conversations between brokerages and the company were ongoing.
An email, obtained by The Real Deal, sent by StreetEasy to affected agents said they will have free access until Oct. 15. The company is not taking on any new users until that date.
“It’s more of the same with them. It’s lack of clarity. It’s confusion and it’s like fear mongering,” said Sarah Saltzberg of Bohemia Realty Group. Earlier this month, brokerage leaders called out the company for allegedly contacting clients behind agents’ backs. The listings portal rebuffed, calling it a standard data verification process.
All a spokesperson for StreetEasy would say on Wednesday was that the fees would be “based on industry standard referral arrangements.” According to multiple industry sources, referral fees typically range from 10 percent to 30 percent on sales.
One brokerage head and a second industry source said StreetEasy told them over the phone that the fees would be 35 percent. Brad Ingalls, a broker at Sotheby’s International Realty who has used the expert program “off and on” over the past four years, said he’d received an email from StreetEasy a few days ago about changes, but said there weren’t “any specifics” on a new fee structure.
“I’m not paying 35 percent for a referral,” Ingalls said, adding that he often will pay other agents 20 to 25 percent.
“Good luck with that,” another agent said.
Regardless of what fee model StreetEasy ultimately implements, agents who close deals through the program seem poised to be on the hook for larger fees. For example: If StreetEasy charged the lowest standard referral fee of 10 percent, an agent would pay the platform $3,645 on a $1.215 million sale. (This deal represents of residential sales in Manhattan, according to Douglas Elliman’s most recent market reports, and assumes a standard commission of 3 percent.) Under the previous iteration of the program, upfront fees ranged from $25 to $350.
One CEO raised the question of whether StreetEasy’s new fee model is lawful: “If they are analogizing this to a referral fee, then it is a further instance of them taking the law into their own hands. Unlicensed persons or entities cannot receive real estate commissions in any form, including referral fees,” the source wrote in an email.
StreetEasy, however, says it has buy-in from agents after a pilot they ran in the spring with 700 agents. Some agents at Triplemint, a brokerage that runs off a lead-generation model where the firm gives agents leads, took part in the pilot program. CEO David Walker said he’s in favor of the new fee model.
“Interests are aligned. You’re only paying if you’re closing and making money,” he said, noting, however, that his firm hasn’t used the program, though its agents always had the opt in on their own.
Eddie Shapiro, president and CEO of Nest Seekers International, said around 3 percent of his firm’s agents use the program. He said he understands why agents would be ok with an increase in cost.
“We don’t have a problem paying when we succeed,” he said. “The concept of it I think would create a much more successful relationship between agents and [StreetEasy’s parent company] Zillow.”
Mark Chin, the CEO of Keller Williams Tribeca, sees it as “predatory pricing,” and compared the relationship between StreetEasy and agents to that of sharecroppers and landowners.
“StreetEasy essentially has the land — the online property and they’re controlling it,” he said. “They’re going to price your ability to advertise there or whatever else… aggressively until there’s no profit left in the deal.”
Correction: An incorrect reference to the number of agents using the Experts program was deleted from the fifth paragraph. An earlier version of the article incorrectly stated that the program also applies to rental transactions; in fact, it only applies to sales.