Tougher rules for real estate ads go into effect this fall

After three years of public vitriol, lobbying and rule-writing, tighter regulations for online real estate advertising will take effect in November.

The regulations, included in the May 6 edition of the New York State Register, require additional disclosures from firms and listing portals. The adoption of the rules, published in October 2019, comes three years after StreetEasy launched its lucrative-but-controversial Premier Agent advertising program, which set much of the real estate industry against the go-to listings portal.

The program, long used by StreetEasy parent Zillow, lets agents who advertise display their name alongside listings that are not their own. Despite popularity among buyer’s agents, listing brokers have called Premier Agent misleading and disingenuous. The Real Estate Board of New York said it caused a “maelstrom” of consumer confusion.

When the state revised the rule to require third-party sites to include the word “advertisement” if an agent is paying for an ad, both StreetEasy and the real estate industry called the new rule a “win.”

But that consensus cracked during the public comment period. The Department of State said it received more than 700 public comments related to the new rule — an “overwhelming majority” of which came from New York Residential Agent Continuum.

NYRAC, an industry organization formed in 2018, said in a letter to the DOS that it feared “the language in the regulation is already outdated” and called Premier Agent “deceptive.”

In a December 2019 letter, the Real Estate Board of New York praised the regulations as a “significant step forward,” but said StreetEasy continued to come up with ways to minimize listing agents. It also said the state’s slow-moving processes cost it credibility with some agents.

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Two years after Premier Agent fracas, NYS regulators tighten rules for online ads

Heather McDonough Domi, an agent at Compass and founding chair of NYRAC, said while the jury’s still out, she does not think the current regulations go far enough. The broker group called on the DOS to require aggregators to disclose fees paid by advertisers, and to tell consumers who fill out a “contact” form on StreetEasy where (and to whom) their information is being shared. (The final rule also requires brokerages to obtain authorization if they display another firm’s exclusive listing.)

“If you’re submitting information to a third-party that’s giving it to someone who has paid for a lead,” McDonough Domi said, “there should be a check box saying, ‘We are selling your information.’ Because that’s what it is.”

Despite receiving feedback from the real estate industry up until the eleventh hour, the DOS said it would not make any further changes to the regulation.

In the May 6 register, regulators rejected NYRAC’s proposal, writing: “The purpose of the proposed rule is to require licensed professionals to use specific text in advertising, across a broad range of media platforms, to promote transparency.” Adding another layer of disclosure would be beyond DOS’ scope, since it would be equivalent to proposing a “new” rule governing online platforms, some of which aren’t licensed by the state.

Following the May 6 notice of adoption, a Zillow spokesperson praised the DOS’ “thoughtful” approach and said the final rules are “fair to all parties.”

“These rules affirm what we’ve said from the start — that digital advertising programs like Premier Agent are allowed under the law — and effectively refute the many misleading, untruthful claims made about online advertising during this process,” the spokesman said.

Since launching Premier Agent in 2017, StreetEasy has modified the contact forms for agents. Last year, it launched Agent Spotlight, which allows agents to avoid Premier Agent on their listings for $333 a month.

But the portal’s relationship with some agents — and brokerages — remains fraught. This past February, StreetEeasy stopped taking automatic listing feeds from firms. A groundswell of agents from the city’s biggest firms has started to bypass StreetEasy altogether.

In an email to members on Sunday, REBNY said the state will issue guidance “providing further interpretation” of the regulation. “REBNY will be providing more information and interpretation of these adopted regulations shortly.”