StreetEasy is at the center of controversy once again.
In the past month, two separate incidents laid bare the latest animosities between the online listings giant and the city’s top residential firms.
The Zillow Group-owned website has found a new way to circumvent brokers and recently overhauled its fee structure to milk more money from New York agents, industry sources told The Real Deal.
“They are overstepping their bounds,” said Brown Harris Stevens CEO Bess Freedman. “StreetEasy needs to stay in their lane.”
Though StreetEasy has been asking agents to submit copies of their exclusive rental agreements for more than a year, so that it can verify the accuracy of listing data, brokerage leaders have become more concerned with the practice.
Specifically, they accused the site of using the confidential information in those agreements to reach out to landlords and convince them to work directly with StreetEasy — instead of their agents.
“StreetEasy has been using the information included in our exclusive agreements to contact owners and landlords directly to pitch for an exclusive on their entire building, circumventing the agent,” read an Aug. 22 email from Douglas Elliman to its agents. A copy of the email was viewed by TRD.
Warburg Realty and BHS sent out similar emails, and Freedman said StreetEasy reached out to at least one of her agent’s clients.
“Maybe it’s a one- or two-off, but I want agents to protect themselves and our clients,” she said, noting that any time there’s an exclusive agreement, it’s between the firm and client. “You have to respect the four corners of the agreement,” she added.
But Stephanie Schonholz, StreetEasy’s director of industry relations, called the emails an “unfortunate misinterpretation” of what the platform’s data integrity team was doing.
“If we have to ask for certain documents and information from agents to verify what they’ve posted, we’re within every right to do that and we should be doing that,” she said. “We have no products or services that are cutting out the agents.”
Overbilling the experts?
Hot on the heels of that kerfuffle, StreetEasy announced in mid-September that it was reforming its Building Expert program, complete with a new fee model. But the platform refused to publicly disclose how much the change would cost agents.
The new and improved version of the controversial pay-to-play program — now dubbed StreetEasy Experts — will allow agents to appear on all listings at the building, and, crucially, only pay a “success fee” if they close a deal from a lead generated by it.
The program first launched in 2015 under the premise that participating agents would pay a fee to have their contact information displayed alongside building descriptions for buildings 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.
Initially, all a StreetEasy spokesperson would say was that the fees would be “based on industry standard referral arrangements.” According to multiple industry sources, referral fees typically range from 10 to 30 percent on sales.
Schonholz later told TRD that the fee is one that “we’ve played off of with our parent company.”
Nationally, in some markets, Zillow has been replacing Premier Agent, which charges upfront fees for leads, with a fee due upon closing. That fee is roughly 35 percent of an agent’s commission, Inman first reported.
Sources from two brokerages said they were told over the phone by the company that the success fee would be 35 percent of an agent’s commission. StreetEasy declined to confirm or deny the claim.
Heated agent reactions
Several agents were shocked to hear about the site’s new fee structure.
“I’m not paying 35 percent for a referral,” said Brad Ingalls, a broker at Sotheby’s International Realty who has used the expert program “off and on” over the past four years. He noted that he will often pay other agents 20 to 25 percent for a referral.
One agent, who spoke on the condition of anonymity, said he would stop using the Experts program if a 35 percent fee is implemented because “it just doesn’t pencil out. I can’t afford it.”
In the case of an agent who has a 60 percent split with his or her brokerage and gets a lead via Experts, if the agent is on the hook for a 35 percent fee, he or she would only pocket 5 percent of the commission.
Even if 35 percent is not the ultimate fee, it seems the cost for agents using the Experts program is going up. And even if StreetEasy charged the lowest standard referral fee of 10 percent, an agent would pay $3,000 on a $1 million sale. Under the previous iteration of the program, upfront fees ranged from $25 to $350.
Earlier this year, the platform hiked daily fees for rental listings and debuted “Agent Spotlight,” in which brokers pay $333 per listing each month to keep other agents off it.
Mark Chin, Keller Williams Tribeca CEO, called it further evidence of StreetEasy’s “predatory pricing.” He compared the relationship between the platform and agents to that of landowners and sharecroppers.
“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.”
Schonholz replied that StreetEasy is “a business like any other business around the country.” Of the “dozens” of agents and brokerages that Schonholz discussed the changes with, none of them raised questions over the fees, she added.
Eddie Shapiro, president and CEO of Nest Seekers International, said he understands why agents would be OK with an increase in cost. “Agents don’t mind giving a percent of something,” he said.
StreetEasy also ran a 700-agent pilot program in the spring to test out the company’s new direction.
Some agents at Triplemint, the startup brokerage that runs off a lead-generation model where the firm gives brokers leads, participated. And the firm’s CEO, David Walker, said he’s in favor of the new fee model.
“Interests are aligned,” he said. “You’re only paying if you’re closing and making money.”
Brokerage heads spinning
Other brokerage execs took issue with the way StreetEasy handled the changes and the fact that their agents learned of it before they did.
StreetEasy sent agents who were previously using Building Experts an email about the new program last month. But the email, which was reviewed by TRD, made no mention of the new fee rate.
Instead, the platform offered agents “free access” until Oct. 15, after which the company notes that brokerages must sign a participation agreement with StreetEasy granting their agents further use.
Leadership at several major brokerages were only contacted days later.
“Every head of every brokerage is furious about it,” said one industry source on the condition of anonymity. “Like their heads are spinning at the audacity of it.”
As of press time, it was unclear which companies would capitulate and sign an agreement with StreetEasy allowing their agents to use the Experts program.
Sarah Saltzberg, of Bohemia Realty Group, told TRD that while the confusion over the fee is troubling, it’s not surprising. StreetEasy has a repeated pattern of keeping agents in the dark, she noted.
“There has to be clarity,” Saltzberg said. “And in my experience, that is not their strength in communicating with the agent community.”