real estate coaching why zillow is not your friend

May 29, 2024

Why Zillow’s New Touring Agreement is Harmful for Agents

We’ve long believed that Zillow is bad for real estate agents, and their newest Touring Agreement is another example of why.

Recently, Zillow announced their newest feature called the Touring Agreement, and it’s left many agents confused and even a little nervous. In light of the changes coming due to the NAR lawsuit and the requirement for buyers to sign a Buyer Agency Agreement, Zillow created a non-exclusive touring agreement that is open to all agents and consumers. According to Zillow, “Our Touring Agreement helps lay the foundation for you to discuss compensation and exclusivity once you meet with the buyer in person. By design, it covers touring activities only and expires after seven days.”

This agreement is being promoted as “intended to promote transparency” and make it easier for consumers to arrange showings, but the truth is, it’s a way around the traditional buyer agency agreement that is about to become mandatory, and it essentially makes real estate agents work for free.

Some brokers, like Jason Oppenheim, president of California-based Oppenheim Group, were unhappy with this agreement. “This can’t be what NAR meant,” said Oppenheim. “They’re trying to create a loophole with a nonsense, unenforceable agreement that actually means nothing. The idea of working for free, I don’t know where that happens anywhere else. Everything you’re doing is for free, and you have no exclusivity protections. That’s what they pose it as the right solution to the marketplace, and they’re expecting these same people to be buying leads from them.” (www.therealdeal.com)

According to the agreement, the buyer doesn’t pay any fees for touring services, and if the consumer wishes to enter into a client relationship with their agent, they would sign a Buyer Agency Agreement.

Does this look like a great idea for buyers who want to look at a home without commitment? Is it a great way to give a real estate agent a “test run”? Sure. Is this a means to support agents and help them build their business? Not even close.

But wait, there’s more!

If you go out with a buyer and they buy the house, you’re not going to get paid because the settlement states that whatever your agreement is with the buyer, that’s the maximum you can get paid. If you have your own Buyer Agency Agreement (your own, not with Zillow) that says as a buyer’s agent, you get paid 2% as your professional fee. Now, if you show a home and the seller is willing to pay 3%, you don’t get that extra 1%. You can only get the 2% because that’s what your agreement with your buyer says.

Now, if you show a home using Zillow’s Touring agreement and it says 0% for 7 days, and if you show a listing, the buyer makes an offer, and the homeowner offers 3% as the buyer’s agent fee, well guess what? That leaves you high and dry, because your agreement with that buyer says ZERO. You just sold a home and walked away with nothing, thanks to Zillow.

But wait, there’s still more!

Zillow is taking a 40% referral fee, which actually means they are taking your listing and then reselling it back to you for 40%. The worst thing is that the listing agent doesn’t even get the lead; it’s the other agent who is willing to pay the 40% who gets the lead.

How to Respond to a Client Who Doesn’t Want to Sign Your Buyer Agency Agreement

We recently had an agent ask, “How do you handle the conversation with a new contact who asks why they should sign a buyer agency agreement when they can just sign a touring agreement for 7 days and see homes?” After all, Zillow makes this sound easy for clients, but the truth is these clients are left to their own devices.

Start off by acknowledging that this is an option for them, but there are some pitfalls that come with it, such as:

Clients don’t have anyone representing them. You can say to your potential client, “In fact, Zillow very specifically says in the touring agreement that this is not an agreement between the buyer and the agent. This means that the touring agent’s fiduciary duty is to the seller, so anything that you say to them may be shared with the seller. It’s like if you were being sued, asking the attorney who is suing you to help you with your court case. They aren’t going to help you win; they will help you lose.”

Touring agents won’t do a good job helping clients if they aren’t getting paid. You can say, “It might seem great for clients who want to look at homes without making any commitment to an agent or give the agent a ‘test run’ before committing, but we don’t even know how, or if the touring agents will be compensated by giving these tours, so they will more than likely rush you through the tour so they can go do something that will earn them money to put food on their table.”

Not only is Zillow Flex a bad idea for agents participating, but it’s also bad for agents who aren’t.

Zillow’s 7-day touring agreement can also present challenges for real estate professionals not affiliated with Zillow Flex. Here’s how it could negatively impact them:

Exclusivity Limits Listings Access and Creates a Competitive Disadvantage: Non-Zillow Flex agents are barred from showing these exclusive listings during the critical first week, which means their buyers could be missing out on the home of their dreams. The inability to show all available properties right when they hit the market can make non-Zillow agents appear less effective, potentially undermining their professional credibility and the quality of service they can offer. They could potentially lose clients to Zillow Flex agents who have exclusive access to new listings, affecting their business growth and reputation.

Strain on Client Relationships: Agents may face difficulties gaining new clients and maintaining current client relationships when they cannot provide access to a full range of listings, especially new on-market properties that are bound by the Zillow agreement. For sellers, their home might be on the market longer, because non-Zillow agents are unable to serve interested buyers in their properties immediately after listing, actually limiting or decreasing the number of showings.

Market Manipulation Concerns: Such agreements could be viewed as a form of market manipulation, where a single entity (Zillow, in this case) exerts undue influence over how and when properties are shown and sold. This perception could lead to broader industry pushback and reputational risks, not to mention potential ethical and legal challenges that might arise. Ethical concerns about fairness and equality of access to listings may grow, and such practices might eventually attract heavy regulatory scrutiny if they lead to significant market distortions or if they disadvantage a large segment of the real estate professional community.

The Takeaway

The Zillow 7-day touring agreement negatively impacts real estate agents and consumers alike. Without guaranteed compensation, agents cannot perform at their best, which ultimately disadvantages consumers. This agreement also disrupts the real estate market, particularly affecting agents outside the Zillow Flex network, and could harm the industry’s overall health. All in all, this agreement just isn’t good for any agent, nor their clients, and it’s up to you to voice your concerns to your brokers, and your real estate boards.

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