Online Brokerage REX Pursues Litigation Against Zillow & NAR – NMP Skip to main content

Online Brokerage REX Pursues Litigation Against Zillow & NAR

Katie Jensen
May 16, 2022
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The legal battle between REX Home Loans (Real Estate Exchange, Inc.) and NAR continues to heat up, even though REX is reported to have shut down operations.

KEY TAKEAWAYS
  • In March 2021, REX filed an antitrust lawsuit against NAR, Zillow, and Trulia, requesting the federal court to force Zillow and its subsidiary Trulia to stop separating homes for sale into two groups.
  • Earlier this year, NAR counter-sued REX, claiming the company made false and misleading advertisements and statements about its services to deceive consumers.
  • REX's brief — filed May 2022 — alleges that Zillow & NAR colluded to segregate big broker and other association member listings from listings of tech competitors like REX.
  • REX Home Loans retained one high-profile attorney to carry them through the litigation process: David Boies, who has previously represented Al Gore, Harvey Weinstein, and multiple accusers against Jeffrey Epstein.

The legal battle between REX Home Loans (Real Estate Exchange, Inc.), an online brokerage, and National Association of Realtors (NAR) continues to heat up, even after REX shut down operations, according to multiple media reports.

In March 2021, REX filed an antitrust lawsuit against NAR, Zillow, and Trulia, requesting the federal court to force Zillow and its subsidiary Trulia to stop separating homes for sale into two groups. The two groups are those listed by brokers who belong to NAR and those listed by others. However, contractual restrictions require Zillow to segregate listings.

Earlier this year, NAR counter-sued REX, claiming the company made false and misleading advertisements and statements about its services to deceive consumers. The courts, however, dismissed NAR’s countersuit. In the ruling by Judge Thomas S. Zilly, he states NAR failed to allege facts to show how its reputation was specifically and concretely harmed by REX’s allegedly false statements. Zilly shot down multiple attempts by NAR and Zillow to have the original lawsuit dismissed.

In May 2022, REX filed a reply brief against Zillow and NAR over the real estate segregation rule. The brief alleges that Zillow and NAR colluded to segregate big broker and other association member listings from listings of tech competitors like REX.

This brief filing comes after REX filed a motion for an injunction that prohibits Zillow from continuing to segregate listings. Before, Zillow’s web display aggregated all homes for sale on a single web display. The segregation rule was imparted by NAR to benefit its legacy brick-and-mortar member companies. Zillow agreed to follow the segregation rule when the company announced it would become a real estate broker, joining NAR and other broker associations.

After Zillow decided to lock arms with other legacy brokers, its site now places the homes listed by innovators under an "Other listings" tab, which some consumers call the "hidden" tab. The new display by ZIllow forces consumers to search for a separate tab to access homes with lower commissions.

"The segregation rule has no place in real estate," said REX CEO Jack Ryan. "REX is committed to making all listings accessible to all consumers through digital technology and an honest approach to every customer. Zillow and NAR now admit that the segregation rule has no benefit to consumers. REX backs its words with actions. We will always stand with consumers and deliver the best real estate experience through technology and talent, not by segregating homes and coercing consumers. If Zillow and NAR are unwilling to end the segregation rule, the court should end this indefensible rule immediately."

REX alleges in the lawsuit and brief filing that the segregation rule was put in place to protect “outrageously high” commissions brokers collect on homes sold through the traditional mortgage process. Typically, consumers pay 5% to 6% of the home price in commissions when they purchase homes sold through the traditional process. REX states that it harnesses digital technology and predictive analytics to bring commissions down to as low as 2% to 2.5%, saving consumers millions of dollars. 

The segregation rule banishes REX to a hidden tab, though, so consumers are mainly exposed to “egregiously expensive” and “outdated traditional models” that charge homeowners upward of $40,000 to sell a median-priced home in the Seattle area, REX claims.

Although REX Home Loans may have shut down operations, the company retained one high-profile attorney to carry them through the litigation process: David Boies, who has previously represented Al Gore, Harvey Weinstein, and multiple accusers against Jeffrey Epstein. According to a court filing, Boies petitioned the court to represent REX in the matter.

Highlights from the REX filing include:

  • Neither NAR nor Zillow suggests the segregation rule provides any consumer benefit. Zillow admits that ending the rule would improve the consumer experience. This alone establishes ongoing injury to consumers and justifies a preliminary injunction.
  • Zillow cannot dodge responsibility by registering its distaste for the segregation rule. As the U.S. Supreme Court has long held, going along with an illegal scheme is as much a violation of federal antitrust law as the creation and promotion of one.
  • Zillow's continued segregation causes confusion for customers who will seldom find homes listed on the segregated tab and are driven to transact with legacy brokers, many of whom collect 5% to 6% of the home's value in hidden commission costs and fees.
  • The preliminary injunction REX seeks, if granted, would minimize harm to REX during the pendency of this lawsuit, and improve Zillow's website.

"NAR continues to believe REX’s claims are without merit and will vigorously defend ourselves," a spokesperson from NAR said. "NAR is proud to be affiliated with the hundreds of local broker marketplaces around the country which promote equity, transparency and market-driven pricing options for the betterment of all consumers. NAR remains confident the pro-competitive, pro-consumer local broker marketplaces serve the best interests of buyers and sellers and will ultimately prevail."

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