Home Brokers & Agents Does Fiduciary Duty Require Putting Listings on Zillow?

Does Fiduciary Duty Require Putting Listings on Zillow?

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Responsibility Duty

A really interesting discussion broke out in the comments section of my post last Wednesday titled “The MLS Is Not Doomed! But Most of Them Are.”  A reader with the alias DeRidder LA Real Estate, LLC injected everybody’s favorite topic, Zillow, into the conversation:

Disallow compilations of your MLS data to be sent to Realtor.com, Zillow, or Trulia. Disallow your membership to post homes for sale on Realtor.com, Zillow, Trulia, or any other entity in the future that rises to threaten the profession. An MLS with brokers focused on protecting their market can keep ZTR out. Don’t believe me? I already see it being doing in 3 geographical markets, with two of them being fairly large markets.

All you idiots that posted homes for sale on Zillow and Trulia are the cause of this chaos, along with all you idiots that pay ZTR each month for advertising. Did you guys not see this shit coming 5 years ago? I guess not. I’ll admit I’ve been an idiot before. I have never purchased advertising from ZTR, but I have posted homes for sale there. I wised up though, and you should too!

Which then led to a remarkably civil discussion between DeRidder, me, and a couple others, which, in turn, ignited this question:

In 2017, does fiduciary duty require that the broker put listings on Zillow?

First, a few caveats. I suspect that people will disagree sharply here. But I really would like a civil, measured debate and discussion on this. So for this post, I’m going to warn everyone up front that name-calling, personal attacks, etc. simply will not be tolerated. I will delete the comment and consider banning you from the site if you go out of bounds. You can hate on Zillow the company all you want, but if say Jay Thompson comes by and you get into personal attacks (“shill!” and so on), I will excuse you from the grownup table.

By the way, I’m singling out Zillow upon request from DeRidder, who asked that we focus on Zillow instead of “good portals out there with buyer eyeballs who aren’t trying to take over real estate.” Because I’m a sweetheart, I agreed, although I disagree that Zillow is somehow different from portals like Realtor.com and Homes.com and Movoto and… you get the picture. Given Zillow’s vast lead over all the other portals, it’s fair in my eyes to cast Zillow as the representative of all the portals out there.

Oh yeah, disclosure time: I have a business relationship with Zillow, but of course, they do not control or even know what I’m writing about here — until they read it here like everybody else.

With those caveats in place, let’s get into it.

Fiduciary Duty, Defined

First, let’s be clear on what fiduciary duty means. Because it isn’t clear to me that many brokers and agents know what that means.

The Wikipedia definition is most accessible to laymen, so let’s start there:

A fiduciary duty[4] is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal“): such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from his position as a fiduciary[5] (unless the principal consents).[6]

This translates to: “Put your client’s interest ahead of your own.” Now, look at this from NAR Legal:

The REALTOR® Code of Ethics’ Article 1 requires REALTORS® “to promote and protect the interests of the client.” REALTORS® must always keep this in mind when recommending a pocket listing to a client. Even beyond the Code of Ethics, state law generally dictates that real estate agents owe a fiduciary duty to their clients, meaning real estate professionals must place their clients’ interests above their own and act in the best interests of their clients at all times. [Emphasis added]

Obviously, fiduciary duty does not mean that the fiduciary cannot benefit financially from the relationship. Otherwise, no lawyer would ever take on a client, nor would any real estate broker ever be able to earn a commission. It does mean, however, that apart from the fees and benefits that the client clearly understands ahead of time that the fiduciary will get from the relationship, the fiduciary puts the client’s interests first, even above his own.

Fiduciary Duty: Pocket Listings and Coming Soon Listings

The above quote from NAR Legal actually comes from an article entitled “Law & Policy: Professionalism and Pocket Listings.” Whether we call them pocket listings or Coming Soon listings, we’re talking about properties that are marketed without being put into the MLS. Since the MLS is where all of the professionals in a given area go to find out what’s for sale, putting a property into the MLS is the equivalent of putting it on the open market.

NAR Legal rightly points out that fiduciary duty requires brokers and agents to put the client’s interest first. Accordingly, in some situations, pocket listings and Coming Soon listings are entirely appropriate and legal. For example, in the high-end luxury market, sellers often don’t want others to know they’re putting their house on the market. For these sellers, confidentiality is more important than wider exposure via the MLS. When a quick sale is a seller’s top priority, then Coming Soon listings are justifiable. In those cases, the seller wants to get a deal done fast and understands that might mean leaving money on the table.

In order to do an off-MLS listing without violating the Code of Ethics and state law, the broker must thoroughly discuss doing that with the client and get prior approval (usually in writing) to leave the property off the MLS. NAR Legal states:

When an agent recommends a pocket listing to a client, it is crucial that he or she thoroughly discuss with the seller the pros and cons of listing a property through the MLS. The agent should go one step further and be sure that the seller understands the benefits being waived by not including the property on the MLS. In general, the MLS offers sellers the greatest exposure of their property, allowing it to be actively marketed to every real estate agent belonging to that MLS. In addition, by listing on the MLS, the property may be downloaded to and displayed on third-party advertising sites used by the general public. Withholding a property from listing on the MLS significantly diminishes these marketing opportunities, which may result in reaching fewer potential buyers and a longer time from listing to selling the property, and, perhaps at the core of most sellers’ minds, it may not yield the highest price for the property. [Emphasis added]

Just in case you think it’s just NAR that feels this way, here’s a column entitled “Off MLS or “Pocket” Listing? You’re at Risk!” from the legal counsel of HAR:

You get the picture? This current love affair by some with “pocket listings,” meaning property listed with a REALTOR® who in turn does not place it on the MLS, can invite trouble. In fact, this issue of pocket listing may be the greatest legal risk facing REALTORS® today.

Why? Once you have taken a listing, you have created the highest level of trust in our legal system: the fiduciary relationship, a “special relationship of trust.” A relationship created to help sell a property on the market. Market access is best provided by the MLS, with listings exposed to other brokers, agents and their buyers, as well as listings routed to public websites for consumer access and review, versus unknown and minimal exposure from a pocket listing. No jury would find that you fulfilled your fiduciary duties by choosing to sell a property under a pocket listing that results in limited exposure and limited buyers. [Emphasis added]

HAR’s legal counsel also notes that your insurance might not cover this kind of liability:

A seller may ask you a month after the closing on a property, “Why did you ‘pocket’ my listing, and not put it on the MLS like my neighbor’s property who received a higher price for a similarly situated property?” Your response might be to call your liability carrier to report a new claim. Your insurance company might, however, take the position that intentionally leaving a property off of the MLS is not covered, i.e., no REALTOR® should be that careless.

Scary, huh?

Well, it’s 2017 y’all and consumer behavior has changed significantly in the last ten to twenty years. Everything said above in relation to the risks and responsibilities of taking off-MLS listings applies with full force to refusing to market the home on Zillow.

Market Exposure, 2017 Edition

We simply cannot deny that in 2017, Zillow has the buyer eyeballs. Even DeRidder admits to that fact of life. In Q3, Zillow had 165 million monthly unique users. No one else is even close.

We also know that in 2017, consumer behavior has changed. From the NAR 2016 Profile of Home Buyers and Sellers:

  • For 44 percent of recent buyers, the first step that they took in the home buying process was to look online at properties for sale, while 17 percent of buyers first contacted a real estate agent.
  • The typical buyer who did not use the internet during their home search spent only four weeks searching and visited four homes, compared to those who did use the internet and searched for 10 weeks and visited 10 homes.

One does wonder what the 39% of buyers who didn’t look online at properties and didn’t contact a real estate agent did first. Read Home Buying for Dummies? Get prequalified for a mortgage? Beg mom and dad for a loan to make the downpayment?

In any event, that’s NAR’s study. Another source, the real estate CRM provider Contactually, says that 80% of all home buyers are searching online.

Furthermore, in 2016, 94% of Millennial buyers — who make up the largest group of first-time homebuyers, like ever — used the internet. And critically for our discussion is this set of facts from NAR:

Real_Estate_in_a_Digital_World___Real_Estate_Broker___Millennials

That was in 2014. Do we think that the percentage of people who found the home they ultimately purchased increased or decreased over the last three years?

But, Rob… Apples and Oranges

Given the above, it seems like a pretty strong argument that a listing broker who ignores Zillow is not providing maximum market exposure to his seller client. But there are counter-arguments, and DeRidder makes it in the comments:

A suit about not listing on Zillow would be drastically different than a pocket listing suit. Just so the audience knows, a pocket listing is when a real estate brokerage keeps a listing in house in an effort to sell the listing with a double-sided commission. That’s a far cry from a real estate brokerage not listing on Zillow because competition from Zillow has harmed their business.

The goal of a pocket listing, according to this line of reasoning, is to double-end the deal: get both the buyer and the seller. That’s quite different from refusing to help a competitor like Zillow who is harming one’s business. DeRidder continues, after a back-and-forth with Drew Meyers (a former Zillow employee):

Zillow is not part of my marketing plan, however I completely respect your preference, or any other seller’s preference, to have your home listed on Zillow. In that case if my company was not including Zillow in the marketing plan I would recommend other real estate agents who would perhaps be able to accommodate your preference.

So, what do we make of this line of reasoning?

No Difference in Fiduciary Duty

I don’t see the difference, at least from a legal standpoint.

First, the goal of pocket listing is not necessarily double-ending a deal. In many states, dual agency is actually prohibited under the law. Plus, most of the pocket listings and Coming Soon listings end up being a cooperative transaction where someone else who is in the listing agent’s network brings the buyer. This is actually pretty common in luxury markets where the number of people who can afford a $40 million oceanfront mansion is tiny, and so are the number of agents who know such buyers.

Second, and more importantly, fiduciary duty specifically requires that the fiduciary — in this case, the broker and agent — put the beneficiary’s interest first. NAR specifically states that the REALTOR is to place the client’s interest above his own interests and act in the client’s best interest at all times.

That a broker considers Zillow to be a competitor harmful to his business is irrelevant when it comes to fiduciary duty. In order to live up to that “highest standard of care,” the broker must do what is in the client’s best interest, even if that means helping a competitor harmful to his own interests.

Disclosure Requirements?

Accordingly, I wonder if the disclosure and discussion requirements for refusing to put listings on Zillow mirror the requirements for taking a pocket listing. DeRidder rightfully admits that marketing on Zillow is not part of his strategy, so if clients want that, they should find some other company/agent.

Unfortunately, that isn’t where the inquiry ends, is it? Rephrase the language of the HAR legal counsel from above this way:

A seller may ask you a month after the closing on a property, “Why did you limit exposure to my listing, and not put it on Zillow like my neighbor’s property who received a higher price for a similarly situated property?” Your response might be to call your liability carrier to report a new claim. Your insurance company might, however, take the position that intentionally leaving a property off of the number one website and mobile platform is not covered, i.e., no REALTOR® should be that careless.

Let’s also rephrase NAR’s requirements of the agent before taking a pocket listing:

When an agent recommends not marketing on Zillow to a client, it is crucial that he or she thoroughly discuss with the seller the pros and cons of marketing a property on Zillow. The agent should go one step further and be sure that the seller understands the benefits being waived by not including the property on Zillow.

Seems to me that simply telling the client that you don’t market on Zillow is inadequate to fulfill your fiduciary duty. You must thoroughly discuss the pros and cons of not putting the property on Zillow, and be sure that the seller understands the benefits being waived.

So, just like with off-MLS listings, before you refuse to syndicate the listing to Zillow, you will probably need the seller’s agreement in writing.

Obviously, nobody is doing any of that today, or required to do any of it. Question is, should they?

What Are the Cons of Marketing on Zillow for the Seller?

I can’t see how the answer is anything other than, “Yes, you should.”

The key concept in both the off-MLS and no-Zillow cases is reducing market exposure in order to achieve some goal of the client or deliver some benefit to the client.

We’re all agreed as an industry that convincing the client to market the home as a pocket listing in order to double-end the deal is a no-goodnik violation of the Code and the law. We’re all agreed that convincing the client to do a Coming Soon listing so that you can do the deal only with your friends and avoid having to cooperate with a competitor is a no-no.

“You’re forcing me to benefit a competitor who harms my business” was and is never a valid reason to breach one’s fiduciary duty to do what is best in the client’s best interest. If you’re going to reduce market exposure to the seller’s property, then reducing that market exposure has to be in the client’s best interest and the client must understand what he’s giving up.

Therefore, the core issue is when it is in the client’s best interest not to get market exposure via Zillow. Just as in the case of off-MLS listings, if the broker must thoroughly discuss with the client the pros and cons of putting the listing on Zillow, you have to discuss both the pros and the cons? So what are the negatives to the seller for marketing a property on Zillow?

We saw that in the off-MLS case, there are circumstances — e.g., privacy — where not putting the property on the MLS is in fact in the client’s best interest. We also see in some cases that doing a “Coming Soon” may in fact be in the seller’s best interests:

The data shows that properties marketed as “coming soon” before being listed in the multiple listing service (MLS) tend to sell faster than MLS listings that never receive “coming soon” promotion.

In both of those cases, the broker is fully justified in not putting the property on the MLS, with the understanding of, and with the approval from, the seller client.

What are the equivalent considerations for not putting a property on Zillow? I can only think of one: the Zestimate.

Maybe if the Zestimate is consistently way below the actual market estimate of value for the area (not uncommon in nondisclosure states, like Texas), it would be in the seller’s best interests not to put their home on Zillow where uninformed and unrepresented buyers would wrongly believe that the home is way overpriced. I could see that reasoning.

Do any other situations exist that would justify not marketing the property on Zillow? Let’s hear it!

Call for Expert Opinions

While I realize we may get a more than usual number of temper tantrums in the comments of this post, I’d like to reiterate that I’m hoping for civil discourse on this issue, especially from those people with expertise in this area. (I’m looking at you, MLS and real estate lawyers.) I’d also like to hear from brokers and folks who have been dealing with agency and fiduciary duty issues for years and years.

If refusing to market on Zillow is not the same thing as taking a pocket listing, from the standpoint of fiduciary duty, why is that? What’s the difference?

If they are the same today given the massive change in consumer behavior, do brokers and agents who choose not to market on Zillow face liability from unhappy sellers? If so, how would they minimize that?

What are the circumstances and considerations for when it is not in the seller’s best interests to put the property on Zillow?

The floor is yours, ladies and gentlemen!

-rsh

76 COMMENTS

  1. I have a page in our company presentation book. To update your numbers (from NAR survey of home buyers and sellers 2016) – Buyer’s found the home they purchased: Internet 51%, Realtor 34%, Sign 8%, and then it falls off (print media 1% or less).
    Now to your discussion. Zillow is Advertising, ZTR, company, etc is ALL advertising. We have a fiduciary obligation to sell the clients home using multiple means of advertising. 2 decades ago, this would include (or primarily be) Newspaper and MLS. Back then the MLS was a mysterious thing many clients may or may not understand. Now, they may misunderstand what the MLS is. It would be easy for a client to see the MLS as the “internet”, ZTR is the “Internet”, and all internet automatically communicates, right?
    2 decades ago, agents would explain whether a home would go in the paper or not, that it could be an extra charge, and the Listing agent would PAY to advertise a property. I contend all ZTR has done is shift WHO is paying for the advertising. As a Listing agent I no longer have to pay for this advertising, but the BUYER agent does. FREE ADVERTISING (for listing agent anyway). And just like the paper, I could get a phone call, or the buyer agent will.

    Some will contend the MLS isn’t advertising – that it exists to offer cooperation and compensation the the buyer agent. Very true, but I can make that offer without a single picture of a home. I say the MLS is advertising a home to Buyers agents and enticing them/their clients to look at the home through photography, descriptions, details.

    SO – at the end of MY day – our fiduciary duty is to ADVERTISE our listed homes to prospective buyers, and discuss why we do or do not use ALL forms of advertising, including ZTR, Home books, newspaper, direct mail, MLS, radio, television, etc. I see no reason to put ZTR into any other special category of advertising. Whether we like them or not, it’s just another advertising vehicle.

    If you’d like to see the page from our company listing presentation used to discuss where and how, email me.

    • As to the MLS being advertising, interesting take. It probably varies by area, but in most of Western Washington the NWMLS’s public site is really pretty basic, and probably not used by very many people. Some of the various brokers sites though are really very good–and being on those sites is clearly advertising. So it’s the ability to publish other brokers’ listings which is the advertising of the listing by the MLS.

  2. The “little referenced fact” about the Supreme Court’s Nov 21 2016 decision in Horiike v Coldwell Banker is that it only held that the Listing Agent owed a fiduciary duty, but sent it back to the trial court to figure out if the Agent had, in fact and as a matter of law, breached that duty. The Code says the duty is one of “utmost care, integrity, honesty and loyalty;” terms that have not been precisely defined. Unfortunately, all legal tests are applied retrospectively, leaving it to the judgment of the Agent to forecast what are the potential consequences – good and bad – of choosing to list on Zillow, et. al. Proving that the principal would have received a higher price (or not) based on the exposure (or lack thereof) would be a challenge, and will fall prey to that ephemeral standard known as “reasonable,” and will continue to evolve over time as new portals, platforms, and software come online. For now, as a practical matter, it is the basis of a good and honest discussion with the client as to the pros and cons, some form of a written acknowledgement that the discussion took place, and affirmative declarations that the decision – ultimately — is up to the client.

    • An excellent point, Jeffrey:

      “For now, as a practical matter, it is the basis of a good and honest discussion with the client as to the pros and cons, some form of a written acknowledgement that the discussion took place, and affirmative declarations that the decision – ultimately — is up to the client.”

      So are you agreeing that the decision not to syndicate to Zillow is the equivalent of the decision not to put the listing into the MLS as a practical matter, requiring the same kind of discussion and written consent of the seller?

      PS: I think the holding of Horiike v. Coldwell Banker is different than your impression of it. I wrote about that here: http://www.notorious-rob.com/2016/11/quick-followup-on-horiike-v-coldwell-banker-ca-dual-agency-case/

      • “So are you agreeing that the decision not to syndicate to Zillow is the equivalent of the decision not to put the listing into the MLS as a practical matter, requiring the same kind of discussion and written consent of the seller?”
        There’s that word again – “equivalent.” I’d say “similar,” but not identical, due to the contractual relationship of licensees with MLS organizations in their area, and the local, customary practices of realtors and the nature of the market for that type of property.
        As to your excellent blog on Nov 22 regarding Horiike, I think you did a great job summarizing the spectrum of possible interpretations, and am bemused by the “shrug” response of CAR after taking a strong amicus position in opposition to the Court of Appeal ruling – which was upheld by the Supreme Court. In classes I have conducted for licensees since then, there continues to be considerable confusion over what is meant by the duty to “LEARN AND disclose.” Most licensees have been trained to disclose, but to AVOID learning (i.e., “investigating.”) I still think it will be very interesting, if Horiike proceeds to trial, whether they conclude on the facts that what the LA did (or didn’t do) was a breach of the FD.

  3. You wrote: “A suit about not listing on Zillow would be drastically different than a pocket listing suit. Just so the audience knows, a pocket listing is when a real estate brokerage keeps a listing in house in an effort to sell the listing with a double-sided commission.”

    Assumption here, but not necessarily true. All commissions are negotiable and an Exclusive Agency listing does not always command a “double-sided” commission. Nor is that always the motivation. (And even if it were, so what?) The sooner Realtors® stop patronizing buyers and sellers by foisting the “contest” model on them, the more stable the residential brokerage business will become.

  4. This varies by state. In Washington brokers only owe defined “statutory duties” to their clients, and in the case of sellers one duty is “(e) Unless otherwise agreed to in writing after the seller’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a buyer for the property; except that a seller’s agent is not obligated to seek additional offers to purchase the property while the property is subject to an existing contract for sale.” RCW 18.86.040. Note it doesn’t say do everything possible, so I don’t think failing to list on Zillow would be a statutory violation, at least if the reason for not listing on Zillow is basically laziness or ignorance. If it’s for other reasons it might violate the loyalty provision.

    What I’ve believe is that most local brokers not on Zillow are not on that site because they are lazy, or because they don’t know how to get their listings on Zillow. But there are a not insignificant number of brokers who don’t like Zillow because it means that a buyer is more likely to call someone else rather than them. I’m not really sure I understand that, because if a buyer sees a listing on another brokerage site, that buyer is more likely to call someone from that brokerage, rather than the listing agent. But basically they want to try to flip the buyer to being their client, if not on their listing on another property, and they think Zillow hurts their prospects. I think such brokers are doing a considerable disservice to their clients, and probably would be in violation of Washington’s loyalty duty (and fiduciary duty in states where that exists).

    The real solution though is sellers need to be educated that they want their listings on Zillow, Trulia, Realtor.com, etc., and to only select brokers whose listings appear there. Ironically, buyers need to be taught not to look at such sites because not all listings will be on those sites in a timely manner, if ever. But the best solution, IMHO, is consumer education.

  5. My opinion is yes, like it or not, we have an obligation to place our own bias on the back burner to ensure our clients (sellers) have all of the internet exposure available to them. Yes I see the writing on the wall, we are loosing ‘absolute control’ over our information however this is the age of fast, quick and easy to find information whether it is looking for a new house or how to change your oil. The internet is where WE ALL go to get started….

  6. What I don’t quite understand is that this happens every day in commercial real estate. I know of companies who keep the listings in house for 30 days before making them available to any other brokers publicly. Additionally only some fraction on inventory is on any of the big 2 national portals and each region has it’s own standards. CRE has never fully embraced the broker to broker and broker to customer model and I am note sure if that’s good for the consumers but keeps the brokers employed.

    • John – commercial and residential real estate are like investment banking and consumer banking: theoretically the same, but practically two different industries.

      One thing about CRE is that the universe of potential buyers is tiny, just like high end luxury residential real estate. So pocket listings are more of a norm there than in residential.

      A mentor of mine used to say about commercial real estate, “If it’s on the Internet, it’s got hair on it.”

      • Rob ~ I happen to be in commercial real estate. And just to be clear about the two different industries? The two are not that different when it comes to commercial apartment buildings which just so happens to fall under the commercial RE umbrella. But yet local giant companies such as Marcus & Millichap live off not marketing their listing to the public in order to double end their listings. And one mentor saying “if it’s on the internet, it’s got a hair on it” doesn’t make it so. Since 1990 I’ve purchased plenty of commercial apartment building by first searching the MLS & LoopNet (the internet,) and all of them I’ve purchased have been money earners and great investments.

        I can’t tell you how many times I haven’t been able to get my offer submitted because the agent refused to let me represent myself as the buyer. Time after time again I’m told that unless I’m strictly acting as a principle I can forget about buying the property? And I would argue there’s no way the listing agent is living up to their fiduciary duty to the seller!

  7. So let’s just keep this one simple. “Market my home to the greatest number of people, in order to get the most amount of money, in the least amount of time with a minimal amount of hassle.” Other than that, it’s your job listing agent / broker to fill in the blanks on how to fulfill these core objectives for the Seller. And is what you do today your final answer? In the case of residential real estate, there are tragically 1.2MM ways to “get there.” A different way for each IC that does things uniquely from the next IC. And that wide range of “service variety” my friends, is not always seen by the consumer as a good thing. So what? So plenty. This situation has now become the “wide open door” for others to “walk right into your world”, grab the product (the listing) and ultimately own the business.

  8. The horse (ZTR) has already left the barn. Like it or not, Zillow is a mammoth site where a lot of consumers go. Failing to list property on it or any other site in order to “thumb your nose” at it, does a huge disservice to the seller. Likewise, using the “Coming Soon” technique to collect buyer’s names before the property is placed on the market violates the law in many states and certainly the very foundation of the Realtor organization. If its for sale, it should be listed everywhere possible.

    • Yes, Bryn – I agree. I explain to sellers that when I post their listing on ZTR – I have blocked them from getting the data off the MLS – ZTR will add things that may be detrimental to the seller’s interest, ie; What the seller paid for the property (none of anyone’s damned business) using idiotic comps to justify their Zestimate, (which is frequently waaay off the mark and buyers see a $200,000 home with a Zestimate at $125,000) wrong locations on their maps.
      When explained and shown to them, I have a form directing me to either post the listing or not post the listing, check the box and sign.
      Brokers: You are not required to allow these charlatans to gather your data from the MLS.

      • Many broker sites will have data on what was paid and even a link to an automated valuation model. You can’t keep that information from all but the most uninformed buyer. That information typically comes from public records, not MLS data, and when I represent a buyer it is their damn business. I don’t know why you think it wouldn’t be something a buyer needs to know.

        I would hope that your explanation to sellers is a bit more balanced than what it appears, and that you explain to them that they only need one buyer and if that buyer is looking on Zillow they won’t find them if their listing is not on Zillow.

  9. Is this an early April fools joke? A fiduciary duty? Why not just give brokers a mandate (NAR) and provide them a list of all the things they need to do in order to service their client. I don’t think “check the box marketing strategies” are where the business is going….in fact, IMO, it’s going the other way……… 🙂

    • Heh, to be fair, the whole fiduciary duty thing isn’t from NAR but from state licensing laws that make the broker & agent a fiduciary of the client. In states where you have “transaction-only agency” type of a deal where the broker/agent does not have to be a fiduciary, then obviously none of this applies. Code of Ethics will still apply to those who are REALTORS, of course.

    • Ok, read it. Your question: “What are the circumstances and considerations for when it is not in the seller’s best interests to put the property on Zillow”?

      IMO, when the broker/agent and their client, or just the homeowner themselves, have decided on an alternative marketing strategy….and there are many choices now and it seems more are on the way.

      With a 5 year window, I’ll take the other side of any model that focuses on the sharing of MLS data. Selling a commodity makes differentiation a tough thing to achieve…I’m a Blue Ocean guy and I don’t see anything Blue in these existing models….but, I’m just one guy 🙂

  10. Notorious~ I guess the real gray area falls under the agents FD responsibility and what it takes to get the best and highest price in the shortest amount of time. With that said, one could argue that if you’re not doing everything (& I mean “everything” possible)- you’re not doing enough!
    And let’s not forget before Z; agents did just fine selling homes and holding up their FD responsibility to sellers. Let’s not forget “now” that we have Z we also now have the MLS allowing public access (which offers the most accurate and complete listing data.) Let’s not forget that the public can search RE agent IDX websites to attain listing data (which comes straight from the MLS.) Let’s not forget that Z’s data is often flawed/wrong and incomplete, and if consumers knew that (which they don’t)- I have a feeling they would feel cheated. Because, after all, Z claims to be the so-called leader in RE “but in reality” Z is merely a media website that does not offer the most accurate and complete listing data.
    And as far as eyeballs on Z. Sure Z has spent ridiculous money to make sure they attract a lot of eyeballs. But it is fair to say (and proven) Z overstates the traffic on their site “plus” a lot of their traffic are renters, looky-loos or those complaining about the inaccurate Zestimate placed on their home.
    I would argue all day long Z is not the best place for consumers and we have an FD responsibility to let consumers know that. Just because Z did a great job working the SEO equation doesn’t mean it is the best place to search and in reality, Z is not the best place to search for homes, especially if you want the most accurate and most current listing data.

    Thanks for the vine!

    • Thanks Jon – but I kinda feel like you’re slaying straw men monsters here… 🙂

      There has never been the claim that a REALTOR breaches fiduciary duty if she doesn’t do *everything possible* to market the seller’s home. There has been — as you can see from the articles from NAR and HAR that I quote — the widely-supported claim that NOT putting the listing on the MLS is a breach of fiduciary duty because:

      1. Wider exposure is always in the client’s best interest, UNLESS
      2. The client has other interests which necessitate narrower exposure, such as privacy.

      The REALTOR is not allowed to reduce exposure to the property for his/her own benefit, because fiduciary duty requires that you put the client’s interests ahead of your own.

      So the current understanding of fiduciary duty in real estate relevant here is that the REALTOR must:

      (a) thoroughly discuss the pros and cons of narrower exposure not for you but for the client;
      (b) make sure the client understands the consequences of narrower exposure; and
      (c) get the client’s approval in writing.

      So, is that analysis correct as it comes to the issue of pocket listings and off-market Coming Soon listings?

      If it is, why is it different for not marketing on Zillow?

      • Rob~ thanks for the response.. And you’re right – to make a point I was taking it too far by being so literal.. That’s why I feel it is crazy to say agents must list on Z or else risk breaching their fiduciary duty… As a matter of fact. I feel if I don’t explain why listing on Z is a bad idea and can potentially hurt the sale – then I am breaching my FD…

        BTW: ALWAYS LOVE THE MV’s… You rock!

  11. Rob, before I get started I would like to tip my hat to you for allowing me the privilege of using your blog to openly discuss important real estate issues such as these. Thank you.

    Rob, I believe it was you injected thought-provoking content into the previous thread that lead to steering the conversation down the path that it went. The convo was originally about survival of the mls in this market. That’s okay though. That’s typical of lots of blog conversations to start off on one topic and migrate to another. However, unlike the previous thread where you sort of sat back and moderated, I see in this thread you have taken a totally pro-Zillow position. That’s interesting considering you work for Zillow. I can’t help but to be suspicious that Zillow, given their size, wouldn’t have a hand in the social internet to try to drive conversations to an endpoint favorable to them. I know that many big companies do this and some have even been caught doing it. Belkin is an example of one such company who got caught trying to manipulate their online reputation. You noted your association with Zillow to the audience in your caveats though, and I’ll take that as fair enough. To begin…

    There you go again trying to equate a pocket listing to a broker’s decision not to list on Zillow.

    You’re carried away with my equating using pocket listings to double-end a deal. If one were to read the previous thread they would clearly see I was arguing this from a derogatory standpoint when drawing the comparison of cooperating with brokers. You know as well as I know that some brokers use pocket listings to double-end a deal. We all know that. To correct the record, you quoted me only from the derogatory standpoint of pocket listings. It should be noted that I also said, “I suppose there could be circumstances where a pocket listing might be a good fit”. In fact, Rob, you named a few perfectly plausible examples of pocket listings in this thread. Be fair. And again, to draw comparison of a broker’s decision not to list on Zillow with that of a pocket listing is just plain wrong, and full of errors.

    With regard to pocket listings you say, “Everything said above in relation to the risks and responsibilities of taking off-MLS listings applies with full force to refusing to market the home on Zillow.” Balony. I explained in the previous thread the difference between a pocket listing and refusing to list a home on Zillow. Yet, you continue to usher in this concept that not listing a home on Zillow is strkingly similar to a pocket listing. It is not. Not even in the same universe. Just so your readers don’t start buying into to your equating of pocket listings with deciding not to post on Zillow, I re-quote myself from the previous thread:

    “I don’t see how deciding against listing on Zillow has any similarity to a pocket listing. I don’t know how to argue that a pocket listing is in the best interest of a client. I suppose there could be circumstances where a pocket listing might be a good fit, but I’ve never had a pocket listing. In starch contrast, I invoke the help of every broker within my reach when trying to sell a client’s property. I send out emails to all of them that beg for help selling including the offer off coop. In some cases I offer bonuses to brokers at my own expense to try to get a property sold. A pocket listing is the complete opposite of the marketing efforts just described.”

    To sharpen my point even further, a pocket listing, in its derogatory nature would be when a broker tries to double-end a deal. The result of this is that fiduciary duty may be breached because the client may not get his property sold as quick or as much as it may have sold for. Rob, mathematically see your argument as this:

    [(BrokerListing)-(ListOnZillow)] = [(PocketListing)]

    If the equation above mathematically described the marketing approach a broker uses then I may begin to see your argument that perhaps fiduciary duty is lacking. However this is the real life left side of the equation we are talking about here:

    [(BrokerListing)+(MarketingEfforts)-(ListOnZillow)]

    The above left side of the equation does not equal a pocket listing. Hence therefore,

    [(BrokerListing)+(MarketingEfforts)-(ListOnZillow)] != [(PocketListing)]

    The term identified above as MarketingEfforts offsets any consideration of pocket listing because the listing is being shared in so many other places. As such your comparison of pocket listing to deciding not to post on Zillow does not belong here.

    A pocket listing is in no way related to deciding not to post on Zillow. Your attempt to marry the two concepts together does not fit. I don’t see a whole lot of support coming from your pocket listing comparison. If you’re trying to say that agents need to be careful, then okay, let’s be careful with pocket listings. I move forward in my argument with the pocket listing spurious correlation removed from my consideration.

    To focus squarely on the question of if fuduciary duty requires putting listings on Zillow:

    I argue that “You’re forcing me to benefit a competitor who harms my business” is a perfectly valid reason not to list on Zillow. Without our businesses, we will be out of business, and then there will be no way to provide fiduciary duty to anybody. I conceded all of your points about pros/cons of marketing on Zillow, but brokers should not list on Zillow when it’s a suicide mission. It is a suicide mission as evidenced by what has transpired in the past 5 years or so. Zillow is taking over, and I think we can all agree on that. I continue to the next point. Nothing about fiduciary duty requires a broker to harm himself.

    But Zillow is a big website with bunches of visitors! While I I’m first to admit that Zillow has a ton of eyeballs, your offering Zillow’s unique visitors of 165 million per month is just completely off target. There are 319,000,000 people in the U.S. The number of 165 million unique visitors suggests these are visitors are actual people when in fact they are unqiue ip addresses. One person may (and usually does) have several different electronic devices with different ip addresses. Furthermore those ip addresses are usually dynamically assigned from a vast pool of ip addresses that vary in numbers depending on size of the subnet. My phone changes its ip address several times a day. If I visited Zillow each time my ip address changed then it would look like five unique visitors. So let’s not get the audience thinking 165 million different people visit zillow each month, because I’ll bet they don’t. A more fair ascertion would be to divide one’s market area by the total number of people in the U.S. My market area is around 30,000 people. If I assume my market area receives an equal share of those 165 million unique visitors then the number of unique ip addresses that visited Zillow in my market is 15,500. 15,000 is a fair number of eyeballs, but that number pales in comparison to the collective amount of traffic from all other portals including regional broker websites. I’m sure there could be tweaks to the calculation, but I had to put it out there so that we don’t get carried away with prequalifying Zillow just beneath your header titled “Market Exposure, 2017”. In short, Zillow ain’t all that, and I’m not looking to help them be more either. Especially when they threaten my existence.

    I see more bad numbers. You give general statistics about how many search online for a house. We all know about that. Beneath the header titled “Market Exposure, 2017” you only mention Zillow in the first two-sentence paragraph. The only usable information is the 165 million uniques. The rest of the infomration is just about people searching online for houses. We already know that. The information I have complied is that most people use several websites to search for homes. Luckily, it seems that google is still the number 1 place people begin their real estate seach, not Zillow. I’m not looking to help Zillow change that statistic.

    But wait I still have to list on Zillow as a fiduciary duty because Zillow has lots of eyeballs. In the definitions Rob gives fiduciary duty specifically states the fiduciary must not profit from his position as a fiduciary unless the principal consents. Essentially real estate brokers profit from their role as fiduciary, however, we all know that the right to sell agreement with the client permits such profit.

    Now, consider what fiduciary duty does not say. Fiduciary duty does not say that a fiduciary must suffer in any way from his position as a fiduciary. There are plenty of brokers whose websites have suffered losses in traffic because of Zillow’s presence. Lots of people have said Zillow built a better mousetrap, and maybe they did. I, on the other hand, know that Zillow got in on the ground floor at creating a national homesearch website. Before Zillow/Trulia there were mostly local or regional websites with real estate websites. Then along comes Zillow who trick all of us real estate brokers into giving them our data for free, then they used this data to build a national website. Now, Zillow threatens the real estate profession as a whole. Zillow over the years have stolen the prominence from real estate brokers. Those of you reading this thread that understand what prominence is are likely to also understand that without prominence everything else is lost. Zillow have created an atmosphere that has redirected millions if not billions of dollars away from the real estate profession. That is serious damage from my perspected. Real estate agents have suffered tremendously at the hands of Zillow. Fiduciary duty does not say that the fiduciary must suffer in their role as a fiduciary.

    Folks, you would not take your client into a neighborhood where you felt your safety is at risk, even if your client felt his safety was just fine. The reason you wouldn’t is because you believe you may suffer injury. You would not take your client to a homeselling seminar hosted by your competitor. The reason why is because you may suffer loss of loyalty of your client. Most of you would not purchase a billboard your clients’ home for sale even though it may sell your clients home faster because you may suffer financial losses. When agents list themselves on a billboard instead of their client, when the client would clearly have benefited from the billboard, is the agent breaching fiduciary duty? No, because the billboard will hopefully gain more clients to provide his fiduciary duty. And lastly, you may no longer list your clients’ homes for sale on Zillow because Zillow has made you suffer loss of your prominence. Not listing on Zillow allows the agent not to suffer loss of prominence in the effort to stay in business and provide fiduciary duty for many years to come. I could sit here all day and give example after example.

    Among this sea of opinions, there is fact to be had in all of this. I said this in the last thread, and I will say again. It is not now, nor has it ever been, the fiduciary duty of a broker to list clients’ properties on Zillow. The absence of cases is proof of such. Until a court case to the contrary surfaces, it will never be the fiduciary duty of a broker to list clients’ properties on Zillow. There is no similarity between a pocket listing and a broker’s decision not to list on Zillow. And as such, a broker will find himself well above the fiduciary duty standard under state law, and in full compliance of COE Article 1.

    What can be done?

    1.) Call your real estate commissions and ask. I’ve called my Louisiana Real Estate Commission today and asked them point blank, “Am I breaching my fudiciary duty by not listing clients’ houses on Zillow”.

    2.) Ask NAR point blank. I just send NAR a support request asking, “I am reading some stuff on the internet that says I may be in breach of my fiduciary duty if I don’t list my clients’ properties on Zillow. Am I in breach of my fiduciary duty if I don’t list my clients’ properties on Zillow.”

    3.) Wait for a court case to set precedence that tells us in retrospect whether we should or shoud not have listed clients’ properties on Zillow.

    Thanks again, Rob, for allowing use of your blog.

    • A wonderful response! I should have just given you a guest post spot, this reply is a post in and of itself 🙂 Let me read it more carefully and respond.

    • I’m going to digest things a bit, but would LOVE a follow-up if you hear from your state real estate commission and/or from NAR on your questions.

      One general question you haven’t answered, however, is what the downside of putting the listing on Zillow is for the seller client. I’ll try to deal with the equivalence or non-equivalence of pocket listings vs. Zillow later, but if you agree (as you seem to) that agents need to be careful… well, let me try this.

      1. Would you agree that before an agent takes a pocket listing or a coming soon listing, she should discuss the pros and cons thoroughly with the seller client and ensure that the client understands the benefit he is waiving by not entering the listing into the MLS? (And practically speaking, secure written approval from the seller to avoid claims of liability later.)

      2. If you do agree to #1, would you agree that the agent should do the same with listing or not listing on Zillow?

      3. If you do agree with #2 (which you might not), then what are the pros and cons an agent should discuss thoroughly with the client?

      I’m thinking about the equivalence/non-equivalence in the meantime. 🙂

      -rsh

      • Rob~ it is my understanding any, and all agents looking to engage in a pocket listing must explain the pros and cons to the seller as well as have the seller agree. I would assume not doing so is a major violation. As far as explaining the pros and cons listing on Z, I can only speak for myself and say I always explain why I prefer not to list on Z. I explain that listing on Z where the listing data is inaccurate and insufficient doesn’t make sense. On top of that, I show the seller the Zestimate (which is always way lower than they want to sell.) After the seller sees just how awful the Zestimate is on their home, they ALWAYS tell me to NOT list on Z.
        So when thinking about it…. Please think about selling your house. Make sure you put on your novice hat and then think about the Zestimate being 30,40,50% lower than what it should sell for. Would you want potential buyers thinking they should pay $800k when real comps and a professional CMA says your home should sell around $1,300.00? (just so you know every single seller I’ve dealt with gets very upset when they see what Z is doing with the Zestimate, and every single seller tells me to forget about listing with Z, and I don’t blame them!) And by the way- I haven’t had one problem selling the home quickly and for top dollar without listing on Z!

      • Hi Rob, I’ll provide some clarity for your response. Firstly, as stated in my reply I conceded all of your pro/con statements about Zillow. I don’t have any downsides to putting a seller’s listing on Zillow. In my opinion putting a seller’s listing on Zillow causes no harm, other than maybe the seller could benefit more greatly if he had me spending my time on other non-Zillow things that I’m talented at. You and some agents tsk the Zestimate concept. This doesn’t bother me so much. I see the Zestimate as a form of puffery. Likewise, I’ve seen some agents screw up worse than a Zestimate.

        Here are the other answers you asked.

        1.) Yes I agree with this point. If an agent took a pocket listing, especially at the request of the agent, the issue should be thoroughly discussed, agreed, and documented. With that said I offer the caveat that I have never taken a pocket listing, nor do I profess to be an expert on pocket listings.

        2.) No, I do not the agent should have to resort to cya techniques with regard to Zillow. Zillow is a competitor and for the purposes of this discussion Zillow should be given no more consideration than any other advertising site.

        3.) N/A.

      • Jon –

        You have pointed out the one negative of listing on Zillow, which I mentioned: if the Zestimate is consistently lower than what your comps analysis says the client’s house is worth, then not putting the home on Zillow could advance the client’s interests. I don’t think anyone would argue that. Is there another?

        That, of course, raises an interesting corollary question. As Kary mentions above, many broker sites also have AVMs, which can also be inaccurate in non-disclosure states and whatnot. So if the seller client says, “I don’t want my house on Zillow because the Zestimate is screwed up,” do you have to extend that ban to all websites with inaccurate AVMs?

        That might be a separate post/discussion altogether. 🙂

      • Not two minutes ago I received a response from the Louisiana Real Estate Commission. They called me on the phone so you’ll have to take me at my word as to what was said. Twice now I’ve had a compliance question for my real estate commission. Both times, instead of answering my email where I could have a record of it, they pick up the phone and call me. Could it be that they don’t want to create verifiable record of their response?

        Anyway, my question to the Louisiana Real Estate Commission was:

        “Am I breaching my fudiciary duty by not listing clients’ houses on Zillow”.

        And the answer I received from the Louisiana Real Estate Commission was:

        “The [Louisiana Real Estate Commission] does not have any laws that govern this. We would get involved if your listing agreement stated that you would list the client’s home on Zillow. Other than that we do not have laws governing this. Now remember, we are in a world where anybody can sue anybody for anything. [Just because we do not have laws governings this] does not mean that a client cannot try to make it a legal issue.”

      • I should have added this to the response above, but I forgot. The phone conversation with the Louisiana Real Estate Commission began with a compliance officer. During my conversation with the compliance officer I told her that my motive for not listing on Zillow is that Zillow is my competitor. I don’t want to help my competitor because I am ultimately hurting my business.
        She escalated the question to the “Cheif Investigations Officer”, and told me she would call me right back. The follow up I gave above is when she called me back after speaking with the CIO.

      • That is some fantastic information, DeRidder — thank you!

        Seems like the CIO really covered his ass quite nicely tho, lol. Of course there’s no law specifically requiring advertising on X or Y, but LA license law makes it clear that you are a fiduciary of the client as you know. And if you do get sued by some unhappy seller, I’ll go out on a limb and say that the CIO’s position at that point will be, “It depends on the circumstances.”

        We’re discussing those circumstances. 🙂

    • “I see in this thread you have taken a totally pro-Zillow position. That’s interesting considering you work for Zillow. I can’t help but to be suspicious that Zillow, given their size, wouldn’t have a hand in the social internet to try to drive conversations to an endpoint favorable to them. I know that many big companies do this and some have even been caught doing it. Belkin is an example of one such company who got caught trying to manipulate their online reputation. You noted your association with Zillow to the audience in your caveats though, and I’ll take that as fair enough.”

      DeRidder, one thing to note. Part of why (most) people work for specific companies is they believe in what they’re doing. So, yes, Rob makes money from Zillow and is taking a favorable position to the company — but my guess is if Rob didn’t believe in Zillow’s product, team, and value proposition to the consumer and agent, he would work for someone else instead.

      • More precisely, Drew, ZG knows they bought my time but not my views and opinions on my personal site. I have no problems calling them out if that’s what I believe. If they want to stop working with me because of my opinion on something, they’re free to do so.

        BTW, as I noted in the post, I agreed to say “Zillow” instead of “portals” because DeRidder asked me to. But everything above is true even if we substitute Realtor.com for Zillow, and I’m pretty sure Zillow isn’t looking to have anybody take a “favorable position” for RDC or Homes or whoever.

    • OK, have thought about the equivalence vs. non-equivalence point you raised some more.

      First, I think your equations actually mixed up the concepts. Using your formulation, the proper equations are these:

      (BrokerListing)-(ListOnMLS) = (PocketListing)
      (BrokerListing)-(ListOnZillow) = (NonZillowListing)

      That is, you take a listing, and don’t put it on the MLS; that’s a pocket listing. Similarly, you take a listing, and don’t put it on Zillow; that’s a non-Zillow listing.

      The real left side of the second equation, you say, is this:

      (BrokerListing)+(MarketingEfforts)-(ListOnZillow)

      Then you take the leap of logic that this “does not equal a pocket listing.” Of course it doesn’t, but the fundamental error is that a pocket listing is related to the MLS, not to Zillow.

      So your equation actually has to be written this way if you want to talk about pocket listings:

      (BrokerListing)+(MarketingEfforts)-(ListOnMLS) != (PocketListing)

      I think everyone, including NAR Legal, would contend that adding MarketingEfforts is irrelevant to whether a listing is or is not a pocket listing. Otherwise, why have the rules about thorough discussion and written approval from the seller client when doing a pocket listing?

      So the real argument you want to make, I think, is something closer to this for the second equation:

      (BrokerListing)+(MarketingEfforts)-(ListOnZillow) != (NonZillowListing)

      Which is plainly wrong — if it isn’t listed on Zillow, then it’s a NonZillowListing, period. So what I *think* you want to say is something more like:

      (BrokerListing)+(MarketingEfforts)-(ListOnZillow) != Improperly Marketed Listing

      In other words, what you’re really contesting is that Zillow is a required marketing channel, as long as you’re putting in MarketingEfforts that overcome whatever benefits the client might get from exposure on Zillow.

      “The term identified above as MarketingEfforts offsets any consideration of pocket listing because the listing is being shared in so many other places. As such your comparison of pocket listing to deciding not to post on Zillow does not belong here.”

      Thing is, DeRidder, the comparison is directly on point once we clarify your mixing of concepts.

      A pocket listing is a listing that is not on the MLS, period. Whatever other MarketingEfforts you put into it is irrelevant as to whether that is or is not a pocket listing. The real question is whether those other MarketingEfforts are enough to make your pocket listing a properly marketed listing which meets the requirements of fiduciary duty.

      NAR Legal and others have taken the position that when it comes to pocket listings, the only thing that transforms them into properly marketed listings is a written agreement by a seller who understands the benefits he is giving up after a thorough discussion with the agent as to the pros and cons in the pursuit of a client interest which can only be served with reduced market exposure.

      Put into your equation forms, the NAR position is this:

      (BrokerListing)-(ListOnMLS) = (PocketListing)

      (PocketListing) = ImproperlyMarketed

      Pocket listings = improperly marketed listings because it reduces market exposure for your client’s property, and therefore risks lower prices and longer time on market.

      And for NAR and most MLS in the country, the MarketingEfforts is irrelevant, so we get this:

      (PocketListing) + (MarketingEfforts) = ImproperlyMarketed

      You can’t take a listing, not put it on the MLS, and then tell your seller that because you did all this other marketing, he can’t complain that you reduced market exposure. You’re still likely liable for breach if you do that.

      The only thing that transforms a pocket listing from an improperly marketed listing (and therefore Breach) to a properly marketed listing (and therefore no Breach) is this:

      (PocketListing) + (FullDiscussion) + (ClientUnderstands) + (ClientBestInterests) + (WrittenAgreement) = ProperlyMarketed

      So the question for us is whether the same conclusions hold using the same equations, the same logic, as for pocket listings but substituting Zillow for MLS:

      (BrokerListing)-(ListOnZillow) = (NonZillowListing)

      (NonZillowListing) = ImproperlyMarketed

      Since MarketingEfforts is irrelevant, we get this:

      (NonZillowListing) + (MarketingEfforts) = ImproperlyMarketed

      The only thing that transforms a NonZillowListing from an improperly marketed listing (and therefore Breach) to a properly marketed listing (and therefore no Breach) is this:

      (NonZillowListing) + (FullDiscussion) + (ClientUnderstands) + (ClientBestInterests) + (WrittenAgreement) = ProperlyMarketed

      Your contention, and the contention of others like Richard on your side of the argument, is this:

      (NonZillowListing) != ImproperlyMarketed

      That is, not putting the listing on Zillow does not mean it is improperly marketed. That’s the whole crux of this debate, right?

      I apologize to all other readers who are wondering what the hell these two pseudo-mathematical fools be talkin’ about. 🙂

      • (listing presentation, which includes a discussion regarding various marketing strategies) = A listing

        (A listing) + (Sold) = commission

        (Repeat Listing presentation) = Successful business

        🙂

      • Albert Einstein Hahn wore the chalk out on that one! I had some bait in there under the variable, MarketingEfforts.

        I was hoping in your derivation you are going to solve for MarketingEfforts and eventually find that:

        MarketingEfforts = FiduciaryDuty

        Then, using multiple equations to solve for the unknown, integrating to revolve around its axis using calculus we wind up with:

        (NonZillowListing) + ∫ (FiduciaryDuty) → ProperlyMarketedIncludingFiduciaryDuty

        So, a non-zillow listing + the integral of fiduciary duty from 0 to infinite approaches a properly marketed listing with full fiduciary duty.

        At somewhere between 0 to infinite you will arrive at a waypoint result called SatisfiedCustomer. Once you have arrived at SatisfiedCustomer it may be okay to stop iterating the equation. The reason you stop iterating is because in most cases when you divide SatisfiedCustomer by NonZillowListing they cancel each other out.

        Lots of takaway in this thread. I think I’m going to build a marketing strategy agreement so that all parties agree that fiduciary duty is satisfied if the items in the marketing strategy agreement are fulfilled.

        Thanks again, Rob, for allowing the use of your blog. Nearly 60 comments on this thread. Good one.

      • DeRidder — your latest equations are the bomb! 😀

        My only thought is this:

        IF ∫ (MarketingEfforts) > SomeStandard = FiduciaryDuty

        In other words, fiduciary duty requires some iteration of marketing efforts that exceeds some standard. We don’t really know what that standard is.

        That lets me rewrite your second equation this way:

        (NonZillowListing) + [∫ (MarketingEfforts) > SomeStandard] = Fiduciary Duty.

        Generally agreed after all this discussion that the Best Practice here may be just to get clear approval (preferably written) from the client not to put the listing on Zillow. Why risk liability if you don’t have to?

      • Rob, I think your final derivation is ready to hand in for a grade. I’ll bet you get an ‘A’.

        I agree that clear approval from the client is the best path at this moment when not putting a listing on Zillow.

        I still have my hang up that Zillow is hurting my business and no broker should be expected to deliver services that hurt the broker. Until some clarification arrives then a marketing plan agreement seems to be the only protective barrier a broker can utilize for himself when deciding not to list on Zillow.

        This has been a killer thread. Thanks for the post!

  12. I am new here. If I understand the question it is this: Does not placing a listing on Zillow translate to mean a broker/agent is breaking their fiduciary relationship with the seller? IMHO, the answer is “No.”

    Zillow is simply an advertising medium, in the context of this question. Period.

    It appears to me, as I glanced through the conversation, there is much information thrown out as fact, that is just opinion, or hearsay. For example, the wide differences in research or studies framing what percentage of people start their home search on the internet, should give one cause to wonder who is right? Or, is anybody right?

    Years ago when newspapers dominated and surveys claimed big percentages of being the catalyst for the sale, marketers always were skeptical of the survey design. The first question was, “Who commissioned it?”

    Rob, I appreciate that you disclosed a business relationship with Zillow, but I then think you need to stay out of the conversation until the nature of your engagement is understood.

    • I let this through even though it adds precious little to the discussion and is just an ad hominem attack, because you did make a point of sorts without actually, you know, discussing it.

      That is this: “Zillow is simply an advertising medium, in the context of this question. Period.”

      Why that is irrelevant to your fiduciary duty to the seller is, of course, unexplained. Seems to me that advertising my home for sale is your primary responsibility as my listing agent.

      So in the hopes someone might make an actual point related to it, I’ll let the comment stand. But in the future, at least do like DeRidder and make a rational, logical argument as to why not marketing on Zillow is different from pocket listings please.

      • Rob,

        It is not relevant because no law exists that requires a real estate broker to advertise on Zillow to maintain a fiduciary relationship with a client.

        There is no evidence that advertising a home on Zillow, as opposed to many other advertising media, is necessary to sell the home, or that a home will sell faster and for more money only if it is promoted on Zillow.

        Think about it like this:
        If Zillow ceased to exist tomorrow, would the real estate industry grind to a halt? I believe the answer is a resounding “no.” In fact, I don’t believe the industry would miss a beat.

        If, on the other hand, an individual broker believes the industry would grind to a halt, they are free to advertise on Zillow.

        I respectfully disagree with your contention that advertising a home is the primary fiduciary responsibility of a broker.

        I hope this adds clarification to my earlier statement.

      • Thanks for the clarification, Richard. See, this is advancing the conversation. 🙂 Let me dig a bit further.

        “It is not relevant because no law exists that requires a real estate broker to advertise on Zillow to maintain a fiduciary relationship with a client.

        There is no evidence that advertising a home on Zillow, as opposed to many other advertising media, is necessary to sell the home, or that a home will sell faster and for more money only if it is promoted on Zillow.”

        Isn’t this the exact center of our discussion though?

        NAR Legal takes the position, as does many an MLS/Assoc. lawyer, that not putting the listing on the MLS constitutes breach of fiduciary duty absent written approval from the seller client. I wondered why, in the Internet Age, that doesn’t extend to refusing to advertise on the #1 portal in the country.

        So if there’s a difference between the two things, it has to be here:

        “There is no evidence that advertising a home on Zillow, as opposed to many other advertising media, is necessary to sell the home, or that a home will sell faster and for more money only if it is promoted on Zillow.”

        Is there evidence that listing a home on the MLS is necessary to sell the home, or that a home will sell faster and for more money only if it is promoted on the MLS? I honestly haven’t seen any studies on comparing the performance of on-MLS listings vs. off-MLS listings (pocket or Coming Soon). We all sorta *think* that the MLS is necessary, of course, but do you or anyone else have any cites that could help us understand it?

        The only study I’m aware of is OLD and done during the height of the Bubble, so it’s validity is… questionable, but it concludes:

        “There was no gain in price in selling a home through MLS vs. by owner, at least when it comes to Madison, Wis., during the relatively strong housing market in the period analyzed.”

        Link is here: http://www.northwestern.edu/newscenter/stories/2007/06/fsbo.html

        I’m unaware of any studies done on on-Zillow listings vs. off-Zillow listings. Maybe one of the guys from Zillow has something they can point to.

        PS: If advertising my home for sale isn’t the primary responsibility as my listing agent, what is?

      • Rob’s reply on January 31, 2017 at 10:16 AM:

        “NAR Legal takes the position, as does many an MLS/Assoc. lawyer, that not putting the listing on the MLS constitutes breach of fiduciary duty absent written approval from the seller client. I wondered why, in the Internet Age, that doesn’t extend to refusing to advertise on the #1 portal in the country.”

        Let’s keep this in perspective. First of all what NAR Legal’s opinion of fiduciary duty is has no affect on John Q. RealEstateAgent. The only person that is affected by NAR Legal is John Q. Realtor. Why? Because John Q. Realtor has joined this organization that called NAR. When John Q. Realtor joined he signed papers saying he would abide by rules dreamt up by NAR. In these rules is where you’ll find the language about breach of fiduciary duty for not putting a listing into the MLS. Because John Q. Realtor entered into this agreement, NAR can enforce their vision of fiduciary duty on onto John Q. Realtor.

        Now brace yourself for this. Unlike my agreement with NAR to put properties into MLS, I have not entered into any agreement stating that I will post properties to Zillow. Therefore I have not breached any fiduciary duty by not listing properties into Zillow.

        This is why breach of fiduciary duty does not extend to refusing to advertise on the #1 portal in the country.

      • Hi DeRidder:

        “Let’s keep this in perspective. First of all what NAR Legal’s opinion of fiduciary duty is has no affect on John Q. RealEstateAgent. The only person that is affected by NAR Legal is John Q. Realtor. Why? Because John Q. Realtor has joined this organization that called NAR. When John Q. Realtor joined he signed papers saying he would abide by rules dreamt up by NAR. In these rules is where you’ll find the language about breach of fiduciary duty for not putting a listing into the MLS. Because John Q. Realtor entered into this agreement, NAR can enforce their vision of fiduciary duty on onto John Q. Realtor.”

        That is a misreading of NAR Legal’s position, which I quoted in the post:

        The REALTOR® Code of Ethics’ Article 1 requires REALTORS® “to promote and protect the interests of the client.” REALTORS® must always keep this in mind when recommending a pocket listing to a client. Even beyond the Code of Ethics, state law generally dictates that real estate agents owe a fiduciary duty to their clients, meaning real estate professionals must place their clients’ interests above their own and act in the best interests of their clients at all times.

        So this is relevant to ALL real estate agents/brokers who are fiduciaries under state law.

      • HI Rob,

        I am following up on your question about what could possibly be more important in keeping a fiduciary relationship than advertising the property. I am not sure where to start:

        In my opinion, honesty, knowledgeable on market conditions, effeciency, and negotiation skills are all more important that where advertising is placed. My answer is not considering Zillow or any other form of advertising.

        You have written on these matters in the past. They are still very relevant today.

    • Richard, thanks for the comment. If you look towards the top of the thread you’ll see Mr. Hahn already disclosed his relationship with Zillow. This circumstance has been vetted already and Mr. Hahn’s contribution is acceptable. If you take away his contribution then there’s nothing to argue with; there is no debate. Most agents aren’t cheering in Zillow’s court so I find it refreshing that Mr. Hahn would offer himself to argue ferverently in Zillow’s court. Hahn, in my opinion, is taking the unpopular side of the argument. I don’t know what Hahn’s personal feelings are about the issue, nor do I find his personal feelings relevant. I think we may come closer to solving a puzzle here if we keep our eye on the target.

      Has an agent breached their fiduciary duty by not posting their client’s property for sale on Zillow?

      • Thank you for your comment.

        For the record, I do not have a “for or against” opinion regarding Zillow. I do have opinions about fiduciary relationships.

        I did respond to Rob to clarify or expand on my opinion.

        BTW, I enjoyed reading your commentary.

        Richard

      • Richard, I do think your clarification brought new content to the discussion. Thanks for that. I especially liked your viewpoint:

        “If Zillow ceased to exist tomorrow, would the real estate industry grind to a halt? I believe the answer is a resounding ‘no.’ In fact, I don’t believe the industry would miss a beat.”

        I’ve got a feeling that not only would the industry continue fine without them, but the industry as a whole would be better off without Zillow.

  13. It seems we have gotten off track here a little bit (IMHO). The debate began with the question of fiduciary duty to our client with regard to promoting the property. A pocket listing does not promote the property, hence, a failure to do the absolute best job for the client. Hence, the probability that fiduciary was breached.

    A parallel between a pocket listing (failure to promote) as being similar to failing to advertise the property in a particular place was suggested. We have gotten caught up in the whole Zillow debate. Personally, I despise what Z has done and if it were possible to avoid, and still do my job to the best of my ability, I would avoid it. But its too big.

    So, let’s use the newspaper instead. Suppose there was strong evidence that 90% of all buyers read the newspaper for their real estate information. Also, let’s assume that a very large percentage (more than 50%) of those readers chose the New York Times. Now, lets also assume that the NYT was free to all real estate agents.

    Wouldn’t we be making a very poor decision if we chose NOT to advertise our clients property in the medium that was most preferred by buyers? Wouldn’t the seller have a chance of winning an argument in court if their property didn’t sell? Because we let our personal opinion taint our decision making process in trying to do our very best to market the seller’s property?

    • Precisely so. Thank you for getting us back on track.

      If 48% (or more) of buyers found the home they purchased on the infidelity website Ashley Madison, I would be asking the same question.

  14. I thought the industry was headed toward a “consumer-first” mantra? That seems to have been by-passed in this discussion.

    This conversation looks to set some kind a parameters or direction that should be followed between an agent/broker and his/her customers.

    If all that consumer talk was for real then how a property is marketed is between the listing agent and their seller, whether by hot-air balloon, pocket, MLS, portals…whatever…No?

    Thanks,

  15. Rob~ you do such an amazing job highlighting important real estate issues, so thank you in advance! In answer to your question, I don’t want my listing on “any” site/portal risking an unfavorable (to the seller) home estimate. And the sellers I talk to feel the same.
    As far as any other reasons? Yes, I have many reasons why I feel brokers/agents shouldn’t provide listing data to Z. Some of my reasons are personal and some are not. But instead of shaming Z any further- my main reason (unfavorable home estimates causing potential buyers to balk) stands by itself and is more than good enough reason (IMO.)

    • “my main reason (unfavorable home estimates causing potential buyers to balk) stands by itself and is more than good enough reason (IMO.)”

      Listing or not listing your clients home on Zillow changes nothing on that front. The Zestimate will be there with, or without, the home listed for sale — and buyers will look at it in either case.

      • Drew, say what you want about “buyers will look at it anyway.” I happen to know that there are a lot of buyers that won’t look at it because they either don’t search on Z (which is a great thing) “or” they don’t search on Z because they know that at least 20% of listings are missing, the listing data is often wrong and the Z gets it wrong when it comes to the home value.

        And “yes” when a seller complains to me about the half ass Zestimate placed on their home, and when the seller requests to not market the property on Z. Not only do I do what they ask, but I also agree with them.

        The bottom line is Z doesn’t sell homes despite the all the eyeballs on Z. And I know for a fact that many of the eyeballs on Z are renters looking to rent, looky-loos that have no intention of buying, and of course those anonymous top contributors.

        Anyway, if Z went away – agents will still sell homes without any problems. And in my humble opinion – consumers will be better off as they won’t get sucked-in believing “Z” offers the best listing data because we both know that’s not the case (despite Z doing their best say otherwise!)

  16. A friend just texted me something that made me laugh, and is missing from this whole discussion.

    That person said, and I paraphrase to make it more polite:

    Do the people accusing you of kissing Zillow’s ass realize that what you’re really trying to do is to keep them from getting sued?

    I appreciate that at least one person sees why I’m bringing this up.

    Look, it’s clear that if you do a pocket listing without taking appropriate care, you’re gonna get sued by some unhappy seller who thinks the reduced market exposure is why his awesome, one-in-a-billion, super-duper special cupcake house sold for less than what he *thinks* it ought to be worth. And if you didn’t do things the right way, you’ll be found in breach of fiduciary duty and pay out your ass in damages because your liability insurance carrier isn’t going to cover that.

    I guess I’d like my readers to avoid that situation *just in case* some court somewhere applies the same reasoning to leaving listings off of the #1 website/mobile platform for real estate. DeRidder is correct that no judge anywhere has ruled that way. I suppose you can wait until some poor broker somewhere gets sued before you think about the issue. I’d prefer that you — the best informed audience in real estate — think about the issue beforehand and if you think there’s some logic to this, that maybe you take appropriate steps to protect yourself.

    • Rob~ I can’t see how even a potential lawsuit can take place as long as the agent thoroughly discusses all the possible listing options and said client and agent both agree to the listing strategy… Do you?

      • It a lawsuit can take place over the temperature of McDonald’s coffee I assure you that one can take place over a listing.

        I think the take away from this thread is to perhaps have a marketing strategy defined and agreed upon at the onset of a listing.

      • That’s kind of my point. Most agents who are doing the “I ain’t putting the listing on Zillow” isn’t having a thorough discussion and getting the permission in writing.

        As DeRidder said, until we have a real clear answer, I would err on the side of caution and get a written agreement from the client that he doesn’t want his home on Zillow.

  17. ROB, big fan but have to push back here.

    Catch phrases like: “do things the right way”, “improperly marketed” seem to reflect that there is a correct or proper way to service a client. To me, that means there is a standard or some kind of conforming procedure to marketing real estate.

    I prefer to read the definition of “fiduciary duty” backwards. The definition used up top has the most important part in parenthesis at the end…. “(unless the principal consents)”.

    Don’t you think today’s entrepreneurs entering the market are going to try and break the “right way” and test the limits of “improper” ways of doing things making the whole discussion about entering listings into any particular bucket a little dated? Yeah, already……

    Things get old faster than ever now days. 🙂

    • Appreciate the pushback, Brian.

      I should clarify that when I say “do things the right way” and “improperly marketed”, I’m referring to what NAR Legal and HAR Legal Counsel have written. You may not believe me, but I honestly don’t have a strong opinion on this. I wrote it to get the conversation going, because the principles applied to pocket listings appear to also apply to portals. If they don’t, it’s worth discussing what’s the difference that makes the difference. 🙂

      See Marinda’s comment as an example.

  18. Great content and interesting dialogue, thank you. I may be late to the party but I do not believe fiduciary duty requires an agent or broker to put listings on Zillow. There are a number of reasons in my mind. Primary among them goes along the lines of Jeffrey Hare’s comment above, “Proving that the principal would have received a higher price (or not) based on the exposure (or lack thereof) would be a challenge, and will fall prey to that ephemeral standard known as “reasonable,” and will continue to evolve over time…”

    Add another layer to that by proving that no exposure on Zillow negatively affected the sale in some way would likely be even more difficult. Also, whether the statistic is that 43% or even 51% of homebuyers find their home on the Internet, keep in mind, Internet != Zillow, or even ZTR. It is more like Internet = brokers + agents + MLS + public records + ZRT + everyone else. Of course, everyone understands this point, but from an evidentiary perspective, it is worth re-iterating. Secondly, listing on Zillow may mean many eyeballs view the property but do all those eyeballs equate to a home sale specifically attributable to Zillow? I would venture a guess they do not. Arguably, from an evidentiary perspective some correlation between the Zillow listing and actual home sales should be made if one is to argue a fiduciary duty is owed. I will caveat that I do not have the data. Nevertheless, even if I did, I do not think it would matter because we end up full circle back to what is “reasonable.”

    On fiduciary duty generally, for the sake of argument, lets say this concept is analogous to the fiduciary duty owed by a director of a corporation to her shareholders. Even with that duty, a director has some autonomy to make decisions that may or may not result in a benefit to the corporation. That is because the director is protected by what we call, the business judgment rule. Borrowing from Wikipedia, because directors cannot realistically ensure corporate success “the business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.”

    I am vastly oversimplifying the rule but to complete the analogy: because a broker or agent cannot guarantee a home will sell, if the broker decides not to post listings on Zillow, so long as the broker acts on an informed basis, in good faith, and with the reasonable belief that her decision is in the best interests of the client, a court would not review that business decision.

    • Seriously great stuff. Thanks Marinda! I was looking for expert opinions just like this one. (If you don’t know Marinda, she’s an attorney who does a lot of work for MLSs.)

      So one question. You wrote:

      “Add another layer to that by proving that no exposure on Zillow negatively affected the sale in some way would likely be even more difficult.”

      From what you know and have seen, why doesn’t this difficulty exist with off-MLS listings? Have there been cases already where courts have found that the evidence shows MLS positively affects the sale?

      I think what’s most interesting about this discussion is that there is no real data that I’m aware of showing the correlation between Zillow listing and actual home sales AND between MLS listing and actual home sales.

      Could it be that the MLS is assumed to be the default because that’s just how the industry has done things for decades, so any variation from normal business practices bears the burden of proving that they do not disadvantage the client, whereas newer practices (like listing on Zillow) bear the burden of proving the opposite?

      • Rob~ thank goodness for Marinda! As most of know “we” can be sued for almost anything, but getting a lawsuit to stick is a much different story… I’m glad Marinda dispelled the notion of a successful suit. And I would add that going over all possible marketing strategies and then having the seller to sign off is the best protection possible.
        No need to scare brokers/agent into listing on Z (IMO.)

  19. From a birds-eye view, the love – hate relationship with ZTR is obviously an ongoing dance for many. Regardless, I am of the impression that when hiring a “qualified” agent, client’s expect that he or she will be acting in their best interests with a goal to ultimately give their home maximize exposure to the largest audience in an effort to sell it for the most amount of money, in the shortest reasonable time.
    Bearing those facts in mind, it would be somewhat of a disservice if an agent decided to avoid sharing the client’s listing on one of the largest real estate portals without first having a discussion with the client about the pros and cons of not sharing the listing.
    From a legal fiduciary duty, once consumers become more informed, I would venture to guess that this issue of not giving a traditional listing maximum exposure could lend itself to some liability, especially if one can prove that those listings that made it to the portal, on average sold for more money and/or in less time.
    On the issue of commercial real estate, I predict that It’s only a matter of time before we start to see a more open commercial platform. Commercial listing and selling is certainly more complex, however companies not willing to share their commercial listings on the few commercial platforms available to keep things within the company is just as concerning, let alone raises the question of whose best interest are they serving.

  20. I help run a multi-office company who has been around for 42 years. I have personally been with our company for 30 of those years. In the first 25 years we never had a single lawsuit filed against us. Zero. In the next 4 years, we had 8 suits filed against one of our agents or the company, or both.

    We settled 2 for insignificant amounts and won the others outright. Incidentally, this is when I learned that “settling” doesn’t equate to “guilty”. Sometimes its the wisest choice – a “nuisance factor”.

    While I respect what Marinda is saying, whether you can prevail or not, is not the point. The point is that it is time consuming, gut wrenching and very unproductive to be involved in a lawsuit…..even when you win.

    Therefore – do your damnedest to avoid the possibility by protecting yourself. As our attorney used to always say: “never give them a toehold”.

    • I wholeheartedly concur. I was simply pursuing the hypothetical. Avoiding litigation is always the best strategy. Not only is it, as you say, “time consuming, gut wrenching and very unproductive.” It is unpredictable.

  21. Is it unrealistic to believe pointing out the pros and cons to every client and allowing them to decide is the best decision? I personally went shopping around for a real estate broker and a rental manager asking about if they use Zillow in particular. I ended up choosing the company ( http://www.citywiderpm.com/ ) that did the above for me.

    I consider myself a seasoned investor, though, and this approach probably does not benefit everyone. I also think it depends on who you deal with. At the end of the day, I think the companies that are open about these options are those that will last. Am I wrong?

  22. Rob, This has been a fascinating run of posts and comments, kudos on keeping things civil. One additional hypothetical. If Zulia was at a 10% market share, and there were 9 other similar companies, each at 10%, would you make this same argument for all 10 companies? I understand the “lots of eyeballs” comments (even if the numbers are puffed up), but it seems that if we needed a mandatory disclosure to NOT put a property on Zulia, could we open up a potential liability for agents when all the competing portals do not need/receive the same disclosure? Could this potentially open agents/Zulia to an anti-trust suit?

    And just as things ebb and flow over the years with real estate marketing, why do you think that this type of disclosure has never been done before on any other dominant form of real estate marketing? i.e. newspapers, yard signs, etc. Thanks!

  23. Sellers really don’t care where their homes will be advertised.They one thing and the only thing they do care is to get the asking price from a qualified buyer and the less contingencies the better.This thing with ZTR is a circus that NAR and the MLSs created.With all due respect to the consumer, the agents who advertise on those aggregators sites will find themselves out of business, it is just a matter of time.Zillow and Trulia are one. All they do is collecting data. Data is power and a day will come and they will have an A-Z transaction system. They are educating the consumer slowly but surely that there is no need to use a real estate agent.

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