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Morgan Stanley Study of Zillow Advertising 'Troubling'

Sep 11, 2015 6:27:57 PM

Haverhill, MA  September 11, 2015 A recent study conducted by Morgan Stanley shows that Zillow Premier Agent advertisers – real estate agents who pay extra to advertise on Zillow – have an increased number of dual agency transactions compared to other agents.

According to the study, more than 60 percent of Premier Agents reported that the advertising increased their dual agency transactions by about 30 percent. When one agent represents both the buyer and the seller in one transaction, it is called dual agency. Although some states prohibit dual agency, every state provides an avenue for real estate agents to work with both the seller and buyer in a single transaction. 

For example, Massachusetts allows for a real estate agent to be "designated" to represent the home buyer, known as a designated buyer agent; however, all other agents affiliated with that agent's brokerage may represent opposing parties in the same transaction, a situation that creates obvious conflicts of interest.   

National Association of Exclusive Buyer AgentsWhile the results of the study may be great news for the real estate agents who get twice the pay for the same transaction, the National Association of Exclusive Buyer Agents (NAEBA), an organization of real estate agents who provide full, exclusive representation to home buyers, reports that it’s not great news for consumers.

Numerous consumer advocates agree that dual agency is not in the best interests of the consumer. The Office of the General Counsel for the New York State Department has cautioned consumers that, “By consenting to dual agency, you are giving up your right to have your agent be loyal to you, since your agent is now also representing your adversary. Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests.”

"I always find it troubling when I hear about home-buying consumers giving up their rights when making what is for most the biggest financial decision of their life," said Richard Rosa, co-founder and co-owner of exclusive buyer agent real estate firm Buyers Brokers Only, LLC. "It just doesn't make sense when in fact home buyers should demand 100 percent loyalty 100 percent of the time from their real estate buyer agent. I commend NAEBA for bringing to the attention of home buyers the issues surrounding dual agency and designated buyer agency.  Dual agency and designated buyer agency are allowed in Massachusetts, so it is critical that home buyers be aware of the type of real estate buyer agent that they are working with. The same is true for New Hampshire home buyers."

The Zillow Web site states, “The Zillow Premier Agent program is designed with the simple purpose of bringing agents more buyers, more sellers, and more business.” Any agent who is willing to pay for the program is "featured" on the Zillow Web site.  There are typically four agents associated with each property listing, including the actual listing agent, who is identified as such. 

Zillow does have consumer information on its Web site that educates homebuyers about agency laws, including information on using an exclusive buyer agent. Zillow's Web site states, "Exclusive buyer's agents work for real estate companies that never represent sellers or list properties for sale. By utilizing the services of an exclusive buyer's agent, you can avoid conflicts of interest that may arise if a buyer client becomes interested in a property that is also listed for sale by a traditional buyer's agent."

Conflicts of interest also may arise if a homebuyer is interested in a property that is listed by the company that a traditional agent works for.

“Real estate buyers deserve to have someone on their side throughout the transaction,” says Chris Whitehead, NAEBA President. “Settling on a Zillow Premier Agent who is unlikely to be loyal only to them is not in the consumer’s best interest.”

About Buyers Brokers Only, LLCBuyers Brokers Only, LLC is the largest exclusive buyer agent real estate firm in Massachusetts, and all its buyer agents are proud members of the National Association of Exclusive Buyer Agents. It exclusively represents home buyers, and all its real estate brokers also are lawyers. Because Buyers Brokers Only, LLC only represents home buyers, and never sellers, it’s 100 percent loyal to its home buyer clients 100 percent of the time. With the main office located in Historic Downtown Haverhill, Massachusetts, the more than 20 buyer brokers at Buyers Brokers Only, LLC cover an area that includes Boston, Boston’s south and north shores, MetroWest, the Merrimack Valley, Central Massachusetts, Southeastern Massachusetts and Southern New Hampshire.

About NAEBA: The National Association of Exclusive Buyer Agents (NAEBA), created in 1995, is an organization of companies dedicated to representing only buyers of real estate. NAEBA member brokerages do not list homes for sale and never represent sellers. This restriction to one side of the real estate transaction avoids conflicts and ensures that the interest of the home buyer is protected at all times from house-hunting and negotiation to inspection, financing and closing.

 Read more about the Morgan Stanley study.

Topics: National Association of Realtors

   

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