People searching for newly constructed homes on the popular Zillow and Trulia websites are not likely to find all the places that are available.
Zillow bills itself as “the largest, most trusted and vibrant home-related marketplace in the world.” But in early 2016, the Seattle-based company quietly stopped publishing listings from some of the country’s largest builders unless it was paid by the builders to add them.
Zillow, which owns Trulia, has contracts with most of the country’s 700-plus multiple listing services (MLS), agreeing to post every house listed by realty agents and entered into an MLS, whether resale or new construction. As long as agents opt in, their MLS listings will be sent to Zillow.
But the company has reversed course when it comes to new homes, saying that builders that sell more than 150 houses a year have to enter their listings directly with the site as part of its Promoted Communities program.
The company maintains that its motives were pure, in that would-be buyers craved more information about new communities and neighborhoods than what was available from the local MLS. By entering their offerings directly, builders could include as much information as they wanted – for example, floor plans, community amenities and lot availability.
“We launched with the consumer in mind,” said Vice President of Builder Sales Lucy Wohltman, “allowing them to discover new construction listings more easily and earlier than ever before.”
But the policy change also became another revenue stream for the company. Most builders don’t put up anywhere near 150 houses a year, but many do. And by charging them $500 per subdivision per month to have those houses listed, Zillow stands to rake in millions for something it was once doing without charging builders anything.
The company won’t release the number of builder participants, or how much it earns from the program, but Wohltman says some 10,000 communities are displayed on the site.
Most builders contacted for this article refused to talk about the Zillow initiative, opting to sidestep any controversy. There is good reason to stay on the company’s good side: Most homebuyers today start their search online, and Zillow is a go-to site. Most builders seem to have capitulated to Zillow’s effort to squeeze money out of them.
But some builders have balked. Beazer Homes – the 11th largest, according to trade publication Builder – has said no, arguing that it has enough leads coming in from other sources.
The numbers tell the dissidents’ story. A builder who operates in, say, 12 different communities would pay Zillow $6,000 a month to list its houses. That kind of money puts a severe crimp in marketing budgets, or else becomes a cost passed on to buyers.
According to the National Association of Home Builders, only 8 percent of all builders sell more than 100 houses annually. Zillow asserts its program impacts “less than 10 percent” of the builders on its site.
But Texas-based Ben Caballero of HomesUSA finds that claim somewhat suspect. Pointing out that 10 percent of the country’s nearly 50,000 homebuilders erect some 90 percent of all houses, he says the change is nothing more than a “pay for play” ploy on Zillow’s part.
Caballero works with more than 60 Lone Star State builders. He lists their houses in their local MLSs, and when a client sells a house, he is credited as the listing agent. At last count, he found that 27 of his builder-clients in the Dallas-Fort Worth area, and three in Houston, had refused to list directly with Zillow. Together, they build in 369 different communities. Two more clients have canceled their subscriptions to the initiative, and one is “on pause.”
Caballero has no quarrel with Zillow’s desire to provide consumers with more information. But he is angry about how the company went about the initiative. He didn’t find out about the program until one of his builder-clients called to ask why his houses weren’t listed.
“Zillow didn’t tell anyone – not brokers and not the MLSs,” Caballero said in an interview. “They did it covertly. Only builders were told listings would be taken down” unless Zillow was paid directly.
“I don’t understand why they were so clandestine about it,” he added. “I have been telling my clients that when they list through me, their houses will be seen on all aggregation sites such as Zillow and Realtor.com. So I have been inadvertently misleading them because I was unaware of the change.”
Caballero isn’t the only one angry at Zillow; so is Georgia’s Kendall Butler of FLI Properties. She wasn’t told about the program, either, and only found out about it when the leads she had been receiving from Zillow slowed to a trickle.
Butler checked and discovered that Zillow had taken down listings from all three of the builders she represents, even though only one met the 150-home threshold. “They removed all my builders’ listings without telling us,” she said. “I called five times and I never heard back.”
The agent sees the program as a “money grab” that goes against two of Zillow’s claimed core values: transparency and putting the consumer first. None of her builders see the value in the program, she said, so they now have no listings on either Zillow or Trulia.
“They tried to force them in by removing all their listings. It seems like blackmail to me,” Butler said.
Zillow’s Wohltman said she “wouldn’t use the word ‘pushback'” to describe these grievances, adding that “it’s more like ‘confusion'” on the part of naysayers. “Builders can still publish their listings through their MLSs, but they will be buried [among listings for resale houses] if they don’t come through the paid platform,” she said.
Caballero said he contacted four MLSs in Texas, questioning “whether they had a unilateral right not to push [listings] through to Zillow,” he said. “But they said they had nondisclosure agreements with Zillow and couldn’t comment.”
Caballero also maintains that Zillow is haphazard when it comes to listings – publishing some, but not all, builders’ offerings. One of his clients says the site lists 45 of his houses for sale, but not 27 others, and incorrectly lists 40 as “not for sale.”
“It is particularly disturbing that Zillow would intentionally publish some listings with a misleading message,” Caballero said. “This is a disservice to the builder and an intentional misrepresentation to consumers.”
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.