Zillow gives up most brokerage licenses

Property valuation and listings portal Zillow is relinquishing its real estate brokerage licenses in all but two U.S. states -- a cost-cutting move the company also expects will put an end to occasional rumors that Zillow planned to get into the business of brokering home sales.

Zillow has always maintained that it obtained brokerage licenses in most U.S. states when the company launched in 2006 not because it intended to broker property transactions, but as a legal precaution to protect its ability to publish real estate-related information.

Now that Zillow's business model is established and accepted, the company believes it no longer needs to maintain its brokerage licenses, and is severing relationships with brokers it had contracted with in order to obtain the licenses, said company spokeswoman Amy Bohutinsky.

"This should put to rest any rumors or any thought that Zillow plans to get into the brokerage business," Bohutinsky said. "We are a media company, selling advertising, and we are relinquishing our brokerage licenses in all but two states."

Zillow will continue to maintain licenses in Texas and Washington state, Bohutinsky said.

Texas is a nondisclosure state, but as a licensed broker Zillow can obtain real estate data for its property valuation estimates through its membership in multiple listing services, Bohutinsky said. In some other sparsely populated nondisclosure states, such as North Dakota, Zillow doesn't provide its automated property-value estimates, dubbed "Zestimates."

In Washington state, where Zillow is based, the company does not rely on MLS data for "Zestimates" -- the state's public property records are among the best in the nation, Bohutinsky said. But Zillow will maintain a brokerage license in its home state because it belongs to the regional Northwest MLS in order to build relationships with local real estate industry leaders, she said.

"I would equate it to joining the chamber of commerce where your business is located -- it's just a smart business decision," Bohutinsky said.

That Zillow held brokerage licenses in most states helped fuel a steady stream of rumors that the company intended to get into the brokerage business.

Last year, writing on the company blog about hiring an advertising sales executive, Zillow founder and CEO Rich Barton said such rumors were "understandable" given the company's brokerage licenses. He called the licenses a legal "belt and suspenders" measure.

Bohutinsky acknowledged that in addition to being a source of rumors, the brokerage licenses were an expense and that dropping them was also a cost-cutting measure. Zillow last month announced it was laying off 40 people, or 25 percent of the company's workforce (see story).

"We've come to a place where there is broad acceptance of Zillow in the industry and of our business model," Bohutinsky said. "We don't feel we need these licenses because we have zero intention of brokering transactions. It's always been an insurance policy."

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