For years, Zillow has promised not to become a real estate broker, and the company says that it still has no plans to do so — Instant Offers doesn’t represent buyers or sellers, nor does Zillow hold active broker licenses in Nevada or Florida. But one big question that remains is whether Zillow would need broker’s licenses to operate its Instant Offers program legally if it were to begin accepting compensation.

  • In both of Zillow Instant Offers' test markets, along with several other states, the law indicates that taking part in obtaining purchasers for a sale requires a broker's license, but only if compensation is involved.

Zillow Inc., home of the most popular real estate website nationwide, is testing Zillow Instant Offers, a program allowing homesellers in Orlando, Florida, and Las Vegas to receive all-cash offers from up to five Wall Street investors and compare them side-by-side with a comparative market analysis (CMA) from a Zillow Premier Agent.

For years, Zillow has promised not to become a real estate broker, and the company says that it still has no plans to do so — Instant Offers doesn’t represent buyers or sellers, nor does Zillow hold active broker licenses in Nevada or Florida.

But one big question that remains is whether Zillow would need broker’s licenses to operate Instant Offers legally if it were to begin accepting compensation.

In Florida and Nevada, a person only qualifies as a broker if he or she collects or anticipates to collect compensation for broker services. (Zillow is not getting paid during the Instant Offers pilot. The company is not currently charging Premier Agents extra to participate in the pilot.)

Zillow declined to say whether it will eventually charge Premier Agents, investors, or sellers for the Instant Offers service. “This is currently just a test and [we] have nothing to share about future plans, including cost,” Zillow Group spokeswoman Amanda Woolley told Inman.

‘Takes any part in the procuring of sellers’

Does Instant Offers perform some services that could require a broker license, if compensation were involved?

Zillow Instant Offers home page

Under Florida law, a person can qualify as a real estate broker if the person — for another, and “for compensation or valuable consideration” — “takes any part in the procuring of sellers, purchasers” or “directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale…”

Nevada law considers a broker to be any person who — for another, and “for compensation or with the intention or expectation of receiving compensation” — “lists or solicits prospective purchasers,” among other practices. Other states have similar laws, including California, Texas and New York.

“By testing Zillow Instant Offers, we are providing a technology platform where consumers who are already interested in selling their homes can receive non-binding offers from reputable institutional investors,” Woolley said.

“We do not represent or otherwise advise any party in the negotiation, purchase or sale of real property, nor do we hold ourselves out as providing real estate brokerage services.”

It will be up to state regulators to decide whether Zillow’s Instant Offers complies with real estate license law, though answers from them were not immediately forthcoming.

“We are unable to comment without a formal complaint and supporting documentation as whether or not the activities the individual(s) are performing would require a real estate license,” Kathleen Keenan, spokeswoman for the Florida Department of Business and Professional Regulation, told Inman via email.

The Real Estate Division of Nevada’s Department of Business and Industry said it was “in the process of reviewing and researching” information regarding Zillow Instant Offers and was therefore “unable to provide an estimated time for response.”

Robert Butters, former deputy general counsel to the National Association of Realtors and now an attorney at Arnstein & Lehr LLP, offered his own quick take on the program.

“[M]any states include the procurement of ‘prospects’ for the purchase or sale of real estate to be ‘brokerage activity’ that requires a license,” Butters told Inman via email.

“The fact that Zillow gives its Premier Agents a crack at getting a listing from the ‘Instant Offer’ sellers, and the Premier Agents presumably are paying Zillow for the right to be a Premier Agent and get the ‘prospect’ from Zillow through the Instant Offer program could constitute receipt of ‘compensation’ for the purposes of satisfying the definition of ‘real estate brokerage’ for which a license is required.

“Of course, each state has its own license law that defines the type of conduct for which a brokerage license is required. But if Zillow rolls this program out on a national basis it would not surprise me in the least if a real estate commission challenges the program.

“Also, Zillow has signed many data license agreements with MLSs in which it promises not to engage in ‘real estate brokerage.’ Some MLSs could be inclined to terminate these agreements on the grounds that Zillow is in breach of them by reason of the Instant Offer program.”

The current NAR legal team declined to comment.

“[B]ased on the information we have we cannot speculate on this. Whether a license is required is ultimately up to the licensing agency and depends on the particular facts,” NAR spokeswoman Sara Wiskerchen said via email.

“Whether or not Zillow’s latest experiment complies with laws that are intended to protect consumers in the real estate transaction, NAR believes that Realtors are the best professionals to protect their clients’ best interests.”

The Association of Real Estate License Law Officials (ARELLO) also declined to comment.

Zillow’s broker license history

Other companies that offer services similar to Instant Offers, such as Opendoor and OfferPad, hold brokerage licenses. Companies like Opendoor and OfferPad buy property in a similar way but hold title to the property, whereas Zillow is a middleman, connecting prospective sellers to a range of investors who want to buy for-sale housing to flip or rent.

OfferPad is one of the investors on the new Zillow platform; Opendoor is not. OfferPad operates in both Zillow Instant Offers test markets — Las Vegas and Orlando — as well as Phoenix, Salt Lake City, Tampa Bay and Los Angeles.

OfferPad is licensed in Florida. In Nevada, OfferPad is working with Realty 360, which is the brokerage under which OfferPad co-founder Brian Bair holds his real estate salesperson’s license.

According to Zillow, the 15 investors that participate in Instant Offers are required to “use brokers licensed in the state in which they are purchasing property. Some investors are licensed themselves and some may engage a third-party broker if they are not licensed (or are not licensed in the market in which they are seeking to purchase a property).”

Zillow previously held a real estate license in Florida, but it expired in September 2009. Zillow Group holds what it calls a “legacy” broker’s license in Florida from when it acquired RealEstate.com in 2015 with its purchase of Trulia.

RealEstate.com held broker licenses in dozens of states, usually under the name FastStart Real Estate. FastStart has had a broker’s license in Florida since 2005, but Florida’s records show that FastStart obtained a new license in Florida in June 2015, four months after the Trulia acquisition.

That license expires in March 2018. Zillow did not respond to a question asking why it obtained that new license.

Zillow held brokerage licenses in a handful of states when it first launched in February 2006 and later obtained licenses in most U.S. states. But Zillow announced it would give up most of those licenses in 2008. Zillow currently holds an active broker’s license in Texas.

“We have several broker licenses that we inherited as parts of acquisitions. Many of these have lapsed while a few are still valid. Having said that, we are not participating in the brokerage business — we do not represent buyers or sellers and have no plans to do so.” Woolley said in an email.

Zillow did not specifically answer questions regarding why Zillow Inc. — not an acquired company — has an active broker license in Texas or if Zillow has any other real estate broker licenses that weren’t part of an acquisition in other states. In 2008, Zillow told Inman it was keeping its broker license in Texas to obtain real estate data for its property valuation estimates (Zestimates) through the company’s membership with multiple listing services (MLSs).

Zillow doesn’t have to be a broker to be a disrupter

Zillow’s Instant Offers pilot has inspired a variety of responses from the real estate industry, including observations that Zillow doesn’t need to be a brokerage to have a big impact on agents and their role in real estate transactions.

“Zillow has always claimed it doesn’t want to be a brokerage,” said Drew Peterson, a North Carolina-based real estate consultant. “It doesn’t have to be when it can connect buyers and sellers without the hassle of the legalities of brokerage ownership/licensure.

“Uber disrupted the taxi industry without owning or operating a single taxi. It simply connected people who wanted rides with people who could offer them.”

He later clarified: “I don’t believe Zillow will become a brokerage. I think they’ll claim they are a ‘platform’ for connecting buyers with sellers, much like Uber and Airbnb are platforms.”

Zillow Group’s director of industry engagement, Jay Thompson, responded, “We’re not collecting fees/compensation, we’re not hiring agents, we’re not getting brokerage licenses, we’re not taking listing agreements, we’re not driving buyers around and showing houses, we’re not doing anything that agents and brokers do every day to run their business.”

He also said that right now, Instant Offers is still “a test,” and that it will include agents “for as long as the test runs, and it will continue to include agents if the test is expanded.”

Real estate broker and regular Inman contributor Sam DeBord noted that, despite being a “test,”  transactions through Instant Offers will be happening in the real world and largely under Zillow Group’s influence.

“Consumers are given options to work with agents, but some agent-free transactions will occur via Zillow initiation. Offers and transactions are managed in Zillow’s transaction management software,” DeBord wrote.

“Zillow’s not technically becoming a broker with this move, but it’s taking on every activity it can that doesn’t require a license — smart. Some agents are screaming. Some are yawning. Let’s just not pretend that initiating a purchase offer for a buyer, providing the forms for the contract, and directing the services upon which it will be transacted isn’t a big shift.”

Teke Wiggin, Amber Taufen and Caroline Feeney contributed reporting to this story.

Editor’s note: This story has been updated with comments from former NAR deputy general counsel Robert Butters.

Email Andrea V. Brambila.

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