New interpretation and enforcement of New York State real estate advertising regulations could drastically change the way third-party real estate websites display listings and lead to fines for non-compliant brokerages.

New interpretation and enforcement of New York State real estate advertising regulations could drastically change the way third-party real estate websites display listings and potentially expose non-compliant brokerages to fines, brokerages and agents fear.

A spokesperson for the New York Department of State (DOS) confirmed by email on Tuesday that the state’s online advertising guidelines are currently under review. Multiple individuals confirmed to Inman that they have spoken with the state regarding the regulations, but details on what changes may come and what it means for third-party listings sites like Zillow and realtor.com are scarce.

“We know that they are auditing websites to make sure of compliance, we were already told that,” Phil Faranda, broker and owner of J. Philip Real Estate in Westchester told Inman.

“The DOS is a little bit of an anomaly in that they are not a judge making a ruling, nor are they a legislature passing a law,” he added. “They are simply updating their interpretation of regulations.”

Since originally revamping the guidelines in 2013 to embrace the industry’s move online, there hasn’t been much enforcement of certain rules. For example, any piece of agent advertising with an agent’s name must have that name match exactly to what’s printed on his or her license. But now DOS officials warn it will be policing these regulations more closely, according to Charlie Hunt, general manager of Hunt Real Estate.

“What that means is they will spot check real estate agents websites on their broker site,” Hunt said. “They’ll spot check yard signs.”

Tasked with keeping state records and compiling and enforcing rules and regulations established by all state agencies, the Department of State could even spot check Facebook names, if it wishes, Hunt said. DOS could then fine brokerages or agents for violating the guidelines.

Much of the conversation around these potential changes have been focused on Zillow’s Premier Agent advertising program, which allows agents to advertise themselves and their services to consumers looking to buy or rent. The ads appear on the side of exclusive listings for properties listed by other agents. StreetEasy, a subsidiary of Zillow, added the Premier Agent program in New York City in February 2017. The Real Deal first reported that DOS was looking into the program.

The Real Estate Board of New York (REBNY), in a March 2017 letter to DOS, claimed that the Premier Agent program has created confusion for many customers. REBNY cites multiple examples of customers accidentally contacting a Premier Agent when they intended to contact the selling agent that listed the property.

“Since its inception, the Premier Agent program has created a maelstrom of consumer confusion with consumers appearing at property showings expecting to find the listing broker, only to find a Premier Agent,” the letter from REBNY attorney Claude Szyfer said. “Even worse, buyers have shown up at properties with their broker representatives only to be accosted by a Premier Agent claiming to represent them.”

DOS confirmed in a statement that it has been, “asked to issue an advisory opinion on whether the StreetEasy website complies with [DOS] advertising regulations.” It’s not clear if that investigation has led directly to a full investigation of the advertising rules, but DOS confirmed it’s reviewing its online advertising guidelines in a separate email.

Susan Daimler, the general manager of StreetEasy, confirmed that the company has engaged in a broad discussion with DOS, to ensure that the agents that advertise on the platform have a clear understanding of what the specific guidelines are.

She also clarified that the talks between the two entities are not just regarding the specific platform, but about IDX websites, virtual office websites, brokerage websites and other consumer-facing portals.

“We engage with a lot of government bodies, and the goal is always to share our perspective, talk about our partnerships with agents and how important they are, the work that agents do, the work that we do and just to help frame and explain an industry that we view as complicated and nuanced,” Daimler told Inman.

Faranda said he doesn’t believe this is simply a case of DOS running around and changing the rules. Rather, it’s DOS “reacting to the lobby of Manhattan brokerages, who can’t figure stuff out for themselves,” he said.

This isn’t the first time Manhattan brokerages have leveraged the department to help them out, Faranda said. In the past, many Manhattan brokerages used titles like vice president and executive director as a recruiting tool to pull top agents, he explained. After it got out of hand, he said the brokerages went to DOS, which, in turn, informed the brokers that you cannot be listed as a vice president unless you were a principal in the organization.

“[Governor Andrew Cuomo] didn’t sign some new law, some judge didn’t do anything,” Faranda said. “DOS simply issued an opinion letter at the behest of the Manhattan brokers who couldn’t fix it themselves, Because they couldn’t simply stop among themselves the stupid practice of giving people inane meaningless titles.”

“This is the same thing,” he added. “The Manhattan brokers are pissed because they no longer control the data like it’s 1990. And they’re taking a page out of the book — if we can’t beat you in the marketplace, then we’ll try to get the government to shut you down.”

It’s a slippery slope, Faranda added. Most third-party real estate websites use a similar business model, which could mean big changes for all of them. Then DOS could continue to look at other potentially misleading advertising practices in the business.

“What happens next?” Faranda asked. “What if I go to a New York City brokerage and look at their listing and the person that gets back to me isn’t the listing agent?”

Email Patrick Kearns

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