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[Breaking] Investors band together to file class action lawsuit against Zillow

(CORPORATE NEWS) Zillow stocks plummeted after they announced they would be negotiating a settlement deal with the federal government over their “Premier Agent” program; investors are suing Z for their losses.

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Filing for class action status

It seems inevitable that investors would be unhappy with the recent (and steep) downturn in Zillow stock value. According to court documents, they’re “Class Action” unhappy.

Today in the U.S. District Court in the Central District of California, the Vargosko v. Zillow Group, Inc. et al suit seeks Class Action status for alleged damages inflicted by the August 08 announcement that Zillow would immediately attempt to negotiate a settlement with the Consumer Finance Protection Bureau (CFPB).

Two years ending in settlement talks

The CFPB spent two years investigating Zillow’s “Premier Agent” program and whether or not the co-marketing advertising for mortgage and real estate companies violates the Real Estate Settlement Procedures Act (RESPA).

The Zillow stock took a nearly 15 percent nosedive at the news of the impending negotiations and investors reacted immediately.

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Long-asked questions about the program

Columnist Ken Harney writes, “Consumers likely are in the dark about the lender’s financial relationship with the realty agent unless they know to click on a question mark icon after the promotional words ‘ask these lenders about financing,'” thus the crux of the CFPB’s involvement and subsequent investigation.

Over a year before the CFPB even launched their investigation, The Real Daily questioned the lawfulness of the practice, concluding that it’s questionable. All along, Zillow’s Terms of Service has indicated that it is the responsibility of each agent and lender to ensure their own compliance with laws and regulations, RESPA included (leaving it in users’ hands).

The investors suing are unlikely impressed.

It will be a long process

Hiring the Rosen Law Firm in Los Angeles, California, the investors allege that they have “suffered damages,” according to Noel Chandonnet, Jr., Director at the firm. They are seeking Class Action status given the scope of the losses alleged, although court documents do not reveal how much they’re seeking in damages.

Chandonnet says they’ll be “in discovery phase for some time,” so we don’t anticipate resolution anytime soon. It is worth noting that although the lawsuit was filed today, no judge has granted Class Action status to the case yet.

The CFPB has not yet responded to our requests for comment on the Class Action lawsuit and the lawfulness of the “Premier Agent” program.

UPDATE: Zillow declines to comment on the pending litigation, but Zillow spokeswoman, Emily Heffter tells us, “we believe our co-marketing program is lawful and allows agents and lenders to advertise in a way that complies with RESPA.”

#ClassAction

Lani is the Chief Operating Officer at The Real Daily and sister news outlet, The American Genius, and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

Real Estate Corporate

Zillow sued for Zestimates violating federal Antitrust laws

(CORPORATE NEWS) Zillow being sued for Zestimates is nothing new, but they’re now being accused of concealing Zestimates on “Co-Conspirator Broker” listings, violating federal Antitrust laws.

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The latest Zillow legal troubles again surround their Zestimates; this time they are being sued for their Zestimates violating federal Antitrust laws. The company has allegedly violated and continue to violate Section 1 of the Sherman Act, 15 U.S.C. § 1 and the New Jersey Antitrust Act, N.J.S.A. 56:9-3.

Plaintiff, EJ MGT LLC, based in New Jersey, filed suit again Zillow Group Inc. and Zillow Inc. today. In a 21-point legal brief outlining their specific violations, two things become immediately clear (assuming of course there is truth in these allegations): Zillow is giving preferential treatment to preferred brokerages (labeled ‘co-conspirator Broker[s] in the lawsuit) and Zestimates are wildly inaccurate (as many have adamantly stated since Zestimates’ conception).

The first few points of the brief explain exactly what Zillow is being accused of doing: “this antitrust action arises from Zillow’s conspiracy with certain real-estate brokerage companies to selectively conceal ‘Zestimates.’” Zillow’s estimate of a residential property’s “fair market value” which the lawsuit states they know “to be inaccurate,” have allowed “only select brokers to conceal the display of Zestimates on their listings to the exclusion of the general public.”

The lawsuit goes on to state that “these agreements between Zillow and certain co-conspirator brokers of residential real estate restrain trade (read: the agents/brokers being allowed to conceal unwanted Zestimates, henceforth referred to as ‘Co-conspirator Brokers’) and deprive Plaintiff and the public in general of the benefits of open and robust competition in two markets: the residential real estate market and the residential real estate brokerage market.”

In essence, Zillow and the Co-conspirators Brokers have made an illegal agreement regarding the display of Zestimates on Zillow’s site.

Zillow has long touted their Zestimates as a “user-friendly format to promote transparent real-estate markets and allow people to make informed decisions;” except Zestimates are often believed to be inaccurate and now they’re being concealed at the request of a select group of Co-conspirator Brokers – a far cry from making real estate more transparent.

If the lawsuit’s claims have any validity behind them, it seems as though Zillow may be in for a bumpy ride. Item 10 in the suit states, “Zillow has acknowledged that it conceals Zestimates as a result of agreements with only ‘certain brokers’ who receive ‘certain treatment’” and uses a message screenshotted from Zillow’s Help Center as proof these words were in fact used to explain why some listings had prominent Zestimates while others did not:

You may be wondering what brought about this lawsuit; it seems Plaintiff, EJ MGT LLC, owns and is marketing a property located in Cresskill, New Jersey, through an agent unaffiliated with Zillow (not a Co-Conspirator Broker). Therefore, their listing contains a prominently displayed Zestimate, while a similar listing in nearby Alpine, New Jersey, which is listed through a “Co-conspirator Broker,” conceals the Zestimate:

The above example is not the only one outlined in the case, however. Item 12 of the lawsuit states that further evidence can be seen by comparing a residence page for a property while it was listed with a Co-conspirator Broker versus the same residence page once the property was off the market. One clearly conceals the Zestimate, while the latter displays it clearly underneath the listing price.

For reference, the Co-conspirator Broker listing was screenshot on December 26, 2017 and the screenshot after it was taken off the market with the Zestimate was taken on January 2, 2018. Merely a week in between images, and yet the difference of how the ad is displayed is quite apparent:

In essence, Zillow has violated the very transparency they claimed to create.

Zillow is allegedly promoting misleading and inaccurate information while using their marketing power to charge brokers to hide this information which could negatively impact a sale, and which Zillow itself has acknowledged is sometimes inaccurate.

Also, general members of the public have no way to prevent Zillow from obtaining and posting information in this way, and it cannot be altered without hiring a Co-conspirator Broker, as Zillow has explicitly refused to offer the option to hide information to individual home owners, further deepening the dependency on Co-conspirator Brokers.

Because of their alleged refusal to treat everyone equally and “empower homebuyers with information,” they have potentially restrained trade in connection with the exchange of information regarding home valuation and offered anti-competitive benefits to only those brokers chosen to purchase that ‘special’ service package from Zillow that removes Zestimates from listings.

Therefore, brokers are not on even footing: when a seller attempts to price check; the brokers without it could be losing out to those who have the ‘special’ package and removal of Zestimates alongside listing prices.

So far, each individual Co-conspirator Broker has not been named; they have been named as a group: Sotheby’s International Realty, Inc., Coldwell Banker Real Estate LLC, Century 21 Real Estate LLC, The Corcoran Group ERA, and Weichert Realty, according to court documents. It is unlikely that any action would ever impact the brokerages, rather Zillow Group itself.

Zillow is being sued for five counts: two counts of conspiracy to restrain trade, one count of violating the New Jersey Consumer Fraud Act, one count of slander of title/product disparagement, and one count of interference with prospective economic advantage. A jury trial has been requested.

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Real Estate Corporate

How big box stores are stalling Whole Foods expansions using leasing contracts

(CORPORATE NEWS) As Amazon begins its Whole Foods expansions, other big box competitors are trying to put the wabash on them using their leasing contracts.

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Over the summer it was made known that Amazon was buying Whole Foods then a few months later we learned that the new owners were revamping store pricing and poaching competitor’s customers.

Despite only having 450 locations, Whole Foods is slowly turning the supermarket market in their favor. However, some of the older, bigger players aren’t having it and have figured out that they can use their own real estate contracts to level the field with Whole Foods.

Apparently it is common practice for bigger retailers in commercial real estate to sign leases with conditions that prevent their landlord from renting to other businesses that would create competition.

For instance if a Starbucks is renting in one location they might include a term that says no other coffee shop can be adjacent so if an Dunkin’ Donuts wanted in next door they couldn’t.

For Whole Foods that means because they are now selling Amazon electronics like Echos or AmazonFire TV, their usually docile neighbor Best Buy could go track down the fine print of their leasing contract and forbid Whole Foods from selling those products.

It’s like they always say — All is fair in love in retail. Well, you know what I mean.

If we’re being honest an Amazon + Whole Foods team is pretty enticing. It makes a whole lot of sense that other retailers that can only offer half of that package would resort to any means necessary to impede their progress.

Even Target is getting in on the defense reportedly not allowing Amazon Lockers to be installed. I get it, you want people there to shop at your store, not to pick up merch they bought elsewhere.

Granted with Target’s new collaborations with companies like Brit + Co, May Designs and Magnolia Market, I doubt they have too much to worry about.

At any rate, this sort of fine-print legalese defense seems like a pretty large indicator that other retailers are feeling the heat from this merger.

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Real Estate Corporate

Discount stores are banking on the bad days of underclasses

(CORPORATE NEWS) Despite brick and mortars closing, discount stores seem to be doing well. But that success seems to be at the expense of the downtrodden.

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Few sights are as ubiquitous in rural America as the simple yellow and black logo of Dollar General, and this is not going to change any time soon.

In a signal of the times, Dollar General’s marketing executive Jim Thorpe said that Dollar General’s best customer was the low income, government assistance recipient.

By the fact that Dollar General’s expansion strategy is to create more stores in small towns and cities, that’s a signal to many that the business world is not expecting incomes to rise in the heartland of the United States.

“Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America,” Garrick Brown, director for retail research at the commercial real estate company Cushman & Wakefield was quoted saying.

“It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places.”

Rival discount stores Dollar Tree Inc. and Family Dollar (also owned by Dollar Tree) are also operating out of the same principles to give Dollar General a run for their money.

While they do not enjoy as much market share as Dollar General, these discount stores are also trying to compete for the stretched dollar of the $35,000 salary household. These same households may find it difficult to travel out of their town to do their grocery shopping due to the cost of gas.

Dollar General, in its confidence of a permanent lower class in America, is also alleviating the problem of food deserts.

According to the Centers for Disease Control (CDC), food deserts are areas that lack access to affordable fruits, vegetables, whole grains, low-fat milk, and other foods that make up the full range of a healthy diet.

Dollar General, while not having a full and robust grocery section with many fresh fruits, are offering more than what one can get in a gas station for certain and are alleviating the lack of affordable, moderately healthy options.

With U.S. income inequality still on the rise, Dollar General’s market share is not going anywhere, and the discount store chain might just become the next small-town staple in rural America.

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