Behind closed doors: The next phase of Compass’s Code of Ethics complaints against Zillow

As the National Association of Realtors (NAR) frequently stresses, one of the main things differentiating a real estate licensee from a Realtor is the Code of Ethics that Realtors are required to abide by in order to be a member of the trade association. 

Despite existing quietly in the background of the industry for over 100 years, NAR’s Code of Ethics made headlines last week when Compass International Holdings filed Code of Ethics complaints against Zillow spanning 26 states, 55 MLSs and 30 Realtor associations. Compass confirmed to HousingWire that the complaints allege that Zillow has made false advertising claims.

“When sellers choose to publicly market their homes and make them available to the broadest possible audience, Zillow is keeping those listings from buyers because they were not initially prioritized on Zillow. In some cases, Zillow is displaying active, publicly available listings as not for sale,” a Compass spokesperson told HousingWire last Tuesday.

In response, a Zillow spokesperson noted that Zillow shows blocked homes as “not available” versus “not for sale.” The spokesperson also said that the company was not surprised by Compass’s actions given the legal battle the two companies are currently engaged in along with Midwest Real Estate Data (MRED), claiming that the Robert Reffkin-helmed firm is “looking for additional venues to fight the same battle it’s losing in court.”

“Compass’s business model depends on keeping listings off the public market first, so they are the one limiting reach and later wanting Zillow to cover for their scheme. Agents who list publicly from the start reach every buyer on Zillow. When a home is shopped around privately to some buyers and listed to all buyers later, we don’t show that on Zillow because it’s not fair to millions of homebuyers without insider connections. That’s not false advertising, it’s standing up for a fair and transparent housing market,” the spokesperson added.

Confidentiality is key

It is surprising that this much information regarding Compass’s complaints has reached the public sphere as Code of Ethics complaints typically remain confidential unless the board of directors pushes the matter to a regulatory body after the complaint hearing concludes or the association has adopted a policy that allows them to, under certain circumstances publish the name of an individual who has been found in violation of the code.  

“Our guidelines are very clear. Everything is confidential,” Michele McCaskill, the general counsel and chief operating officer of Canopy Realtors, said. “Only the parties and the executive committee and staff as needed are privy to any of the information.”

McCaskill added that even the association’s grievance committee that only sees one side of the complaint, never knows what the other side says or even the outcome if a hearing is reached.

“The only time we would share information is if we were subpoenaed and we had to,” McCaskill said.

At Seattle King County Realtors, chief operating officer Marie Hansch said they even redact the names of the complainant and respondent before the complaint is reviewed by the board of directors.

The Code

Although the Code of Ethics was promulgated by the NAR, it is enforced by state and local Realtor associations. In total, the Code consists of 17 articles that deal with things like a Realtors’ duties to clients and customers, their duties to the public and their duties to other Realtor members. Any amendment made to the Code must be approved by NAR’s board of directors.

Those in enforcement say some of the most common complaints they see deal with Article 1, which says that a Realtor must protect and promote the client’s interests while treating all parties honestly; Article 2, which says Realtors must avoid exaggeration, misrepresentation or concealment of pertinent facts about property or transactions and Article 15, which states that members may not knowingly make false or misleading statements about competitors or their business practices.

“The complaints are kind of cyclical,” McCaskill said. “Right now we are in the process of fielding a lot of complaints that have to do with Article 15. I think we have seen a major uptake in that because social media has made it easier for people to just say whatever they want.”  

Out in the Seattle metro area, Hansch said they typically see a lot of Article 1 related complaints. 

“It is kind of a catch all,” Hansch said. “But roughly 75% to 80% of our complaints are filed by members of the public who are upset about something that has happened in a transaction, not other Realtor members.” 

How are complaints handled?

When a party files a complaint, the complaint first goes to a Grievance Committee where it is screened.

“When someone files a complaint, they must present all the facts and tie the allegations to one of the articles of the Code,” McCaskill said. “The Grievance Committee, which is made up volunteer Realtors who are trained to review complaints, look at the allegations and determine whether or not, based on the complaint and the article cited, the respondent could be in violation of the code — essentially like a grand jury.” 

One common reason a complaint may be rejected is because it falls outside of the 180-day window from the event or the date when the allegation became known. 

If the complaint makes it past this stage it heads to a hearing panel, at which point the respondent is informed of the complaint and allowed to file a response. Once the association receives the response, a hearing date is set. 

At Canopy, McCaskill said they take three members of the association’s professional standards committee to serve as the hearing panelists. 

“We then hold a virtual hearing where both parties testify,” McCaskill said. “They are allowed to have their attorney, as well as present evidence and witnesses. The panel then ultimately decides whether or not the respondent is in violation of the Code.” 

The decision is then transferred to the association’s board of directions which reviews the decision. If the board agrees with the hearing panel, then the decision is ratified and any disciplinary action imposed on the respondent goes into effect.

Punishments lean toward education

There are roughly one dozen types of disciplinary actions a hearing panel could levy on a respondent found in violation of the Code. Punishments range from a letter of reprimand or a warning to education to fines up to $15,000 or even a suspension of board membership, expulsion from the association or termination of MLS access or use. 

“Our policy is, if you are found in violation of the code, you automatically pay a $500 administration fee, and we often pair that with education,” McCaskill said. “Letters of reprimand and warnings are simple and easy, but sometimes you need something stronger, so we typically use education and make them take a Code of Ethics class or a class that ties directly to something that they didn’t do correctly.” 

Hansch added that education is a common disciplinary action at her association in Seattle.

“The primary emphasis is for people to learn a lesson if they are doing something they shouldn’t be,” Hansch said. “It should be educational not punitive.” 

Association leaders said a violation would have to be very severe for their association to suspend someone or terminate their MLS access. 

A chance to appeal

Prior to the Board ratifying the hearing panel’s decision, the parties have 20 days from transmittal of the decision to the board to file an appeal. 

Complainants are only allowed to appeal if there were procedural issues with their hearing or if, like the respondents, they were denied due process. If an appeal is granted, the complaint goes before an appeals tribunal, which will then make a final decision. Once the appeals tribunal makes a decision, the case is considered closed. 

Those in enforcement stressed that the whole process is closely governed by NAR’s Arbitration Manual, which the state and local associations handling the complaints must follow. 

Not a fast process

It may take some time for a complaint to be handled, with the NAR manual stressing that it should be handled within six months. 

At Canopy, McCaskill said the grievance committee meets monthly and schedules hearings as needed.

“Right now it is probably at least a two-month wait to have a hearing, so it isn’t a quick turnaround,” she said. 

While most complaints get processed and handled within six months, some exceptions may arise, such as when part of a complaint is also part of a legal dispute, which may result in the hearing panel deciding to pause until the court rules, which could take months or years. 

Given this, unless information is leaked or a punishment is severe enough to be noticed, it is unclear if the greater housing industry will ever know the exact details or timeline of this latest chapter in the battle between Compass and Zillow.