HomeLight Possible Antitrust Violations

HomeLight Possible Antitrust Violations

A copy of the request filed with the DOJ and the FTC asking to review practices of HomeLight brokerage.

This is copy of the author’s request that officially asks the United States Federal Trade Commission (US-FTC), the United States Department of Justice (US-DOJ) to investigate HomeLight, Inc. brokerage on the grounds of alleged violation of Federal Trade Commission Act of 1914, and alleged violation of Sherman Antitrust Act of 1890, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with possible price-fixing practices.

Attn: Citizen Complaint Center, Antitrust Division
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. NW Room CC-5422
Washington, DC 20580

Please find information below with regards to possible antitrust violations.

What companies or organizations are engaging in conduct you believe violates the antitrust laws?

HomeLight.com (DBA HomeLight, Inc.)
255 Berry Street, #315
San Francisco, CA 94158
Phone: (855) 999-7959
California DRE License 01900940

Why do you believe this conduct may have harmed competition in violation of the antitrust laws?

HomeLight is a real estate broker that operates under California DRE License #01900940, but it does not represent consumers when buying or selling real estate in any State. When consumers submit information to HomeLight, this information is exchanged with random brokers for a 25% share of their commission.

HomeLight states that "our service is 100% free, with no catch. Agents don't pay us to be listed, so you get the best match." This is false. HomeLight is a real estate broker, and no real estate broker in the United States works for free.

HomeLight applies a pay-to-play bias towards all matching results. All agents agree to pay HomeLight a referral fee, on all closed transactions, through their employing broker.

HomeLight further claims to be able to identify referred agents who “produce higher returns to consumers” when selling homes, but there is absolutely no third-party evidence for this. HomeLight algorithm is self-proclaimed and is based on “some” data derived from past MLS transactions. There is any number of factors that affect the actual home sale value with no proven correlation between MLS records and agent representation quality. HomeLight claims are, effectively, snake oil.

HomeLight further offers consumers a connection to local real estate developers that buy and flip homes for profit, called HomeLight Simple Sale. HomeLight does not disclose to consumers how much developers and iBuyers pay them for each successful lead, but according to third-party sources, HomeLight receives a 4% commission from the total value of each home sold to an investor. Private real estate investors routinely offer consumers cash offers valued at 70-80 percent against home market values so that these homes can be later flipped for a profit. Lack of payment disclosures between HomeLight and real estate developers in this scheme hurts consumers and is a form of collusion for profit.

Using their California broker license, HomeLight operates across the United States to promote referral schemes in all 50 States and Washington DC.

HomeLight further engages in consumer allocation between real estate brokerages, because it is a broker itself. Instead of representing consumers to help buy and sell homes, the company actively disengages from its licensed activities so that every broker knows that HomeLight will not compete with them.

RESPA (12 U.S.C. 2607) Section 8 narrowly allows payments under cooperative brokerage and referral arrangements between real estate agents and real estate brokers. This limited exemption on kickbacks only applies to fee divisions within real estate brokerage arrangements when all parties are acting in a real estate brokerage capacity.

HomeLight does not act in a real estate brokerage capacity, instead, the real estate licensed is used as a means to an end to collect a referral fee. Sherman Act effectively requires all active real estate brokers to proactively compete for consumers. An agreement or an understanding between brokers not to compete for mutual benefits is a "per se" violation of antitrust regulations in the United States.

HomeLight owes absolutely no duty of care to consumers and takes no responsibility for the transaction, despite receiving a direct financial benefit from the home sale or purchase completed by a referred brokerage.

HomeLight typically captures consumers via traditional advertisement channels such as TV ads, Internet search ads, etc. By placing a hidden rake on a mass volume of transactions, HomeLight heavily advertises their service. HomeLight currently claims to have made a successful match for about 390,000 people with agents since the company had begun operations. With a typical fee paid to HomeLight in thousands to tens of thousands from each referral, this amounts to over one Billion USD in revenue, easily advertised to consumers as a 100% free and unbiased service. This money, structured as junk fees, has resulted in higher broker commission across the country and now resides in 390,000 hard-earned mortgages, collecting interest.

Actions of HomeLight directly increase the costs of owning homes in the United States due to added referral fees, consumer allocation practices, and reverse completion between brokers.

HomeLight rakes in Billions in hidden junk fees while consumers are fighting their way through a housing affordability crisis.

As long as referring schemes, such as HomeLight, are allowed to operate, brokers looking to represent consumers are naturally encouraged to participate in the scheme. “There are no upfront costs, only pay us once the transaction closes,” is an attractive proposition to a broker who acts on this proposition by simply increasing a quoted commission to any consumer who comes as a referral. Any broker who chooses not to participate in such schemes risks to lose “free business.” Such an environment is highly poisonous to a healthy real estate market.

HomeLight referral-only collusion scheme secretly harms real estate consumers and makes it impossible for independent agents to provide a tangible service at an independently set competitive price. HomeLight naturally discourages agents from competing outside their platform.

As a matter of fair real estate transactions across the United States, there is no excuse to maintain these bizarre broker-to-broker collusion schemes established by a handful of “paper” brokers, such as HomeLight. Referral schemes may very well serve brokers with successful consumer-steering, but they do not genuinely serve consumers, and they are certainly not free.

What is your role in the situation? For instance, are you a user, customer, competitor or supplier?

I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed and built to improve the homeownership experience in the United States.

HomeOpenly is a technology company that designs, builds, and maintains a series of online marketplace solutions with focus on home search, automated valuation modeling (AVM), home buyer's and seller's representation services, mortgage origination, refinance, home insurance, renovation, design, staging, home inspections, home security, moving, home maintenance, title, escrow, cash offer stand-in programs, home warranty, and other real estate products and services.

HomeOpenly operates subject to a 0% rake as our primary competitive advantage to establish a competitive fee schedule for service providers with the use of network effects. HomeOpenly is not a broker and all service providers on our network compete for consumers individually. Our efforts are actively hampered by anticompetitive practices of HomeLight brokerage.

Successful implementation of an Open Marketplace™ platform in the real estate industry requires full enforcement of existing antitrust laws that are enacted to protect US consumers.

As long as brokers are able to trade consumers as “leads” between independent service providers in exchange for referral fees, open marketplaces across all B2C real estate verticals will continue to operate at a competitive disadvantage.

If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice

Related to: antitrust, real estate, HomeLight, consumer brokering

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Last updated: November 05, 2019
First published: November 05, 2019