Zillows AI Puts Outdated Real Estate Rules To The Test

Zillow's recent launch of an app within ChatGPT has sparked significant controversy, highlighting a growing rift between rapid technological advancement and the real estate industry's established regulations. While integrating real estate data into a popular AI chatbot seems like a natural next step, it challenges policies that were written long before such technology was even conceived.

Key Takeaways

• Legal experts find it challenging to determine if Zillow's ChatGPT app complies with Internet Data Exchange (IDX) rules, as these policies were not designed for AI applications.
• Zillow asserts it underwent a thorough approval process, including consultations with lawyers representing numerous MLSs, to ensure compliance.
• The National Association of Realtors (NAR) has indicated that compliance decisions are up to individual MLSs, raising questions about who should lead the charge in modernizing industry-wide policies.

This article explores the industry-wide questions raised by Zillow's new ChatGPT integration, which operates under listing display rules from the turn of the century. You can read the first part of this series here.

Outdated Rules in a New Tech Era

The National Association of Realtors' IDX rules, which govern how listing data is displayed online, were first established in the year 2000. While they have been updated over the years, Zillow's integration of listings into ChatGPT has brought their age into sharp focus. Industry leaders argue that these decades-old rules are due for a major overhaul.

Russ Cofano, co-founder of Alloy Advisors, notes that current IDX rules are restrictive, focusing more on what cannot be done with MLS data rather than encouraging innovation. "We need to go back and look at those rules and say, 'Do these serve the industry in today's world, or do they hold the industry back?'" he said.

The Complex Question of IDX Compliance

Determining whether the Zillow-ChatGPT integration is compliant is not straightforward. Mitch Skinner, an attorney at the Larson Skinner law firm, explained that his firm is investigating the issue for its MLS clients but faces a significant hurdle. "IDX policy didn't contemplate this," Skinner stated. "So it's difficult to analyze whether or not [the integration] fits, because, by definition, it kind of doesn't."

The situation is further complicated by the fact that the nation's 500+ MLSs are individually responsible for their own rule enforcement. NAR confirmed this in a statement, emphasizing that each MLS must conduct its own assessment of new technologies. Skinner suggests that instead of simply updating old rules, MLSs should consider creating new policies specifically focused on AI.

The Council of Multiple Listing Services (CMLS) agrees that IDX policy was written for a different time and should evolve with technology, not lag behind it. "Whether this integration is ultimately deemed compliant or not, the industry must move toward policy that is technology agnostic, and that safeguards data while growing alongside innovation," CMLS said in a statement.

Zillow's Approach and the Debate on Policy Making

Zillow maintains it took the proper steps. Errol Samuelson, the company's chief industry development officer, described a "painstaking process" to ensure the app followed MLS rules. He said Zillow consulted with a group of MLS attorneys and its own legal team to get feedback and approval. "At the end of the session, they said, 'This looks really good,'" Samuelson recalled.

However, some industry veterans believe this approach bypasses the established system for policy change. Victor Lund, co-CEO of WAV Group, argued that changes should be debated through NAR's Multiple Listing Issues and Policies Committee. "This deliberative approach has served the industry well, ensuring that changes are considered carefully and collectively," Lund said. He supports creating new AI-specific rules but believes it should be done through the formal NAR committee.

Navigating the Future Without a Central Guide

NAR's willingness to lead policy debates appears to have diminished amidst ongoing antitrust lawsuits and regulatory scrutiny related to its MLS rules. According to Skinner, this has resulted in local MLSs being given more discretion to implement policy and weigh legal risks on their own.

This shift towards local control is already in motion. Danny Frank, an agent with JLA Realty, filed a complaint with the Houston Association of Realtors (HAR) about the Zillow integration. He also urged HAR to work with other Texas MLSs to create clear AI-era data governance standards. While he sees a role for NAR in providing guidelines, he prefers that local MLSs take the lead to protect the interests of their members.

NAR declined to comment for the original story, leaving the industry to navigate this new technological frontier largely on its own.

Missed the first part of this series? Find it here.