Real estate giants Compass and Zillow fight over the future of the market
Both companies have gobbled up competitors and become so dominant that when they shift rules and practices, they have the power to change how homes in the United States are bought, rented and sold.
Over the past year, Zillow, the country’s largest real estate portal, and Compass, the biggest real estate brokerage in the world, have traded lawsuits and allegations of antitrust violations, all while waving the banner of consumer protection. Both companies have gobbled up competitors and become so dominant that when they shift their rules and practices, they have the power to change how homes in the United States are bought, rented and sold.
Zillow owns listing websites including StreetEasy and Trulia and receives about 220 million unique visitors every month. Its scale means it can dictate practices that agents say are bad for their businesses and confusing for consumers.
Compass was already the largest real estate brokerage in the country when, this year, it bought Anywhere Real Estate for $1.6 billion, making it by far the biggest real estate brokerage in the world with about 340,000 real estate professionals. It controls brands that include Christie’s International Real Estate, Century 21, Coldwell Banker and Corcoran. It has come under fire for pushing the practice of private listings, which go to a select group of people before they reach the public.
The National Association of Realtors was the longtime gatekeeper of real estate listings, but the organization was found guilty of antitrust violations in 2023, and its grip on the market has loosened. Now, Zillow and Compass are rushing in to fill the vacuum, battling over who gets control of the listings.
“We have two behemoths in the industry,” said Jonathan J. Miller, a real estate appraiser and consultant. If the leaders of these companies were to quickly change, shifting their strategy or focus, he continued, the ramifications could be enormous. “The entire market — the biggest asset class in the world — is subject to potentially significant change overnight.”
What is the controversy around Compass’ private listings?
Private listings have existed for decades, but they were fairly rare. Perhaps a judge or a celebrity wanted to keep their home and address private, so instead of posting the house online, their broker would call other agents and quietly invite them to the property.
Compass, however, has taken the practice wide. It offers its buyers the ability to share online listings only on the Compass website so its own agents and their clients can see them, before bringing the homes to the larger market. Those are what it calls Private Exclusive listings.
Websites like Zillow list how many days a home has been for sale, and a property that’s been on the market for an unusually long time might give a potential buyer pause. Compass’ Private Exclusive listings allow sellers to test their price without starting the days-on-market clock.
Compass’ critics say the practice disadvantages both buyers and sellers. Buyers won’t know if an overpriced home has been sitting at the same price for a year, and sellers won’t have the largest pool of potential buyers. Compass, on the other hand, does benefit, its critics say. Brokerages take a cut of their agents’ commissions, so by keeping both sides of the deal in-house, the company earns more money.
Critics liken the practice of private listings to putting tape over the odometer before selling a car. Compass disputes this, and says it isn’t obscuring any information about the home itself.
“Sellers should have the right to decide how their homes are marketed and where they are marketed,” Compass CEO Robert Reffkin said in a statement.
Some states, including Connecticut and Wisconsin, have passed laws restricting private listings. New York’s version is on its way to the governor’s desk.
Why do real estate agents complain about Zillow?
When potential buyers look at a home on Zillow, they’re presented with the price, photographs and a menu of information, including the number of bedrooms and a list of local schools. There are also big, bright buttons to click that will connect them with an agent.
Most buyers assume that when they click those buttons, they are contacting the agent selling the home. But instead they are connected with a buyer’s agent, a person who might have nothing to do with the property, but pays Zillow a fee to be connected with potential clients. Some of those agents share their commissions with Zillow.
Many buyers find this practice confusing. A study by Jerry Wind, a professor of marketing at the Wharton School at the University of Pennsylvania, surveyed more than 850 consumers about Zillow’s website and found that less than 1% of them correctly identified who would be contacting them when they expressed interest in a property on Zillow.
Zillow says it’s important to connect buyers with their own broker.
“When you go into a negotiation, you want to make sure that each party to the negotiation has somebody on their side who is advocating for them,” said Mischa Fisher, chief economist at Zillow. The listing agent’s information is available on Zillow for every property.
Does it matter that these companies are so large?
There has been an enormous amount of consolidation in the real estate industry. Last year, Rocket Companies, which provides mortgages, acquired Redfin, an online real estate brokerage in a deal valued at $1.75 billion. The Real Brokerage announced this spring that it plans to acquire RE/MAX in an $880 million deal.
Many in the industry expected the Compass acquisition of Anywhere Real Estate to face antitrust scrutiny from federal regulators, but it sailed through the regulatory process. The office of New York Attorney General Letitia James, however, is investigating Compass over antitrust concerns, according to a person with knowledge of the investigation who was not authorized to speak publicly.
James has concerns about Zillow, too. Last year, her office joined a group of states and the Federal Trade Commission in suing Zillow and Redfin, one of the largest players in the rental market, saying they had entered into an agreement to stop competing with each other.
Zillow is also facing a class-action lawsuit alleging it incentivizes brokers who use its Flex Agent and Premier Agent programs to steer buyers toward its home loan products.
Both Compass and Zillow have also sued each other on antitrust grounds, accusing one another of using market power to stifle competition. In the latest suit, Zillow accused Compass and Midwest Real Estate Data, a listing service, of hiding listings from buyers to shut out competition.
The companies have all denied the allegations against them.
“There is a huge multibillion dollar strategic power play playing out with these very large publicly traded companies, around the country and in court,” said Michael DelPrete, a real estate technology strategist who teaches at the University of Colorado Boulder. “At the end of the day, they’re fighting over content — but it’s not just content. It’s not a ‘Star Wars’ movie. It’s somebody’s house.”
This article originally appeared in The New York Times.