Like many of you, I hate it when I see headlines like above and am always a bit skeptical. Real estate has basically operated pretty much the same way for the last 20 years or so without any real structural changes, but a recent lawsuit against Zillow looks to radically upset the apple cart. What is the lawsuit? Why can this radically alter the paradigm for realtors, buyers, and sellers?
Who is Compass Real Estate?
As shown in the chart above; Compass is the largest residential real estate brokerage based on sales volume. Furthermore Compass’s acquisition of a rival real-estate brokerage firm looks poised to increase the number of U.S. homes that are listed privately, rather than through a traditional public listing.
With its all-stock purchase of Anywhere Real Estate for $1.6 billion, Compass is set to expand its fleet of agents from about 40,000 to more than 200,000 in the U.S. That would create a new industry giant, combining the two biggest brokerages by volume in 2024.
Compass wages war on Zillow
“Agents should not be controlled by Zillow or MLSs, who ban and fine agents that market outside their platforms,” Reffkin (CEO of Compass) said in a statement. “Home sellers should be able to choose when, where and how they market their homes.”
After NAR changed its rules, Zillow created its own policy designed to discourage private listings. Essentially, Zillow may block a listing from its site if it isn’t available on public portals, including Zillow, within a day.
Compass sued Zillow in June. Compass accused Zillow of being a monopoly and said its rules discouraged agents and sellers from using the three-phased strategy.
“While Americans are struggling to access and afford housing, Compass wants to hide available listings from the public,” a Zillow spokesperson said. “Sellers deserve the widest possible audience, and buyers shouldn’t have to wonder what homes they’re not seeing.”
Compass says listing privately could be easier for some sellers without the pressure of staging and timing, bringing more inventory to the market for buyers.
Compass will likely win the lawsuit against Zillow
On the Lawsuit, I’m going to give Compass 70% chance or greater of victory as Zillow has no legal basis to dictate what happens in the market. Zillow’s role is not to ensure that the real estate market is “fair”, they are merely a listing service and therefore the courts will more than likely rule against them in the lawsuit
What is a pocket listing and why should you care?
This is a property that is technically for sale, but agents won’t find it listed on the multiple listing service, the database they use to peruse local options for clients. Likewise, home buyers won’t find pocket listings online or by a “For Sale” sign in the front yard, either. Instead, the real estate agent who’s been hired for a pocket listing keeps it in his metaphorical pocket and shares it only with a smattering of agents he knows and trusts can turn him on to the right clientele. Essentially it is a property that an agent has an exclusive right to sell and markets the property outside of the traditional MLS. In the case of Compass it will be listed internally only to Compass agents.
I’ve used this method in Colorado. When we were finalizing our house to put on the market, we signed the listing agreement and let the agent market it as “coming soon” to her various contacts to drum up business. We went under contract shortly after the property was put into the MLS.
Many sellers prefer a pocket listing to maintain privacy. Especially in high end houses, sellers don’t want the whole neighborhood traipsing through their house. They would prefer to target the marketing to specific contacts their agent has.
Pocket listings constitute only a slim percentage of total listings, by most estimates under 10% of the national total (realtor.com)
Why is Zillow in favor of the pocket listing rule
Zillow and companies like redfin have the most to lose if the rule banning pocket listings is overturned as not all listings would now be shown on Zillow. Zillow has agreements with MLS to display their data on Zillow’s site which brings thousands of views and substantial revenues. If listings are no longer required to be in the MLS, data will now be held directly with listing agents and Zillow will no longer have access to a considerable number of listings especially high end. This could easily create a model where a new company emerges that only allows access to high end listings after substantial vetting, this would be an exclusive “club” to buy/sell real estate.
What is Compass’ plan for listings?
Compass calls its private-listing program a three-phased marketing strategy. First, a listing is shared with Compass agents, their clients and anyone who inquires. Then the listing is posted on Compass’s website but not other listing websites. Then the listing is shared everywhere.
This approach helps sellers get feedback on their price before the home is fully prepped for sale, Compass says. The early stages keep data about price cuts or time on the market off portals such as Zillow, Redfin or Realtor.com.
It also gives Compass control of the data on leads.
Almost half of Compass sellers in the first quarter used the three-phased strategy, Reffkin said on a May earnings call. But about 94% of Compass listings, including the ones that started private, ultimately went onto the portals.
“The worst thing that happens is a homeowner gets an offer, and they have an opportunity to turn it down and go to the public sites,” Reffkin said on the call.
Whomever controls the data wins
For the last 15 years or so Zillow has been the huge beneficiary in the online age of real estate listings. But the tide is starting to turn. As Compass controls over 20% of the residential market and rolls out its new listing strategy big changes are underway. Other brokerages will likely follow suit with a similar strategy to try and keep market share.
Real estate will follow the banking industry
We are just at the dawn of big changes in the real estate industry that we saw in banking 20 years ago. Two-thirds of banking institutions have disappeared since the early 1980s — declining from nearly 18,000 in 1984 to fewer than 5,000 in 2021. The huge consolidation was due to regulation compliance and the big getting bigger from a technology perspective. As a result most small and even mid size banks are unable to survive.
We are now seeing similar forces transpire in the real estate industry with Compass amassing over 20% market share. Furthermore with their new strategy for keeping listings in house it could further industry consolidation. Smaller players will not be able to compete with the scale and technology of the larger brokerages. I predict that about half of the small/regional brokerages will consolidate into a larger brand and/or go out of business. Over the next 5-10 years there will be 5-10 dominant players in the industry, and most brokers will either be owned or affiliated with one of the top tier companies.
Big Changes to how real estate is bought and sold
It has been predicted for the last 20 years since the internet became mainstream that huge changes in residential real estate would occur. Fast forward to 2026 and we are at the dawn of a radical shift in real estate that will mimic what has occurred in banking with huge consolidation and the top 5-10 players controlling the overwhelming majority of the market. This consolidation will be turbocharged over the next several years with the push for in house pocket listings that give huge market sway to the top brokerages. What we are seeing today will create huge winners and losers in real estate and it will be interesting to see how this ultimately impacts pricing and buyers.
Additional Reading/Resources
https://www.csbs.org/too-small-scale-what-10-years-data-say-about-community-bank-compliance-costs
https://www.wsj.com/real-estate/robert-reffkin-compass-ceo-zillow-26266898?mod=mhp
https://www.fairviewlending.com/rocket-buys-mr-cooper-impact-on-mortgage-industry/
https://www.fairviewlending.com/will-commercial-real-estate-fall-2025/
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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. I’m not an armchair reporter/writer. We are an actual private lender, lending our own money. We service our own loans and own commercial and residential real estate throughout the country.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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