Last week, Compass CEO Robert Reffkin announced that Compass has agreed in principle of acquire Anywhere, Inc., parent company of Coldwell Banker, Century 21 and Liv Sotheby's.
If finalized next year, this mega-merger will greatly expand the nation's largest real estate brand, giving Compass direct control of more than one-quarter of the entire listing market.
What does this mean for the real estate industry? And more importantly, what will it mean for consumers?
With cooperation (i.e. "buyer side compensation") no longer automatically baked into the cake on listing agreements, listings have become more valuable and buyer agents have been marginalized.
Accordingly, brokerages are now more reliant on listings (which offer more certainty on compensation) for their survival than ever before.
As I have written about previously, there is much debate and uncertainty about what role (if any) Zillow should play in this changing world order. Zillow is not a real estate brokerage - it is a marketing company. It owns exactly zero listings, yet by effectively advertising and promoting listings on its platforms it gains control over thousands of potential buyer leads, which are sold off to individual brokerages and agents for referral fees of up to 40%.
Should Zillow be able to profit off the listings of other brokerages? Should brokerages willingly share their data with Zillow? Is Zillow an industry partner, or a giant parasite on the rear end of the real estate industry?
The proposed merger with the brands of Anywhere, Inc. would give Compass control over more than 25% of all listing inventory in the US. If Compass decides to take that listing data "in house" and withhold it from Zillow (and potentially the entire MLS system), the online landscape for real estate listings changes overnight.
Under this scenario, Compass becomes a destination website for home shoppers because Zillow would lose a huge portion of its data feed. Outside brokerage cooperation would become a thing of the past as the industry pivots into a tribalized collection of large firms that would list, market, negotiate and close deals in house - without the help of outside agents, Zillow or the MLS.
This is similar to the European model for selling real estate and it would leave Zillow (in particular) on the outside looking in, left to work with a consortium of breadcrumb brokerages fighting for whatever is left of the market.
Change is often born out of necessity and with transaction counts down 35% or more from the pre-pandemic era, playing nice isn't a given anymore. There's simply not enough revenue to support all the players at the table, and the Compass-Anywhere deal would move Compass into position to chart a bold new path.
The Sitzer-Burnett class action verdict created chaos out of an orderly system and fractured a sales process that has served consumers well for more than a century. Other than the plaintiff attorneys, who pocketed more than $200 million from the Sitzer-Burnett settlement, I don't know who benefitted from it. The viability of the entire shared-data MLS system is now in doubt and the only question is who will break it first.
Zillow is dependent on shared data. Large brokerages with actual listings are not.
