A Raging Battle Over How Homes Are Sold

if you watch reality TV shows like Selling Sunset or Owning Manhattan, you know that real estate is a cutthroat business. But inside the real estate industry, there's some new drama raging. Well, I'm not actively in the housing market right now, but I do have a zilla alert for listings in my neighborhood just so I can keep tabs on what's going on. Am I getting the full picture? Probably not. That's our colleague, Katherine Clark. She says that these days, in order to get a full picture, buyers have to do a bit more legwork. You have to look in more of a piecemeal way. You have to look at Zillow, but you also maybe have to look at Redfin, and you have to call a compass agent so that they can send you listings that are not publicly available on their website. And you're having to interact directly with a company that maybe you didn't choose to work with initially. If you're on the market for a house, you've probably heard of compass by now. Katherine says that to a lot of observers, that company is changing the rules of real estate. Compass has a new initiative called private exclusives where they ought to keep some of their listings private from the general public on their own website and circulated among their own agents before they are marketed more widely on Zillow or truly are some of the sites that you might know. Compass says its private exclusives model can get sellers a better price on their homes. But at a time when mortgage rates are topping seven percent, critics say that compass is making a tough market even harder to navigate. There's an affordability crisis in this country generally, and getting on the housing ladder has never been more difficult for folks, especially first time home buyers, you know, just so frequently feel like they're on the back foot to begin with. So for them to be at an increased disadvantage is something that's worth looking at. At first, one brokerage company pushing private listings wasn't a big deal, but as compass has grown larger and larger, it's gotten a lot harder to ignore. If the real estate industry is a game of monopoly, how many squares on the board does compass own right now? It has a lot, and that has made it just this subject of enormous controversy that real estate industry has been tearing itself apart over compasses dominance. Welcome to the journal, our show about money, business and power. I'm Imani Moise. It's Monday, October 26. Coming up on the show, why companies are in a battle over how to sell your home? Being able to browse all the houses for sale in your neighborhood from your couch is a relatively new thing. The way it works back in the 70s and 80s, you'd have to go to an actual brokerage to ask what they had. And the agency used to keep their listings on little cards and their pockets. They got to choose who to show them to, when to show them, you know, what sort of people should be eligible to live and what sort of building. And it was all this kind of private, closeted, very secretive industry. And then, you know, 20 years ago, everything changed and transparency became expected. With the rise of sites like Zillow, it became easier than ever to open up your browser, see all the pins on a map, and feel like you have a strong sense of what's out there. But there was still something called a private listing. You may have also heard terms like pocket listing or whisper listing because they're so secretive. Before Compass came along, these kinds of listings were relatively rare. They typically were something we saw at the very, very high end of the market. So if you had, say, a celebrity or an athlete or someone who was maybe getting divorced or wanted to, you know, maintain privacy for some very specific reason, they might opt to keep their listing what we call off market. So they wouldn't put it on Zillow or one of the public listing sites because then it could get picked up in the press. Maybe their neighbors would see it. You know, maybe someone was getting treated from the next to some other team and they they didn't want folks to know that their listing was coming on the market. So there was always a very specific reason and those sellers, you know, knew for the most part that they were making to compromise when they did that. Conventional real estate wisdom says that public listings mean more money for the seller. There's decades of research showing that when you publicly list something and you get more eyeballs on it, it's more likely to draw more offers, more competition, Ben and Wars and ultimately probably a better price. So how has Compass changing that narrative though? You said there's decades of research saying that this is bad for sellers. If I want to sell my house and I'm not liberal on James, why wouldn't I want it to be marketed as widely as possible? We talked to multiple Compass agents who've been using this tool and what they've told us is that they're pitching it to sellers as effectively a test run. So they will put the listing on Compass's website and they will kind of shop it around inside with Compass agents. They'll get feedback on the price and the presentation and the pictures and then by the time they go to the open market, they're ready for prime time. Compass says that they have a strategy that mitigates downsides for sellers is private listings roll out in three phases. First, a house is listed privately. That means if buyers or their agents want to find out if Compass has a certain listing, they have to check directly with the company. Then a house can go into phase two. It gets listed on the Compass website as coming soon. Finally, if the house hasn't sold already, it's often listed publicly on sites like Zillow or Trulia. But the fact of the matter is that some of these listings are selling before they reach the public listing. So we talked to an agent for our story who said that he ultimately sells as many as 30% of his private exclusives before they hit the market. And so the question is, could that seller have gotten more? We will never know. That agent Catherine spoke with told her that some buyers pay even more than the seller's asking price just to avoid a bidding war on the open market. Does Compass have any data to support its case that its strategy is actually helping sellers? It cites its own internal data, you know, sort of unclear the parameters that they use to collect it. And it's, you know, a point of disputing the industry, whether it tells the real picture. But they say that when homes they represented were initially listed privately, they sold for 4.6% more on average than comparable homes. Whether or not the seller gets a better deal, Compass stands to gain a lot in these kinds of arrangements. That's part of what's made this so contentious. Usually when a house gets sold, there are two agents involved, one representing the buyer and the other representing the seller. Oftentimes the agents are from different companies. And when the sale is done, a 6% commission gets split between those agents, so 3% each. Agents that don't work for Compass, say that system goes out the window when everything stays within the Compass network. And so a lot of them have accused Compass of apply to double their commissions, like that this whole thing is an effort to increase the chances that Compass is going to bring the seller and the buyer to a deal and thereby turn a 3% commission into a 6% commission. Compass said double-ended deals aren't in school, and that it doesn't track them. Compass started rolling out private listings back in 2024. And yes, it was a big deal within the industry at the time. Everyone was up in arms about it and there was tons of infighting, but it didn't really become a massive consumer issue until the acquisition of anywhere. Because then it became so widespread that it's actually impacting how Americans find sell homes. Anywhere real estate owned a bunch of brands you might have heard of, like Century 21, Coldwell Banker, and Sotheby's International Realty. Those brands are now under Compass's roof. When they acquired anywhere, they became a behemoth. So that was a $1.6 billion acquisition and it increased their US agents from about $40,000 to more than $200,000. With its newfound dominance, Compass now has the muscle to make private listings mainstream. That's next. [Music] After Compass first announced it was acquiring anywhere real estate, antitrust enforcers wanted to investigate the merger. When this acquisition was proposed, everyone thought it was going to be sort of a month long, you know, laborious approval process. And they would have to jump through all of these hoops and then overnight it seemed like it was just approved. Compass worked with the lawyer close to the Trump administration to make its case to the Justice Department. And the acquisition was approved quickly. Since the anywhere acquisition, Compass now handles an enormous share of listings across the country. According to some estimates, in Manhattan, the company now oversees more than 80% of residential sales and dollar value. If you're a realtor in a major market, Compass is practically unavoidable. I'll give you an example. We talked to the head of Brian Harris Stevens, which is a competing brokerage to Compass. She had an agent whose client was looking for co-op on the Upper East Side and had been looking for a while. And that agent ran into an agent for Compass and it turned out that that agent for Compass had the exact type of listing that her client wanted. But she had no idea that it existed. So she said, why is this not publicly listed? And she had always a private exclusive. And so agents feel like they're sort of playing the tech tip here. You know, why when they have a buyer who's ready to punch on a listing like this, should they be scrambling to get access to it? Doesn't the seller want to sell it? While Compass agents aren't required to list homes privately, the firm has been actively encouraging them to do so. In New York, for example, Compass recently offered a $1,000 credit to agents who agreed to pull their listings off the website StreetEasy. So if you are sort of scrolling through Instagram or social media these days, you might come across an ad from Compass or one of its affiliates that will say we have listings that are not available on StreetEasy. So they are actually touting the fact that their listings are only available to a certain segment of the population. And so the question is, is that fair to their clients? Is that fair to home buyers? Like, who does that serve other than Compass? Zelo, which owns StreetEasy, is suing Compass. Compass is also facing pushback and lawsuits from MLSs or multiple listing services. Those are the groups that manage regional databases of homes for sale, which are then fed into sites like Zelo. MLSs have strict rules over when houses need to be listed publicly. Compass wants to take their listings and keep them for themselves and market them privately. And then when that hasn't worked or their buyers are ready, then they want to put it on the MLS. But the MLS is saying that's not fair to us. That's not fair to consumers. So we're not going to allow you to do that. We're going to penalize your agents for not putting their listings on the MLS immediately and we're going to find them or we're not going to allow them to list at all. A Compass spokesperson declined to comment on pending litigation. Meanwhile, things between Compass's CEO and those at competing firms have devolved into the kind of drama you might expect from a reality TV show. One critic is Best Freedman, the CEO of the brokerage, Brown Harris Stevens. She's been writing all of these op ads and going on TV and, you know, screaming as loud as she can by these issues. There's a company it's Compass and they have 80% market share in New York and large market shares all over the country. And they have this private network where you shouldn't have to know somebody to see the inventory. To the point where Compass served her with a seasoned assist. Freedman also claims that Compass retaliated against her by failing an ethics complaint. A Compass spokesperson said the company believes Freedman has made false and defamatory statements about Compass but denies retaliating against her. Another big name in real estate, an impraiser named Jonathan Miller has also criticized Compass's private listings on social media. More eyeballs get a better price so the only upside is to double-end and control and have a greater probability of getting both sides of the transaction to help a stock price. There's nothing to do with the consumer. And he's been signing off on his blog on LinkedIn and his newsletter about this and Robert Raffkin, the CEO of Compass, blocked him and wouldn't allow him to make comments on his posts anymore. Compass declined to comment on Miller. So it's kind of silly and, you know, in the weeds, but you have these very, very prominent figures who are sort of thrown dirt at each other. How has Compass's CEO responded to this criticism that its private listing model is monopolistic? Well, besides blocking people. He says that he's just giving sellers the choice of how they want to market their homes and that sellers should be able to market their homes whatever way they see fit. On TV, Compass's CEO Robert Raffkin has continued to make the case that private listings give more control to sellers by not forcing them to disclose things like how many days a house has been on the market or how many times the price has dropped. But when you give it to the real estate websites to the system of the MLSS, they put these negative insights on your listing that make it look damaged unintentionally. While many of Compass's competitors have called foul on policies that have put them at a competitive disadvantage, they have also said not disclosing information about homes hurts the consumer. There's also been criticism that Compass is potentially opening the door to discrimination and WACP president Derek Johnson recently said that private listing networks are akin to quote digital redlining. If a home is part of a private listings network like Compass has, it's effectively being shown to a narrow slice of buyer. So, you know, the people who learn about that listing tend to be folks who are already in the agent's personal network. And, you know, the truth of the matter is that the vast majority of real estate agents, particularly in Manhattan, are not people of color. And that's not sort of automatically a red flag, but it could become one if listings are being circulated only in these insider circles. So, it becomes an issue of exclusion. A Compass spokesperson said that the company follows all laws, including fair housing rules, regardless of how or when a home is marketed. Where does all of this leave home buyers? Who, as we mentioned earlier, are already squeezed. I think this leaves home buyers confused more than anything else. I mean, I have been reporting on this issue for months, and just articulating it in a story was difficult. It's very nuanced, it's very technical, it's intricate. You know, most people don't even know what an MLS is, or who Compass is, or, you know, what other companies Compass owns. You know, folks have no idea about all of those things behind the curtain, and yet they're being asked to navigate the complexities of it in order to get a sense of what properties are on the market. If buyers are going online and they're only seeing 70 or 80% of the listings that are available, will they pay more for a listing that they like? Because they are getting a sense of false scarcity? Does it put buyers on even more of a back fit than they were already on? That's all for today. Monday of October 26th. The journal is a co-production of Spotify and the Wall Street Journal. 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