A turf war is erupting in the residential real estate industry, with the biggest names — including Compass, Redfin, Zillow and Homes.com — falling into two increasingly stratified camps when it comes to so-called “pocket listings.”
Such listings are houses for sale that are shown privately to select groups before going to the general public.
Brokerages and real estate portals on one side believe the private listings are beneficial because they offer sellers privacy and control, as well as a chance to test the waters on aspects of a home sale like staging and price. Those on the other side believe they make the market less fair, and can also drive down sale prices by reducing competition.
All brokerages agree that listings are precious currency. There are more real estate agents in the United States than there are houses for sale, and the more listings an agent can show to a potential buyer, the more likelihood they have of closing a deal and collecting a commission.
On Friday, Compass sued a Seattle-based listing database in federal court, accusing it of “monopolistic” and “anticompetitive” behavior that it says has damaged both Compass’s reputation and business.
The database, Northwest Multiple Listing Service, refused earlier this month to allow any of its listings in the Seattle region from appearing on the Compass.com website. Northwest MLS reversed its stance a day later, but continues to enforce a rule that requires brokerages to enter home listings on the MLS immediately, or not at all.
Representatives for the MLS feed did not immediately respond to a request for comment on the lawsuit.
Friday’s lawsuit is the latest escalation in an ever-raucous debate within the industry, one that has also attracted the attention of the Justice Department. The National Association of Realtors, which has long guided real estate rules, has been under scrutiny since 2019 for its private listings policy, called Clear Cooperation. That policy required agents to enter any new home for sale into a public listing database, called an MLS feed, within 24 hours of advertising it.
In March, after a flurry of legal challenges to the policy and mounting pressure from agents and brokerages to reconsider, N.A.R. softened its policy to allow for delayed marketing, such as Compass Private Exclusives, and declared that individual MLS feeds set the length of time that listings can be kept private. There are hundreds of MLS databases around the country.
N.A.R. did not immediately respond to a request for comment. But with their shift on pocket listings, the industry’s biggest companies are now scrambling to rewrite their rules. Zillow and Redfin this month announced that homes that are initially marketed privately can never be brought to their sites, a move that some industry insiders say is designed not to protect homeowners, but their own supply chain of listings.
“It does look like what Zillow is protecting is not the buyer or the seller, but the MLS,” said Rob Hahn, a real estate strategist who writes a popular industry subscription newsletter, NotoriousROB. “It’s about access to listing leads.”
Robert Reffkin, Compass’s chief executive, called the rule a “punishment” for those who want to market their homes differently.
“Zillow is abusing its market power and effectively telling homeowners, ‘We know what’s best for you, and if you disagree, we will ban you and your agent,’” said Mr. Reffkin. Many sellers, he said, want to try marketing to small groups before putting their home on Zillow, where listings include details like days on market and price-drop histories. “Homeowners should have the right to choose how they market their homes,” he said.
Since November, Compass has been heavily promoting its Private Exclusives, a marketing channel of about 7,000 home listings available only to Compass agents and the buyers working with them. Those listings are generally kept off MLS databases to start.
But many within the industry have pushed back on the brokerage, saying that if they start marketing their listings only to Compass agents, they have to keep it that way. Executives at both Zillow and Redfin told The New York Times they made the choice to ban erstwhile private listings because their sites were created to promote transparency in the industry.
Redfin and Zillow, to different extents, both charge agents a referral fee if they sell a house that was listed on their site (Redfin, which is also a brokerage, only charges agents from other companies).
Andy Florance, chief executive of CoStar,said profit, not transparency, is the true motivation for portals like Zillow.
“They are trying to punish homeowners by saying if you circumvent our marketplace, you can never access our marketplace again,” he said. “It’s overly aggressive,” he said, adding that he believed Zillow was trying to maintain “a monopoly.”
Errol Samuelson, Zillow’s chief industry development officer, rejected that accusation.
“It’s a fairness issue,” he told The Times. “Brokerages are using the lure of these listings that are behind the velvet rope to benefit the brokerage, and when buyers don’t have equal access to listings, it creates fair housing issues and distorts the market.”
Glenn Kelman, the chief executive of Redfin, said he believed the push for private listings was rooted in some brokerages’ desire to keep commission rates artificially high.
“The industry has just gone through this seismic change where the fees that consumers pay to real estate agents are under pressure,” he said. “And now you have agents saying to consumers that the reason you should pay me a high fee is I can show you listings that nobody else has.”
The squabble over private listings, he added, was ramping up because N.A.R., which has been weakened not just by the landmark suit but also allegations of corruption and sexual harassment, had lost the power to advocate for consumers.
“Now you see different parties trying to lead the industry in the absence of an organization that’s supposed to help us all work together,” he said. “When the cat’s away the mice will play.”