Will the Compass deal change how homes are bought and sold?

Based on the sheer scale of Compass’ acquisition of Anywhere Real Estate, there is little doubt that the residential brokerage industry will experience a tidal shift if the deal goes through. 

What’s not yet clear, however, is what this acquisition means for Compass’ private listings push and, ultimately, how it will impact the brokerage community and consumers. 

Private listings could scale up quickly

Compass has spent the last year actively promoting its 3-phased marketing strategy — which begins with listing a home as a “Private Exclusive” — including introducing a client dashboard that integrates the strategy, and helping agents learn how to pitch the approach. 

CEO Robert Reffkin and other Compass execs have highlighted a number of benefits to sellers, such as testing an asking price while not accruing days on market, while reiterating that ultimately it’s the seller’s choice to engage in pre-marketing or go straight to the open market.

While Compass is putting significant effort and resources into its listing strategy, private exclusives currently make up a small share of the brokerage’s transaction sides, which totaled just over 73,000 in the second quarter. Reffkin told investors in July that private listings had “stayed at basically the same level throughout the last number of months,” or roughly 6,600 listings, though data from industry consultant Mike Del Prete suggests it may now be closer to 8,000. 

But that number could grow exponentially. Once the Anywhere deal closes, Compass will have significantly more market share — and the ability to promote its private exclusives strategy to all 340,000 agents under the Anywhere umbrella. According to Paul Hagey, EVP of publications at T3 Sixty, the acquisition would give the combined company about 13% of total national sales volume on just the brokerage side — and an even larger share in some major metros. (Note: Real Estate News is an editorially independent division of T3 Sixty.)

Could more dominoes fall?

Even before NAR announced its decision on Clear Cooperation and pre-marketing in March, the industry had already been fiercely debating the merits of private listings and what a large-scale push toward private inventory could mean for the industry and consumers. Several prominent brokerage leaders, including eXp Realty’s Leo Pareja and even Anywhere’s Ryan Schneider, publicly stated they didn’t support an industry-wide expansion of private inventory. 

But now that Anywhere and its collection of brokerage brands is expected to be acquired by Compass, there may be more pressure to join in the inventory race. Prior to the acquisition news, Schneider himself said to investors during February’s earnings call that “we will not let our agents be disadvantaged” should the industry move in that direction. 

Pittsburgh-based Howard Hanna Real Estate has been another key proponent of brokerages retaining more control over listings and inventory. Though the company is significantly smaller than the top national brokerages, it is the dominant player in some markets, and CEO Hoby Hanna believes any firm in that position would find ways to use that competitive advantage. 

“Forget exclusive and private — what that buyer wants is to know that, if you’re the market leader, are they going to know about the new listings, especially in a tight market? Why wouldn’t a brokerage firm leverage that?” Hanna told Real Estate News in July. 

Learning from the Chicago model 

Some have speculated that a significantly larger Compass would be able to influence and shape rules at the industry level, and its CEO could utilize this power to pressure MLSs, portals and even NAR to adopt policies that are more in line with the brokerage’s goals. 

There was a hint of such pressure in Seattle, where Reffkin effectively encouraged agents to disobey local MLS rules prohibiting pre-marketing in order to execute a private exclusives blitz in March. The dispute has led to legal wrangling and public sparring between Compass and some of the region’s top industry players.

But in Chicago, where the local MLS (MRED) has had a private listing network for nearly a decade, Compass has been able to scale up its exclusive inventory without much resistance. 

After being acquired by Compass earlier this year, regional leader @properties began promoting its own “private-to-prominent” listing strategy, and the company’s co-founders took to local media to make their case for private listings while punching back at Zillow, which had been working with an Illinois State Assembly member to pass legislation limiting pre-marketing and private inventory. 

A combined Compass-Anywhere has the potential to shape the brokerage landscape to look more like Chicago’s, but on a national scale. 

Where does this leave consumers?

Following the acquisition news, Reffkin spoke to investors about four key benefits of the deal. For consumers, he said, the larger brokerage will be able to facilitate a “more simplified, transparent and more seamless” transaction and “deliver what home sellers and home buyers need.”

But if the merger prompts an industry-wide shift to private listings, will consumers truly come out on top? In a world where a few large brokerages control most of the listings, some speculate that consumers would lose visibility into their local markets or be obliged to visit multiple websites or firms to find out what’s for sale. Even Compass agents have debated whether privately marketing homes is in the best interest of sellers. 

Other industry leaders and consumer advocates have warned that gatekeeping inventory could impact market transparency and the integrity of real estate data, shut out small brokerages or lead to fair housing issues. 

A worst-case scenario for consumers would be the collapse of the open housing market, Stephen Brobeck, senior fellow with the Consumer Policy Center, told Real Estate News last month. A company the size of Anywhere going all-in on private listings would “represent a very serious threat to a free market and a transparent market,” he said at the time. 

“Once this starts, it’s like World War I — you’ve got to line up and then all of a sudden, you’ve got six big brokers who are doing it,” he speculated.