Newly unsealed internal documents from Compass, a major real estate brokerage, reveal its strategic preparations to challenge what it terms "organized real estate." These filings, part of an ongoing antitrust lawsuit between Compass and Zillow, offer a rare look into the company's internal discussions and its approach to navigating key industry policies.
Key Takeaways
- Compass defined "organized real estate" as NAR, MLSs, and Zillow.
- The brokerage aimed to increase market share to counter industry pressure.
- Internal debates occurred among Compass agents regarding off-MLS listing strategies.
- Compass acknowledged that its pre-marketing strategy led to more double-ended transactions.
- Executives were aware that most sellers would not risk being absent from Zillow.
Compass Targets "Organized Real Estate"
Compass identified the National Association of Realtors (NAR), multiple listing services (MLSs), and Zillow as components of "organized real estate." Executives believed these entities influenced how real estate agents operated. The brokerage's strategy included expanding its market share to gain greater influence.
"If we had twice the market share in all of our markets, you can’t bully us anymore," Compass CEO Robert Reffkin stated in a May 13 call with sales leaders and brokers. This quote, found within the court documents, highlights the company's ambition to become a dominant force in the industry.
Fact Check
- Compass filed over 1,000 pages of internal documents in the lawsuit.
- Zillow also filed more than 1,000 pages of its own internal records.
Navigating Zillow's Listing Policy
The documents also show internal confusion at Compass regarding Zillow's policy that bans listings from its portal if they are not on the MLS and available to Zillow within 24 hours of public marketing. This rule directly impacted what some at Compass called "the Compass Flywheel," a strategy designed to attract top agents and build a unique inventory.
Despite the new policy, Compass executives were determined to continue with their preferred methods for marketing listings. This stance led to a direct conflict with Zillow's regulations.
"Our homeowners saying that they’re terrified or agents saying that they’re absolutely terrified by the Zillow ban and the fear, they feel like they have a gun to their head..."
Agent Concerns Over Off-MLS Strategy
While Compass presented a unified public image, the internal documents reveal significant debate among its agents about the company's approach to off-MLS listings. Some agents expressed concerns about potential legal issues.
One agent wrote in a text thread, referenced in an April email, "We are going to have fair housing lawsuits." Another agent questioned the monitoring capabilities of Zillow, stating, "I’m curious exactly what we can and can’t do with syncing to Zillow now like what they’ll be able to monitor."
Background on Zillow's Policy
Zillow's policy aimed to ensure that all publicly marketed listings were also available on the MLS within 24 hours. This was a response to practices like Compass's "Private Exclusives," which allowed listings to be marketed internally before reaching the broader public market.
Impact on Double-Ended Transactions
The documents suggest that Compass's multi-phase marketing strategy, which included pre-marketing properties, led to an increase in transactions where Compass agents represented both the buyer and seller. This is known as double-ending deals.
An internal slide from April explicitly addressed this, stating, "Yes, over the last two years, pre-marketing results in a consistently higher % of [transactions] where Compass is on both sides." The slide further noted that off-market sales double-ended 72 percent more frequently than on-market transactions.
Confusion and Communication
In preparation for an April board meeting, Compass planned to assure board members that Zillow's policy would "not impact Compass Private Exclusives." This message continued internally, even as Compass sued Zillow in June.
Rory Golod, Compass President of Growth and Communications, sent an email to sales leaders on June 23, the day of the lawsuit, reiterating that "Private Exclusives and the Compass 3-Phased Marketing Strategy are still allowed under Zillow’s ban."
However, some Compass agents had already perceived that their private exclusive listings would be banned from Zillow. "Zillow is saying even [Private Exclusives] will be banned," a Philadelphia agent wrote to executives on May 20, the day Zillow clarified its standards.
Challenging Zillow's Influence
Compass leadership also explored strategies to downplay Zillow's importance. An internal presentation note suggested, "You don’t NEED to be on Zillow." CEO Robert Reffkin even appeared to use ChatGPT to generate reasons why being on Zillow might not be in a seller's best interest, according to an April 12 email.
Despite this public and internal defiance, executives privately acknowledged Zillow's significant market power. Reffkin himself stated in his deposition, "I’m not a slave to Zillow."
Seller Fears and Market Realities
However, the documents reveal that many sellers were indeed concerned about not being listed on Zillow. Reffkin admitted in his deposition that homeowners and agents were "terrified" by the potential Zillow ban.
Golod echoed this sentiment, stating in his deposition that most sellers would consider it "insanely detrimental" to risk a Zillow ban. He estimated that the number of sellers willing to market a "Coming Soon" listing without it appearing on Zillow would be "almost zero."
Key Insight
Compass's internal slide showed that 72% more double-ended transactions occurred with off-market sales compared to on-market transactions.
The "Black Box" Controversy
The documents confirm that Zillow viewed Compass's display of a "black box" — indicating the number of Private Exclusives in a given market — as public advertising that violated its policy. Compass, conversely, maintained that this "black box" was necessary to avoid fair housing violations by showing consumers more available listings.
A Compass agent, Kerry Carr, stated in her deposition that she would be "afraid" to use private exclusives if she knew Zillow considered the "black box" a violation. She added that she would not want her listing to risk not showing up on Zillow.
These internal communications provide a detailed look into the strategies, concerns, and conflicting views within Compass as it navigated a complex and competitive real estate landscape, particularly in its relationship with Zillow.
