A real-estate giant wants sellers to list their homes privately. Will homeowners benefit?
A battle in the real-estate industry has Compass squaring off against the likes of Zillow and Redfin
Selling a house in today's sluggish real-estate market was already tough, and now one of the biggest players in real estate is asking people to do something that seems to make it even tougher: keep their for-sale listing private.
The push for private listings is part of a real-estate industry battle that has Compass (COMP), one of the biggest brokerages, squaring off against big-name listing platforms Zillow (Z) and Redfin (RDFN).
The fight has potential implications for home buyers and sellers alike, as home buyers could be blocked from seeing certain for-sale listings, and sellers could get fewer eyeballs - and offers - on their homes.
One San Francisco resident says she almost made a $100,000 mistake by going the private-listing route when she was first selling her house.
One of the first few offers Caitlin Bigelow received for her two-bedroom condo in San Francisco two days after it was listed hit the magic number she had envisioned in her head.
She wanted $2.1 million for the condo in the quiet, upscale neighborhood of Cole Valley. The real-estate agent she was working with had been doubtful that the condo would fetch over $2 million, based on comparable sales.
But Bigelow had a feeling she could do better.
When she got the $2.1 million offer, the listing had only been "premarketed" by Compass, the brokerage she was working with, meaning it had only been shown to a small group of Compass agents and their buyers.
So when the offer fell through, she wasn't disappointed. It actually turned out to be a blessing in disguise, she told MarketWatch, because the listing was then posted on real-estate internet portals including Redfin and Zillow, which are viewed by hundreds of millions of users each month.
In the first six days the listing was on Zillow, more than 2,000 people viewed the property online, she said, and over 60 groups of potential buyers attended open houses.
Bigelow's condo eventually went under contract for $2.15 million, which surpassed her expectations. The offer was made sweeter by the fact that the buyer paid his real-estate agent's commission fee of $55,000, a cost that the seller traditionally covers.
She was relieved the initial buyer got cold feet, because she ended up getting three offers once the listing hit the mass market.
Also on MarketWatch: Foreclosures are on the rise, and 60,000 veterans are suddenly much closer to losing their homes
For-sale listings are usually available to the public, but now that could change
Bigelow's experience highlights a risk homeowners could face as a result of the war now being waged between Compass and other real estate companies. After Bigelow posted about her experience on social media, Zillow pointed a reporter to her story as an example of how sellers could lose out if Compass prevails.
The bitter fight revolves around how for-sale listings are shown to the public and how homeowners sell their homes, with huge implications for how much they can sell them for.
In short, Compass wants to keep its agents' for-sale listings out of full view of the public by making them private and only viewable to buyers working with Compass agents for a number of days. Zillow and Redfin say that buyers should be able to see all listings. Zillow has threatened to ban Compass's exclusive listings from later appearing on its platform in retaliation.
The battle comes as the real-estate industry has fallen on tough times. Home sales are at a 30-year low, as house hunters struggle with high mortgage rates and record-high home prices. Brokerages are also adjusting to new rules stemming from class-action settlements over the commission fees that real-estate agents make on home sales.
Compass's move to keep listings private would be a major change from how for-sale homes have been marketed to potential buyers in the digital age.
Under traditional rules in the real-estate world, homes like Bigelow's that are for sale typically need to be listed on a multiple listing service within 24 hours of the agent publicly declaring that a home is available.
Those MLS feeds, private databases that brokers enter listings into, are accessible only by real-estate agents licensed by the NAR.
But access has also been fairly democratic. Local MLS databases syndicate their listings to third-party websites via a data exchange, allowing serious buyers and casual browsers alike the chance to see home listings on platforms like Zillow and Realtor.com.
Compass, one of the largest residential real-estate brokerages in America, is trying to upend that system. Its goal is to push the industry toward allowing homes to be listed privately.
Compass's reason for private listings and how that could impact buyers and sellers
Why does Compass want to make for-sale listings private, and how does that impact the average buyer and seller?
Compass envisions rewriting the rules so that homes can be listed privately for a set period to test the market before becoming publicly accessible. Such as in Bigelow's case, Compass wants to market a home to its own agents for a few days before the home goes public on Zillow and other portals.
The brokerage's main argument is that their real-estate agents should have the liberty to privately market a seller's property so they can get a better price for it, or get offers more quickly.
Compass has said it isn't trying to create so-called pocket listings, meaning homes that are bought and sold without ever appearing publicly on the market. Compass says it's only asking for additional time to "premarket" a listing before making it public on Zillow and other platforms via the MLS data feed.
One MLS refused to take Compass listings that had been "premarketed"; Compass sued the North West Multiple Listing Service over the issue, citing anticompetitive business practices and charging that the MLS was depriving home sellers of the choice to market their home as they choose, among other allegations.
Compass founder and chief executive Robert Reffkin says the MLS system has too much control over how real estate is publicized in the U.S.
Under current rules, if a home is for sale and the sellers want to tell the market, it must go on the MLS, which has control of almost all real-estate listings in the U.S.
Such control is what Reffkin opposes. Current policies are "solely focused on preventing cooperation outside of the MLS," Reffkin said, "because they don't want the MLS to be replaced by an alternative listing system."
Currently, if a for-sale listing doesn't appear on an MLS within a day of the house being available for sale, it can never be publicly marketed and must be kept private, under an NAR policy called Clear Cooperation. This creates less transparency in the system, Reffkin told MarketWatch.
Plus: 'Discouraging': Frustrated sellers are cutting house prices by tens of thousands of dollars as buyers grow more selective
Real-estate giants vehemently oppose private listings
Some of the biggest names in real estate disagree with Compass.
Household names such as Redfin and Zillow are pushing for listings to stay public. Zillow has even gone as far as declaring that it will stop displaying premarketed listings that are withheld from the public feeds towards the end of May, which has sent chills through the industry. The company has an outsized influence: Zillow says it gets over 200 million unique user views for all listings across its site each month, making its reach pretty large.
Zillow says it values transparency and that sellers and buyers stand to lose out when listings are kept private. "If you are selectively marketing the listing to some buyers, [and] to try and encourage buyers to work with your brokerage to get access to the hidden listings, or if you're using those listings as a means to get both sides of the commission, it's that kind of practice that harms consumers," Errol Samuelson, chief industry development officer at Zillow, told MarketWatch.
"It's a matter of fairness, it's a matter of equal access," he added. "Zillow's entire purpose for being was to provide transparency... when you help consumers be educated, good business results naturally follow from there."
"It's a matter of fairness ... Zillow's entire purpose for being was to provide transparency."Zillow's chief industry development officer, Errol Samuelson
Real-estate brokers argue that the more public a listing is, the better it is for the buyer and the seller.
In theory, the more eyeballs a listing gets, the higher the price the seller can get. For the buyer, the more listings they can see online, the better informed they will be about what they can buy. More importantly, publicly available listings means house hunters aren't compelled to hire a real-estate agent just to see listings from the get-go. Anyone can browse listings and even view reviews of agents before reaching out.
That's a big benefit that most Americans have only recently gotten used to. Finding homes for sale was more difficult in the past, before the rise of digital home-search platforms.
Previously, the lack of one central listings hub like Zillow, "where all agents had real-time access to information pertaining to homes for sale in a particular market, opened the door to mischief and outright nefarious behavior," the National Association of Hispanic Real Estate Professionals said in a statement.
In some cases, the lack of transparency helped foster discrimination. "Real estate brokers could exclude sharing listing information with brokers that they "simply did not like, or who represented buyers they felt were less desirable," they added.