Editor’s note: This is part one of a two-part story examining the impact of the Redfin-Compass deal. Look for part two in the coming days.
“The future is bright. Look forward to building it with you.”
Those words, from Compass CEO Robert Reffkin to Rocket Companies CEO Varun Krishna, have a little bit of subtext. Between them, Krishna and Reffkin recently came to control an outsized portion of the real estate market—Rocket through a mega-pipeline stretching from consumer portal to the largest mortgage portfolio in the nation, and Compass with more affiliated agents than the next two brokerages combined after its Anywhere acquisition.
When the two men announced a three-year partnership granting exclusive listings to Redfin, and proprietary leads to Compass (and Anywhere), there were naturally some concerns. With all the power these companies have, what kind of future do they envision for the industry?
“This is my personal view—I think this alliance marks the end of the restrictions that MLSs have had on agents and sellers on how they market homes,” Reffkin told investors after the announcement last week.
Industry veterans have heard this kind of talk before—as recently as two years ago, when the commission lawsuit settlements and the Department of Justice were supposed to upend the traditional structure of real estate. Will the Compass-Redfin partnership compel larger changes to the MLS model—or real estate generally?
Big questions
“This will not be the thing that brings down the MLS,” says Ken H. Johnson, a broker turned economist who currently serves as Chair of Real Estate at the University of Mississippi. “And we should probably start asking ourselves, do we really want to bring down the MLS?”
In the post-Burnett shuffle, critics of the MLS system—both inside and outside the industry—seemed to have found a new voice. AI startups claim they can replace listing agents, brokers are suing for MLS access and the National Association of Realtors® (NAR) has quietly backed down from listing service mandates.
While Compass and Reffkin say their goal is simply to give sellers choice in how to market, critics and rivals argue the shift away from the MLS is a long-term business plan for the mega-brokerage to control inventory, and eventually, the market.
So far, though, MLSs and agents continue to operate largely as they have for decades, as consumers rely on portals fed by IDX feeds to access listings and market their homes as widely as possible.
NAR, in a statement shared with RISMedia, said it “does not comment on specific brokerage practices or business models,” noting that the organization does not have a national policy on “Coming Soon” listings.
“NAR values the pro-competitive and pro-consumer benefits of MLS, including broad market exposure, access to available properties for sale in a marketplace, and equal access to the public,” the statement reads.
But the Redfin-Compass alliance opens up a new avenue to bypass or supersede the MLS, through somewhat unprecedented power over listings and agents. In a joint release from Rocket and Compass, the companies focus on how Redfin will “lower the barrier of entry” for sellers.
Kristen Haseney, a lawyer who formerly worked as general counsel for the Connecticut Association of Realtors® and is currently a professor of real estate at the University of Connecticut School of Business, says it is “unlikely” the deal will impact the process of buying and selling a home.
Haseney adds that there is still “strong support” for open access to listings across the industry, and that she doesn’t see the deal as putting pressure on MLSs to implement private listings of their own.
“(A private exclusive is) not a new concept, and hasn’t become an industry standard because it’s not 100% successful every time for every single listing,” she says.
That doesn’t appear to have discouraged Compass from trying. Reffkin has become a chief critic of “legacy” real estate entities and practices, and over the course of two years, went from lobbying for changes to the Clear Cooperation Policy to characterizing MLSs as monopolies that “exploit” agents.
Is the plan to replace the MLS with Redfin, and Compass’s own platform? Asked directly, a Compass spokesperson disputed that Reffkin is a “critic” of the MLS, saying that Compass supports MLSs that offer sellers pre-marketing or private listing options. The spokesperson claimed that Compass wants whatever the seller wants—whether that includes the MLS or not.
But the Redfin partnership, at least on the surface, appears to be a doubling-down on the idea that Compass can supplant these organizations and systems, writing new rules for marketing and cooperation. Reffkin made it clear in his remarks to investors that the company would be launching the partnership with Redfin even in markets where MLS rules are not friendly premarketing.
Bess Freedman, CEO of leading New York-based brokerage Brown Harris Stevens, says the kind of world Reffkin wants to create is going to undermine trust with consumers, specifically through the push to remove “negative insights” like days on market and price drops from listings.
“The central nervous system of our business, our industry, is being transparent and (having) a fair market structure to reveal real price discovery. I feel like this is just—it’s constantly beating that down, and destroying all trust in the market,” she says.
With what feels almost like a hostile takeover bid, though, Reffkin appears poised to test whether consumers—and agents—really need or value the “transparency” of the MLS.
Again, speaking to investors, Reffkin noted his company now controls around 700,000 listings, and previewed how he thought MLSs will respond as Redfin hosts more and more exclusive “Coming Soon” and “Private Exclusive” sales.
“What’s going to happen is that MLS is going to send our agents a fine for up to $5,000,” Reffkin said. “Are you telling me that you’re fining the agent $5,000 for marketing that listing publicly—searchable by 60 million people on Redfin, (and) that you’re doing that to protect fair housing? Are you doing that to protect transparency?”
The market
The idea that Compass could control enough exclusive inventory to essentially compel buyers or sellers to work with their agents, though, is the main question many brokers are asking. Compass has long denied it is seeking to double-end deals by marketing in-house, claiming that the financial benefit it gets from this practice is negligible.
Compass also stresses that its “Coming Soon” and “Private Exclusive” options are entirely at the discretion of the seller—and historically, still end up listed on the MLS after “premarketing.”
But through its lawsuit against Zillow, internal documents showed that the company has pushed agents to utilize “3PM” (three-phase marketing, including a “private exclusive” phase) with numerous incentives, trainings and other “accountability measures.”
One of those documents indicated that usage of “3PM” fell from 37% to 25% last year, in the wake of Zillow’s decision to ban listings that were marketed “publicly” but not shared with the MLS (and Zillow).
At the high end, if Anywhere implements the same focus on 3PM, that would translate to over 250,000 listings that spend some time as a “Private Exclusive” or “Compass Coming Soon.”
Chicago-based MLS MRED, which offers an internal private listing network open to members but not syndicated publicly, has reported about 15% of its listings in recent years are private.
Reffkin has become more and more overt in acknowledging the attraction aspect of his private listing business, telling investors last week that “as awareness around our unique inventory grows via the Rocket and Redfin partnership, we believe more and more homebuyers will seek out our agents’ listings and our agents for their advice.”
Is the Redfin deal, along with the addition of a couple hundred thousand Anywhere agents, enough to push the balance of these listings to some critical mass that would compete with the MLS?
“I don’t see this (private listings) being a predominant model,” says Johnson.
But unlike Haseney, Johnson thinks the deal could push MLSs to implement their own version of a private network or coming soon status, as many already have. Most importantly, though, that does not translate to increased demand from consumers, according to Johnson, who he says largely just want to put their homes out to as wide an audience as possible, and don’t have any need for the premarketing strategy that Compass touts.
“It’s not universally appealing,” Johnson says.
The Compass spokesperson disputed this, based on the specifics of the 3PM strategy. Compass agents can start the private exclusive phase of marketing in 15 minutes, the spokesperson claims, and even a seller who is in a hurry or who doesn’t see the need for premarketing has nothing to lose (again, not risking any negative insights) by premarketing while the house is cleaned, photographed and prepped for full market.
The spokesperson again pointed outside the real estate industry, saying that everything from breakfast cereals to Hollywood films premarket and test before a launch.
Asked if Compass believes that consumers will ever be open to marketing that excludes the MLS and is only available on a portal like Redfin, the spokesperson said that the choice is always up to the seller.
From a brokerage standpoint, Freedman says she still doesn’t understand how an increase in private listings benefits “anybody.” Anecdotally, there is extremely limited demand for the service in her market, Freedman says. As many brokerages have deemphasized private listing services, Brown Harris Stevens has no plans to make any changes in response to the Redfin-Compass deal.
“I wouldn’t create something for the sake of matching lazy thinking. I’m not going to copy something that’s just stupid,” she says.
Freedman also questions where the consumer guardrails are—how Compass agents are presenting the private listing option to sellers, or whether they will share days on market or price drops if “asked directly” by another agent or buyer.
Reffkin, in his remarks to investors, characterized those data points as an “artificial barrier” that discourages sellers from listing, and claimed that removing them could bring more inventory on the market.
More broadly, for her agents and business, Freedman says the Redfin partnership itself amounts to “noise,” as the appeal of a Redfin listing just isn’t significant in her market.
“Let them keep eating fast food. We’re going to fine dine over here,” she says. “We’re going to continue to give service to our consumers and talk to them honestly.”
