Compass, currently one of America’s largest real estate brokerages, has made private listings a key part of their recent strategy. This action has sparked a huge controversy in this nascent industry. As of mid-February 2023, over a third of Compass’ listings were marked “Compass Private Exclusive” or “Compass Coming Soon.” This further illustrates the intense competition for unique real estate opportunities. This troubling trend has left industry experts to wonder what this means for transparency and increased competition in the real estate market.
The company’s CEO, Robert Reffkin, has repeatedly defended this approach, calling it a move for privacy and discretion for sellers. Compass aims to provide homeowners with the option to market their properties without immediate exposure on popular platforms like Zillow and Redfin. This strategic pivot coincides with a major change in regulatory guidelines from the National Association of Realtors (NAR). They’ve recently changed their rules, in March, in fact, to better accommodate sellers who wish to keep their marketing strategies private.
The Rise of Private Listings
Many firms engage in this practice, but recently, Compass has expanded the use of private listings at an alarming rate. The brokerage famously rolled out proprietary terms such as “Compass Private Exclusive” and “Compass Coming Soon.” These choices give merchants the flexibility to decide how soon they want to appear on the market. These pre-MLS options allow sellers to test the waters for interest before fully committing to listings on local Multiple Listing Services (MLS).
The NAR’s rule changes have been instrumental in this movement. Once upon a time, a rule required that agents list their properties on the MLS within 24 hours after they started offering them for sale. With the new implementation guidance, using a public marketing and sales process no longer requires the seller to go public first. This new change has provided more opportunities for creative real estate transactions. Now Compass can even include these options in their catalog and they’ll be better able to serve privacy-seeking homeowners.
In his recent opinion piece, Compass CEO Robert Reffkin made it clear whose side he’s on. He added that Compass is committed to following NAR’s rules while providing new, creative alternatives for sellers. He said, “Compass has achieved everything it has without banning homeowners who don’t give us their listings,” underscoring the brokerage’s focus on choice and flexibility for clients.
Industry Response and Challenges
Despite Compass’ persistent messaging in defense of its private listing strategy, other voices in the industry have sounded the alarm on the negative impact. Leo Pareja, the CEO of eXp Realty, a strong opponent to private listings. He thinks they’re misguided and will be harmful to the market and consumers. He emphasized the importance of transparency in short-term rental listings. In this fashion, buyers have convenient and equitable access to every property on the market.
In reaction to the changing environment, Zillow and Redfin have likewise changed their approach to private listings. Beginning in late May 2023, Zillow will require “coming soon” listings on other real estate websites to be published on its platform within 24 hours. This recent change adds unnecessary complexity to Compass’ strategy by capping the length of time that properties can be kept off widely available platforms.
Industry professionals such as Summer Goralik showcased the positive repercussions that came from these changes. She noted the concern of the conflict creating seller-driven marketing needs versus brokerage interests. She stated, “If this plan to market off the MLS is literally driven by client need, then 100% that should be the journey.” However, she cautioned that if brokers push for off-market listings without seller input, it could negatively impact the integrity of the selling process.
Compass’ New Plan for Sharing Listings
In light of the challenges posed by new regulations from Zillow and Redfin, Robert Reffkin announced a new plan aimed at maintaining Compass’ competitive edge while adhering to industry rules. This program to introduce buyers and agents of any brokerage to Compass’ private listings. They can still view these listings one-on-one through a printed book available at each Compass office.
This sector-specific approach aims to protect individual privacy while ensuring sufficient transparency for market participants. A spokesperson for Compass emphasized that “home sellers deserve choice in how their home is marketed,” reinforcing the idea that sellers should decide whether to start with private or public listings.
Though a step in the right direction, critics are still concerned about the resulting meaning of this strategy. Caitlin Bigelow shared her concerns: “I think that the off-market exclusive ultimately is bad for people and good for Compass.” She told her agents that she would post off-market listings to let Compass agents know. Initially, she was unwilling to take any bids on her home during that period.