Leading brokerage Compass filed an antitrust lawsuit last month against listing giant Zillow in a fight over exclusive property listings. It's the latest tussle in the real estate agent space, a year after major rule changes were implemented following a consumer victory over the industry's leading firms in a landmark federal case. 

As Compass seeks a preliminary injunction against Zillow in the New York federal case, mortgage lenders are paying attention for any impacts to their business. Real estate veterans say they don't see how the latest legal bout could hurt home affordability, but raise questions over other downstream impacts for both buyers and lenders.

"It's unfortunate, but it's just an indicator of what's happening in the industry right now," said Terry Lockery, regional sales leader with Prosperity Home Mortgage. "Everybody's fighting over data."

How Compass, Zillow and real estate rules intersect

The dispute originates around the Clear Cooperation Policy implemented in 2020 by the National Association of Realtors. It requires seller brokers to submit listings to Multiple Listing Services, which make it available to other participants, within one business day of publicly marketing the property. 

The rule however allows "office exclusives," or so-called pocket listings that are promoted between brokers affiliated with the listing brokerage. Clear Cooperation was not part of the recent NAR settlement, which focused instead on how commissions were paid.

Compass claims it's the nation's largest brokerage by volume and touts a network of over 33,000 agents. The ubiquitous Zillow platform racks up billions of visits each quarter, but does not employ its own agents and rather uses its brokerage licenses to gather MLS listings. 

How different listing strategies are clashing today

In November Compass debuted its 3-phased marketing strategy, in which sellers list their home in two separate exclusive stages before finally going wider on MLSes, giving others like Zillow access to those listings. NAR updated its Clear Cooperation Policy in March, which Compass suggested doubled-down on protection for "office exclusives" like Compass'. 

Zillow announced in April its own new listing standards, barring any listing from its platform which wasn't given to it within 1 day. The policy states they'll be banned "for the life of the listing agreement between that listing broker and seller," which Compass implies means firing them. The rival has decried the new standards as the "Zillow ban."

The site will also ban real estate agents on their third violation of the rule, as well as any non-compliant listing posted by that agent moving forward. 

"The Zillow Ban is designed to make it hard, indeed nearly impossible, for home sellers to sell their home outside of Zillow, in an effort to force all listings to be on Zillow where Zillow makes money selling leads off the homeowners' listings," the lawsuit said. 

Zillow collects an up to 40% commission from the buyer agents it directs consumers to on its website, via its Flex Pricing program.

Compass' request for a preliminary injunction to halt Zillow's new listing standards is currently pending in federal court. The listing giant defends its standards as legal and pro-competitive, and suggests the exclusive listings limit both listing access and choice of brokerage.

"While Compass has been waging a campaign against market transparency to the detriment of consumers and agents, Zillow, by contrast, has a long history of providing transparency and equal access to real estate information, to the benefit of consumers and agents," a spokesperson for the latter company said. 

Brokerages are taking sides

Although they aren't named as defendants, Compass describes competitors Redfin and eXp Realty as co-conspirators. Redfin has partnered with Zillow in recent years for multifamily and construction listings, and the Rocket Cos.-owned firm in April announced its stance akin to Zillow, without directly mentioning its peer. Brokerage eXp, also a sizable player in the market, publicly joined Zillow's policy against "the anti-consumer practice of encouraging sellers to list their homes off-market." 

"[They] knew that these policies would harm Compass and hoped that slamming the door on Compass's approach would arrest the wave of support and similar strategies that had started to spread," wrote attorneys for Compass, referring to Redfin and eXp.

Homes.com meanwhile has opposed Zillow. Andy Florance, founder and CEO of CoStar Group which owns the brand, has rallied against the rival on social media and characterized Zillow as an "anticompetitive cartel."

Will home financing be impacted?

Lenders said they don't see the Zillow dispute affecting their daily business, but mulled some longer-term factors. Lockery focused on the battle over data as a point of concern for lenders. He pointed to brokerages adding mortgage businesses including Zillow, Compass' joint venture with Rate, and Douglas Elliman's recent mortgage announcement.

"Companies that are just focused on data and don't have that relationship business, I think they're going to suffer in an environment like this," he said. I think that's going to be the hurdle."

Jeremy Schachter, a Phoenix-based branch manager with Fairway Home Mortgage, also downplayed the lawsuit's mortgage impact but raised concern with the concept of exclusive listings at the center of the lawsuit. Although inventory nationwide is rising, Schachter explained that not every market, or specific neighborhood, is abundant with homes for sale. 

"Personally, I feel like sellers are not really doing themselves a favor because they're not putting [their home] on the open market," he said of pocket listings at-large.

According to Compass, 94% of its exclusive listings reach the MLS via its program's final stage, where platforms like Zillow can pick up those listings. The company's program results in "better quality-adjusted" prices for sellers, it contends. Home prices today remain elevated, although the exponential gains during the refinance boom have subsided. 

Jason Lindwall, president of Move Concierge, also accused Zillow of trying to monopolize the data associated with a listing. The real estate veteran, whose company helps buyers transition into new residences when moving, said the issue represents the evolution of the industry following the muted aftermath of the NAR settlement. 

"I think we're starting to see encroachment in different perspectives of the real estate transaction, just as we were seeing in the brokers now trying to get into mortgage and title and insurance," he said. 

The real estate agent landscape is watching numerous developments unfold. Real Estate News has reported the widening battle between brokerages and MLSes over exclusive listings, while another prominent broker of television fame has filed his own Clear Cooperation complaint against NAR. Meanwhile, a Department of Justice probe into the rule is apparently cooling off.

The turmoil in the sector reminds Schachter of the upheaval mortgage professionals dealt with over a decade ago in the aftermath of the Great Financial Crisis. 

"I actually tell real estate agents, now you know how mortgage loan officers dealt with the Dodd-Frank Act," he said.