Real Estate Listing War: Why Compass Withdrew ‘Zillow Ban’ Lawsuit

The legal battle over the so-called “Zillow Ban” reached a surprisingly peaceful resolution Wednesday afternoon: Compass, the country’s largest real estate brokerage, dropped its lawsuit against Zillow, marking the end of a fierce dispute over access to home listings. The bout between the two real estate giants may be settled, but a broader fight is still underway. It could decide how and where you find your next home — and whether you need an agent to do so.

The legal volleys kicked off last summer, when Zillow started banning some for-sale listings from its well-trafficked website. A growing number of real estate agents, the search site said, were gatekeeping available homes rather than sharing them widely with brokerages and search portals. Agents were trading homes in clubby “private listing networks,” advertising them solely on their own brokerage’s website, or tucking them away in internal databases that could only be unlocked by contacting certain agents. While agents of all stripes held some listings off the portals, the face of this strategy was Compass’ hard-charging CEO, Robert Reffkin, who urged his agents to advertise homes via select channels before funneling them to sites like Zillow.

Compass quickly sued Zillow in federal court over the new rules, painting the “Zillow Ban” as an existential threat to its business. If Compass listings got banned from the country’s biggest search portal, the company argued, then its agents couldn’t effectively do their jobs. Zillow countered that Compass’ trove of “exclusive inventory” clashed with the spirit of a fair and open market, where home listings are available for anyone to see. Some buyers might get early access to homes simply by enlisting the right agent or navigating to the right brokerage’s website, while others could face a murkier home search.

As the fight went on, Compass’ stock of exclusive listings kept growing — until recently, there were thousands of for-sale homes that could only be found on the Compass website or by contacting one of its agents. The company also formed powerful new alliances. In early January, it closed a $1.6 billion deal to buy America’s second-largest brokerage, Anywhere, giving Reffkin more leverage in the race to control real estate listings. Then, in February, the company cut a deal to funnel its “exclusive inventory” to Redfin, another popular home-search portal, which agreed to provide Compass listings with favorable placement on its site, among other perks.

“During this entire legal process, Compass’ momentum never slowed down,” says Mike DelPrete, a real-estate tech strategist and scholar-in-residence at the University of Colorado Boulder.

Finally, Zillow wavered: Earlier this week, the search portal said it would relax its rules. Many of the homes that would have been banned under the initial policy are now in the clear, though the company still discourages brokerages from using their own websites to advertise the existence of “hidden listings” in private databases, which can be accessed only by contacting one of their agents.

“It’s the hiding of the listings that we think causes damage to buyers and sellers, and the marketplace,” Errol Samuelson, Zillow’s chief industry development officer, told me shortly before the rule changes were announced.

Zillow also announced a new program called Zillow Preview, which offers prime placement and other perks to brokerages that agree to share their “coming soon” listings — homes in the early stages of advertising that aren’t yet technically on the market — with the search portal.

I always thought we were going to win because humans want freedom, and it’s about choice versus controlRobert Reffkin, Compass CEO

Compass leadership considered Zillow’s watered-down rules to be an effective end to the “Zillow Ban.” No ban, no lawsuit. The company, whose CEO once vowed to me that he would “never give up” in his fight against real estate’s biggest search portal, filed a motion Wednesday afternoon to drop the legal battle.

“I always thought we were going to win because humans want freedom, and it’s about choice versus control,” Reffkin told me Wednesday. “Agents and their sellers should have the choice of when, where, and how to market homes, and it should not be restricted by these platforms.”

Compass’s legal case was far from a slam dunk. In February, a judge denied Compass’s request for a preliminary injunction, which would have forced Zillow to stop enforcing its rules. A Zillow spokesperson said in a statement that while the company “welcomes Compass’ decision to voluntarily withdraw its lawsuit,” its rules remain in effect. The spokesperson said Zillow will “continue to choose not to display listings that were previously hidden from the public for the benefit of any one company.”

“Any suggestion that these standards are no longer being enforced is incorrect,” the spokesperson said. “Hidden listing networks that gate access to listings behind a registration wall or require buyers to work with a specific brokerage do not meet our standards and, to the extent Compass continues operating a network of inventory hidden in the shadows, those listings remain at odds with our standards.”

Documents unearthed during the court proceedings showed Zillow executives debating whether to use a carrot-or-stick approach to stem the tide of hidden listings: Should they punish agents who advertise homes in some places but not others? Or should they entice them to share homes more widely by offering deals they couldn’t resist?

Zillow tried the stick approach, and it didn’t work. Despite the rules it put in place last year, the company continued to see brokers share listings selectively, using their own private gardens of listings to try to lure more agents and clients. Now it’s trying the carrot method, offering perks that could draw more listings out of the shadows and onto its portal.

“We thought, if this is the way the industry is trending, then we need to do something to make sure that those listings get exposure and consumers aren’t harmed,” Samuelson told me. “And we think that this achieves that.”

Other search portals are scrambling to offer their own carrots, too, striking deals with brokerages to host more exclusive inventory on their websites. The upside for buyers is that more home listings may be available widely for anyone to see, regardless of whether you work with a real estate agent. Expect to see more “coming soon” listings popping up across the internet, many of which might have previously been advertised only among agents or listed on one brokerage’s website but not elsewhere. Some buyers may no longer have a leg up, but others — especially those going it alone — may suddenly enjoy access to homes that would have otherwise floated beyond their reach. They may also, however, have to navigate to a few more sites if they want to see everything out there.

The crux of Reffkin’s and Compass’s crusade is that sellers and their agents should exert more control over their home listings. Rather than immediately surrendering their inventory (for free!) to portals like Zillow — which show, to many sellers’ dismay, just how long a house has lingered on the market and whether it’s seen a price cut — they should advertise them in friendlier waters first. Sure, Zillow provides more exposure than anywhere else, but it also monetizes listings in ways that anger many agents. It often funnels inquiries from potential buyers to agents who pay to advertise on Zillow, rather than the listing agent representing the seller.

“Sellers should be able to decide what’s on their listing,” Reffkin told me. “And now, because we’re pushing back, they’re going to get that choice. It’s a huge win.”

Listings have always been the most valuable currency in real estate. With portals competing more fiercely to host those listings, big brokerages are unequivocal winners — they’ll be able to demand better terms and a bigger slice of the pie. There will undoubtedly be more dealmaking as real estate’s power players jockey for prime positioning in the race to hoover up more inventory. At the same time, some agents will continue to pass around listings out of view of the general public, just as they have for decades. Most buyers don’t care about industry infighting, though — they just want to see all the homes for sale. With more home listings at their fingertips, they may also come out ahead.

James Rodriguez is a correspondent on Business Insider’s Discourse team.