Compass Sues Zillow

Anthony Lamacchia:

Can’t we all just get along? Nope, not in the real estate industry. As of late. The latest lawsuit that made all kinds of news last week is Compass suing Zillow. And in it they’re naming accomplices and they’re naming co-conspirators like exp. They talk about Redfin, they talk about a 11:00 PM phone call.

Lots of drama here and somewhat of an advertisement here in this lawsuit. I read it last night on the way back from Florida and I read Mr. Reffkin’s, uh, declaration. On the case, which I found to be very interesting, so a couple of different things occurred to me. Occurred to me after reading this lawsuit.

Number one, I feel very confident in what I said before, which is the market would solve a lot of this CCP clear cooperation concern. Why? Because when you are in tight inventory markets, realtors, brokers, [00:01:00] brokerages, et cetera, uh, they get tempted to market things internally and sell it to their own buyers.

Why? Because they have this many buyers and this many sellers. Well, we are headed. Out of that market, we’re already on the road out of that market. I just spent the last six days in Florida, I visited three real estate offices. In between being, uh, down there with my son for a basketball tournament. Every office I went to, I heard about inventory that is sitting on the market.

Properties not selling. Okay, so CCP originated from the late teen years of this century, uh, because inventory was going down and more and more brokerages were starting to try to sell things internally. Now the market’s going back the other way. Finally. Finally it’s happening. If you didn’t see my video that I did just last week, I was drawing on the board in the next room and I was explaining how inventory of homes for sale is going up.

Buyer power is going up, seller power is going down. So Mr. Reffkin, I hear you in this lawsuit, some of your points, I’m like, eh, he’s got a point. But as I’ve said, said publicly many times on this particular issue of CCP and what Zillow is doing, I am with Zillow. Zillow is right, and Zillow is doing what’s best for the consumer by doing it and ensuring that the vast majority, majority of properties end up on the open market.

But I understand that you, Mr. Reffkin, have very high hopes and you have this three-phase marketing plan that you want to have for some marketing differentiation. I get it. We have touted our. A link system over the years and years back, we were talking about it, but the our link system is internal marketing broker to broker in the company, realtor to realtor when our realtors were starving for inventory.

We came out with our link system because we wanted to get it so that our agents would realize when, when one agent had a buyer that wanted a certain property, we wanted them to get an alert to connect with another agent who might have had a matching seller. Okay, so that’s essentially phase one of your plan.

Let me read this here. Page two of the lawsuit. The listing is first presented as a Compass Private exclusive on Compass’s internal platform. No problem. That doesn’t stop because of what Zillow’s doing, where it is accessible to Compass agents who can then share these listings with their home buyer clients or with other brokerages.

You can still do phase one. Phase two is where the problem lies with respect to CCP. Then the listing moves to the coming soon phase. Where the house is posted to Compass’s public home search platform and made searchable for consumers and agents across the country. That’s where the problem is, and frankly, that’s where the problem should be.

Okay. Zillow is right to say, Hey, once you market it. It should be on MLS. Now if Compass did that for a day or two days initially before it went in the mls, some of the MLSs allow that. There’s still about 600 MLSs across the nation. So this isn’t as if, um, every single rule is too much. But I have in other videos, and I will in this one.

Mentioned some of the MLS rules that I feel are a little over the top, and I do think some MLSs should reevaluate those. I’ll get back to those soon, but I wanna stay on this here ’cause I’m talking with Robert right now. Number three. Okay. In phase three, the listing is shared with multiple listing services, databases of listings accessible to agents, and thus distributed to aggregators like Zillow, most home sellers using compasses.

This is interesting. Three phase marketing strategy. Continue on to phase three, 94%. Of sold compass listings end up on the market. Now here’s what’s interesting, and Mr. Pareja, the CEO of exp, he pointed that out and I, what I think is his op-ed today in, uh, on Inman. But he actually said something to the effect of, where is it?

Leo’s a smart guy. Leo’s a friend. Ah, they’re gonna call me a co-conspirator now. ’cause I said, he’s a friend. Here we go. He said, but here’s the twist. They admit that 94% of their exclusive listings end up on MLS anyway. If, if exclusivity was really serving the seller, why does nearly every listing eventually go public?

Now, I’m gonna add something to what Leo didn’t say there, and what Mr. Reffkin doesn’t say here, because Mr. Reffkin was not in the business in 2007, 8, 9, 10, 11, when inventory was skyrocketing, that 94% is going to go up. Not down. So the luck that they’re having where 6% are selling internally, which is somehow luck to them, I don’t see it that way.

If we sell a buyer who contracts with Lamacchia Realty, one of the listings that we have, or a listing of another brokerage, I don’t give a damn. It makes no financial difference to me whatsoever. If buyer Joe Schmoe with realtor Suzy Q buys a Lamacchia listing or buys a Douglas Elliman listing a compass, listing an exp listing.

I don’t care. It makes no monetary difference. And you know, to, to tell you the truth and tell you what I really think in some cases we make, we may make less if they buy our own listing. ’cause the sellers get delusional into thinking there’s more money in it and there’s more. Um. Negotiation and haggling in those particular cases.

So wanted to point that out. Another thing that struck me about this Compass lawsuit, which again, it’s, it’s an advertisement for Compass. It’s quite interesting. You can totally tell this was written by very smart lawyers, but also there were marketing people involved. And there’s no question in my mind, Robert, who is a smart man, he’s wrong on this topic, but Robert Reffkin’s a smart man.

There’s no question he was involved in writing this and there’s nothing wrong with that. I look over the language and when we have lawsuits, so I’m not criticizing, but this is undoubtedly a marketing piece. Uh, and I think there was some strategy in that, and I actually think it was quite smart. So the other thing that I noticed, compass is extremely pro seller, which kind of confuses me because here in Massachusetts.

I am gonna show you some MLS statistics. Let’s pull them up. If you look at the first column, 13% of the properties, uh, the units that they sold in Massachusetts in the first six months of the year, 13% of them Compass had the buyer and the seller. Okay? So that’s one of their agents bringing it to one of their properties, 13%.

Then listed but not sold. Meaning they had the listing but they didn’t get the buyer’s side. The buyer was brought from another brokerage, maybe Coldwell, maybe Lamacchia, who knows? That’s 39%. But then 47% of the time they’re working with buyers. Now you could argue, well, Anthony, so aren’t they on the sold, not listed.

Okay, fine. So let’s add it. 47% sold, not listed. 13% listed and sold. Now, you could argue those numbers can vary a little and blah, blah, blah, but 60% of their time they’ve got the buyer. So I don’t know why they speak so incredibly seller friendly. If I was a buyer, especially if I was a. Lawyer reading this case, and I was thinking of buying a home.

I wouldn’t want to buy from Compass. They talk about how it’s terrible that MLS is in Zillow. Uh, they talk about Zillow Ready, Zillow, uh, number six in, in page three of the lawsuit. Zillow is an unfriendly place for home listings. So the law, the premise of the lawsuit is that. They want all their properties to be on Zillow when they want them to, but then they say it’s an unfriendly place.

And then they say days on Zillow metric showing how long the property’s been on the market. They’re saying that’s a bad thing. Well, I, Anthony Lamacchia, broker owner of Lamacchia Realty, now the third largest real estate brokerage in Massachusetts, buy transaction. I am concerned about buyers as much as I am sellers.

I am. I really am. And I think the transparency for buyers is really important. And buyers knowing how long properties have been on the market, knowing if they’ve had a price adjustment, um, knowing if they’ve come off the market and come, go back on the market. That’s important for buyers. Mr. Reffkin tears all those apart.

He says Market history shouldn’t be shown. Days on market shouldn’t be shown what pricing history shouldn’t be shown. Huh? So a buyer should have no awareness. A buyer’s not entitled to some transparency. He’s extremely pro seller, and I get it. He wants to control the inventory. He wants sellers to see that.

But maybe a seller’s pleased with that. But if I’m a seller, I’d be thinking, eh. Maybe I’ll sell with them, but I’m not buying through them, just my opinion. Um, I also thought it was funny. They, they, so, so they’re arguing that they want to be on Zillow site, but then they shred Zillow and then they said something quite funny.

They basically said, compass competes with Zillow for home search queries and the strategy. The strategy that Compass has poses a significant threat to Zillow’s home search monopoly and revenues. I wrote Funny next to it, compass.com and Lamacchia Real. I’ll say it about my company too. Lamacchia realty.com will never ever have the search power and the amount of home buyers in a given month.

The Zillow has now they say, never say never, but I’m saying never. It’s not gonna happen. Zillow eats everybody’s lunch online. It, it’s not even close. And realtor dot com’s right behind them. So lot of craziness in here. Lot of crazy talk. Um, but I want people to be aware of this and I want agents to be thinking about this.

Last week I heard from so many agents, I even did an Instagram video right from Disney’s ESPN Center and I said, I’m not doing that. Well, that was last week. This week I’m back in work mode and I thought it was necessary to talk about it. Um, alright, stay with me. Zillow Misleadingly connects prospective buyers with paying agents unaffiliated with the property.

The prospective buyers may have to sign buyer representation agreements. Mr. Reffkin, do you know that a tremendous amount of Zillow agents and teams do this? They buy leads from Zillow. Now I can understand if you’ve got some frustration with Zillow, their business model, maybe how much they charge. I share some of those frustrations.

Over the years I’ve been known to bang heads with Zillow or pull our budget or things like that. But at the end of the day. They’re the best. Um, I don’t know if they’re the best. They are the most viewed home search website in America, and it’s not changing anytime soon. homes.com dropped a billion dollars and they fell flat on their faces.

Okay, so this misleading by contrast, a prospective buyer who finds a property on compass.com, blah, blah, blah. I mean, I don’t know if he realizes, but he’s, he’s, he’s criticizing the practice of many of his agents. Again, doesn’t make a lot of sense to me. Multiple Compass agents have had their home seller clients.

This is page 53. Ask if their listing will be banned from Zillow. Well, they should be asking home sellers with properties currently in the coming soon phase have expressed unease that their listing could be banned from Zillow and have told Compass that they would consider switching to an agent at another firm.

Well, what did you expect, Robert? Come on. You can’t do this and not expect that. I did training. We did several weeks of training leading up to the, I believe it was June 30th deadline when Zillow was going to start enforcing, and if you read Zillow’s guidelines, they’re not that bad. I did that in the prior video on May 23rd.

They specifically said, listen, they basically said, as long as you’re not substantively marketing the property to the public. They’re cool with it. An agent, I said this to Zillow. I had conversations with Zillow. Maybe those are gonna end up in here. I said, guys, be careful. You we’re, you know, US brokers, we’ll never be able to stop an agent from taking a quick selfie picture in front of a new listing when they sign it up.

So we explain to our agents at Lamacchia, Hey guys, be careful. Don’t overdo your marketing. Don’t act like you’re gatekeeping. No big deal. We’re fine with it. But Reffkin isn’t. Reffkin is now, or compass isn’t. Again, I don’t want to attack him personally. He’s a very capable guy. Uh, built a hell of a big company, but I don’t understand some of what they’re doing.

Okay? They’re now in a fight with Zillow exp to some extent, Redfin to some extent, NAR. I mean, it, it’s, the list goes on and [00:14:00] on. Then I read the declaration. Now most of Robert’s declaration was somewhat of a regurgitation of the lawsuit, so I won’t bore you with it, but I am gonna put, um, paragraph 16 on the screen.

Impact of Zillow, LAS on Compass. If Zillow is allowed to enforce its Zillow LAS, it will cause irreparable damage to Compass and home seller and home buyers. They said that as a savior, stifling innovation and restricting choice, this choice thing. Come back to me for a minute here. This choice thing is laughable.

Okay? I’ve had some compass agents across the country who follow me on Crush It. Follow me personally on Instagram. Reply to me. So you don’t believe in seller choice. I’m like, guys, let’s, let’s be serious. Every single one of you replying to me, I’ve listed more homes than you have, just, just to be clear, okay?

Never ever have I met a seller that said, I want the most money for my home, but I never want to go on the market. Now, did I do a lot of luxury? No. Do I think that happens a little bit more in luxury? Yeah, I do. It happens like 0.02% of the time that a luxury seller or, and we’ve dealt with this a little bit, someone in law enforcement or someone, um, a, um.

Kind of a high profile person. I don’t wanna put a target on anyone, but you know, someone that’s high profile in a case or a maybe a judge. Every two years we hear from someone that’s, I’m a little concerned about going on the public market, right? Okay. It’s one out of thousands. It’s not even 1%, it’s 0.002.

Okay. So the seller choice thing is ridiculous, and I hope that the judge sees this. I hope that the jurors see this. Because they need to know that that’s the truth. Alright, back to it. With respect to Compass specifically, compass has spent years building a reputation as an innovator and it has invested millions of dollars to develop and launch the three phase marketing strategy.

I envision and believe that the three phase marketing strategy is essential to the future of Compass and its growth. It is one of the essential strategies and branding efforts Compass will use to differentiate itself from its competition. It is critical to how we plan to grow our market share by attracting new agents and home seller and buyer clients getting more listings and growing our home search platform as a destination in the industry.

Our value proposition for agents and clients has always been to offer them technology choice in freedom. The choice word is it’s, it’s so funny. The Zillow LAS prevents us from delivering on that value proposition. So listen folks, honestly, there’s a part of me that doesn’t even feel like Zillow had to do this.

Again, I’m with them on the policy decision. They, they essentially. Became the enforcer for the industry. NAR was trying not to be. ’cause they keep getting sued for everything and I can’t say I blame them, but ah, the market would’ve solved this anyway. This three phase marketing plan, the Lamacchia Links system, I saw something about Douglas Aman has something.

None of it’s gonna do much in the next couple of years. As inventory goes up, more and more sellers are gonna pressure their agents to get the property exposed to as many people as possible. More and more listings are, they’re gonna be a harder time selling them, especially this fall. So the market would’ve self-corrected.

This capitalism always does, as mil Milton Friedman says, but it is what it is. We’re at where we’re at, and it looks like Zillow and Compass are going to duke it out. Will Compass get lucky? Maybe Zillow is a giant to take on, but Compass is no, uh, small opponent either, so we shall see.

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