Zillow Lawsuit Deepens Industry Rift Over Listing Data

Zillow threw down the gauntlet in the long-running standoff with the Chicago-area Multiple Listing Service and Compass this week, filing a lawsuit that could result in major implications for listing transparency.

Zillow alleges Midwest Real Estate Data — the Chicago-area MLS known as MRED — coordinated with Compass to use its rule-making power to force Zillow to display Compass private listings nationwide, or lose access to its Chicago feed.

But more broadly, the fight is about who should control listing data and how homes should be marketed. Should homesellers get to hide their listings and important pricing data, or is a fully public market best for consumers? Is the MLS a neutral marketplace or a competitor that can take sides with brokerages and platforms?

Compass and Zillow trade barbs

Zillow followed up its lawsuit with a PR push against Compass’ private listing strategy. On Thursday, the home search giant put out a study arguing that home sellers lose money when the same agent represents both sides of the deal, and when homes are sold off the MLS within the same brokerage.

The study used a home’s Zestimate — a metric some criticize for being inaccurate — and compared it to the final sale price after adjusting for market moves. The study identified private listings by counting homes that weren’t listed before they were marked as sold in the MLS and were brokered by two agents within the same company.

Using that methodology, Zillow found that sellers who listed privately lost $1.4 billion over the last three years, and off-MLS listings sold for 1.3 percent less than on-MLS listings, sellers whose agent also represented the buyer lost a combined $1.5 billion over the last three years.

On Friday, Zillow followed up with a survey that found 61 percent of potential sellers said they believe broad online exposure will produce better results than a private network. The survey also found that 85 percent of sellers want an agent who can “pre-market their home to the broadest online audience.”

The first number seems to track with data on how many people actually end up listing privately. About 35 percent of Compass’ listings use the Private Exclusive or Coming Soon pathways, meaning most are still syndicated through public channels from the beginning.

Zillow contends that’s because Compass has pushed private listings aggressively, even when it may not make sense for the seller.

“It is the relentless and deceptive marketing of PLNs by Compass and others driving the rise of private listings, rather than legitimate consumer demand,” Zillow wrote in the lawsuit.

Compass International Holdings CEO Robert Reffkin targeted Zillow on LinkedIn on Thursday, reviving an internal Zillow strategy document that Zillow used to plan out responses should the Clear Cooperation Policy be rolled back. He said the document highlights Zillow’s plan “to sue a brokerage in order to keep agents and home sellers from marketing outside of Zillow.”

What does the lawsuit mean for agents?

The spin factories are in top gear, but so far, nothing has really changed operationally for agents who are syndicating their listings to Zillow, MRED, Compass or other channels. Compass cut off listing flow to Zillow, but Zillow still has the same inventory because it’s getting data from MRED and other MLSs around the country.

D.J. Paris, the president of sales and marketing at Kale Realty, said agents should be prepared to reassure their sellers about what the lawsuit means for their listings.

“The most important to-do this week is call every seller and mention that there’s a lawsuit, here’s what it does and doesn’t affect today, and here’s where the listing is appearing right now,” Paris said. “The agents who make that call first look like experts. You don’t want the client calling you first.”

If Zillow wins the suit, it could set a precedent that would make it harder for other MLSs to push back against Zillow’s listing rules. If it loses, then brokerage-MLS agreements like the one at issue may become more common, Paris said.

“If Zillow loses, MLSs nationwide learn that rule-making power is a tool they can use against portals on behalf of their largest brokers,” he said, noting that fragmented listing data would grow. “Agents who aren’t at one of those brokerages have fewer places where their listings get full reach.”

What should the MLS be?

One major question the lawsuit poses is how the MLS is supposed to operate. Zillow wants the MLS to be a neutral cooperative between brokers where all agents and brokerages are on the same playing field. It’s accusing MRED of breaking from that standard by favoring Compass’ business model.

MRED’s governance structure, as the lawsuit notes, is relatively unique among national MLSs. 13 of the 15 elected board members are reserved for brokerages that have paid a fee to become “Preferred Unit Owners.” Three of those board seats are held by Compass-affiliated brokers: Fran Broude, Compass’ regional vice president for much of the Midwest; Nicole Minier of Coldwell Banker Real Estate Group and Matt Silver of Corcoran Urban Real Estate.

That structure, Zillow argues, is what made it possible for MRED and Compass to allegedly conspire to coerce Zillow into displaying homes that were pre-marketed off platform. Zillow makes the case in the lawsuit that MRED took direction from Compass to challenge Zillow’s use of the MLS data, in a way that hurt its own business interests.

“A self-interested MLS would promote broad distribution of its publicly available listings and would not threaten to withhold those listings from feed recipients such as Zillow — which distributes them for free to tens of millions of consumers — in service of protecting a small percentage of listings that are privately marketed on MRED’s and Compass’s competing PLNs,” the lawsuit states.

The Council of Multiple Listing Services, a national trade group representing MLSs, shares that view. In a March statement, the organization criticized private networks and the effort to hide stats like days on market from public portals.

“Siloing and hiding information weakens competition between brokerages and moves the market away from an open, shared system toward a more fragmented one,” the organization said in the statement. “If this direction persists, brokers and consumers will be required to constantly search countless venues to find available homes, and they will never be confident that they have a complete view of the marketplace.”