Shaina Mishkin
Two of the biggest companies in residential real estate, Zillow Group and Compass, are duking it out in a Manhattan federal court in a case that could change the way homes are sold in the U.S.
At issue are home listing policies specific to the two companies. Zillow, the online real estate marketplace for homes to rent, buy or sell, requires agents to list homes on the multiple listing service, or MLS, a broad housing market industry database that feeds into Zillow and other websites, within a day of marketing it to the public. Not doing so could risk the listing being removed from Zillow, according to the company's policy.
Compass allows sellers to restrict their listing to just agents and their clients before it appears on the MLS. Buyers browsing the Compass website can't view these listed homes, but instead see "Compass Private Exclusives" that advertises the number of homes listed off-market. Clicking the ad brings the user to a tool to search for a Compass agent. Zillow says the ad counts as public marketing of a home for sale without listing it on the MLS, running afoul of its policy.
Compass sued Zillow in June, claiming that the website is hurting its business and engaging in anticompetitive behavior by removing the listings it says aren't compliant with its standards. A four-day hearing began Tuesday before a federal judge who will decide whether to grant Compass' request to block Zillow's policy while the case plays out.
Both Compass and Zillow executives have testified at the hearing, which drew a full house on Tuesday to a courtroom in U.S. District Court. Investors and home buyers and sellers should pay attention because the ultimate result of the case could have ripple effects on the housing market's competitive landscape and the homebuying and selling experience.
Both companies are large in their categories: Compass is the top U.S. brokerage by sales volume, according to RealTrends' annual ranking. It had 38,400 agents on its platform in its most recent quarter, and expects its pending acquisition of brokerage Anywhere Real Estate to bring 340,000 agents under its umbrella internationally. Zillow had 250 million average monthly unique users in its third quarter, and estimates that at least one of its products are used by agents involved in 80% of U.S. home transactions.
Consumers don't access the MLS directly, but the service is central to the way homes are sold in the U.S. This vast network is used by agents to share listings with other agents, and is the backbone of brokerage websites and listing portals such as Zillow, Redfin, and Realtor.com. ( News Corp, which owns Barron's, also owns Move, which operates Realtor.com.)
Compass argues that Zillow is using its market power to compel sellers to widely market their home even when they would prefer to keep their listing out of the broader database. "Let agents be creative and market homes that meet their client's need, not in a one-size-fits-all way so that platforms can make money monetizing their home's listing," Compass CEO Robert Reffkin said during his testimony.
Zillow says its policies are best for consumers, who benefit from access to the most potential buyers and sellers. Without the policy, Zillow CFO Jeremy Hofmann testified that he was concerned that "sellers would have a harder time maximizing price; for buyers who would have a harder time finding all the inventory; and then for agents who have their fiduciary duty to maximize price on behalf of sellers."
An injunction against Zillow could result in more sellers and their agents keeping their homes off the MLS for longer, reducing Zillow's access to listings and possibly sending some buyers directly to brokerages. But if Zillow's policy remains in force , it could hurt the effectiveness of Compass's strategy, which Reffkin described in his testimony as "critical to our future."
The litigation could also have stock implications. Zillow has been named as a defendant in several other lawsuits filed this year. Analysts say the litigation is among the factors weighing on the company's stock, which is down 7.9% this year. "Back in September, this was a $90 stock. Right now, it's just under $70," notes Robert Mollins, a Gordon Haskett analyst covering both Zillow and Compass. "That kind of tells you that [litigation] has been weighing on the shares."
The analyst rates Zillow a Buy, with an $87 price target. "We see a favorable risk/reward as we believe investor concerns around competitive encroachment and legal risks are overstated -- particularly for a company that has continued to innovate and gain market share in a challenging housing environment," he wrote in a Thursday note.
Compass stock is up 60% this year. In a tepid housing market, the brokerage has been focused on growing its number of agents and technology offerings. The brokerage agreed to buy Anywhere, the parent company of real estate brands such as Corcoran, Sotheby's, and Coldwell Banker, earlier this year. The deal, which is expected to close in the second half of 2026, has been a focus for investors since it was announced in September.
The future of the marketing strategy is also an area of interest. A team of Oppenheimer analysts led by Jason Helfstein wrote in early November that they are bullish on the "success of [the Compass strategy] Three Phase marketing, despite resistance by Zillow." The team rates Compass shares Outperform with an $11 price target, according to FactSet.
Write to Shaina Mishkin at shaina.mishkin@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 21, 2025 04:00 ET (09:00 GMT)
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