News that Compass is moving to acquire rival Anywhere met a mixed reaction Monday.
The acquiring brokerage’s agents largely lauded the proposal, while Wall Street investors weren’t immediately thrilled — with Compass shares dropping 15 percent Monday as analysts processed how the company would sort out Anywhere’s smattering of business models, its duplicate infrastructure, and its pile of debt.
But some real estate observers saw at least one clear upside to taking such a big swing: By expanding Compass’ industry footprint from roughly 40,000 top agents to 210,000 nationwide, the proposed acquisition may hand CEO Robert Reffkin more leverage — and an even bigger megaphone — in his efforts to bring about changes to longstanding industry policy on private listings and beyond.
“Compass understands that they need market power in order to take on Zillow,” Russ Cofano, the former CEO of Collabra Technology, told Inman Monday. “This certainly helps.”
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Compass and Anywhere’s joint announcement elaborated little on any non-financial reasons behind the move. A presentation Compass that gave to its investors touted hundreds of millions of dollars in cost-cutting potential that they could realize in the years ahead, as well as other efficiencies and benefits to business operations.
And early indications from Compass are that the two companies would continue to operate independently under the deal, “maintaining distinctive brands, platforms, and cultures,” a Compass spokesperson told Inman in an email.
Representatives for both brokerage companies on Monday declined to comment further.
But for industry observers like NextHome co-founder and CEO James Dwiggins, the prospect of a private-listing platform that combines the networks of Compass and Anywhere in some way might be too enticing for Compass leadership to pass up.
“I can’t imagine Robert not wanting to push that across all the brands,” Dwiggins said Monday in a webinar discussing the deal. “Yes, if they had 210,000 agents in the United States, and 25 percent market share of U.S. residential real estate, it would have an impact.”
Cofano concurred with this notion. With Anywhere’s brands and agents in the fold, Compass would become even more “formidable” in the private-listing arena, he said.
“Their listing power increases significantly and it would make no sense for them to back off the whole concept of private listings now,” Cofano said.
For months, Reffkin has ratcheted up the heat on Zillow, the National Association of Realtors and MLSs as he sought to challenge the industry’s Clear Cooperation Policy, as well as Zillow’s policies related to off-market listings.
Victor Lund, a founder and managing partner of WAV Group, believes the more consolidated the brokerage industry becomes, the more leverage brokerages like Compass will have to get their way.
“If MLSs and associations do their best to impugn these companies, they’re going to take their listings and walk,” Lund told Inman. “And that’s going to fracture the industry. And that’s what’s at risk here.”
Lund doesn’t believe the industry will actually reach such a rupture point. Too many companies and associations have an interest in working together, he said. But the implied threat of such a dramatic step could force changes that MLSs might have otherwise been reluctant to make.
“I think that some MLSs in real estate have leaned too far into their relationship with the agent, and in doing so leaned away from the broker — and their policies reflect that,” Lund said. “As brokerages across our industry consolidate, I think you’re going to find … existing MLSs change their tune a little bit in regards to becoming more broker-centric.”
But others are skeptical that such changes would represent an improvement.
“I think this is bad for sellers and buyers,” Dwiggins said about the deal. “As stated, these policies, in my opinion, are harmful to consumers. … I think this ends up causing a long-term rift in the industry — which, take [NextHome] out of it — I think it just harms the consumer, and that’s sad.”
One of the key areas Lund sees as up for grabs is the practice of MLSs offering services and platforms directly to agents that are often seen as the province of the brokerage. Lund believes that this practice might soon be on the chopping block if more brokers start to get their way.
And with Compass potentially growing to 210,000 agents across the U.S. under the proposed acquisition — reflecting a significant share of both NAR membership and Zillow customers — Reffkin’s statements would hold more weight than before with the industry’s largest players as well, Dwiggins said.
“Robert’s got a massive war chest at play — not financially,” Dwiggins said. “It’s a lot of agents that are represented under the National Association of Realtors. Forty-thousand agents was one thing, but again, that number, I think it’s a very interesting move.”
Inman editor Jim Dalrymple II and reporter Lillian Dickerson contributed to this report.
