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Why is the country's largest, I think now, monopoly real estate company Compass and all their subsidiaries paying agents $1,000 to hide ads? This seems meaningless. Doesn't seem like a good business in the long run. How can this be? I'm Bill Gross. This is my weekly market review. I've talked a lot about Compass and Zillow.
And I think the reason for this is not just the internal affairs of us real estate professionals, but a reflection of what is happening in our economy. And in this struggle that is currently taking place, there is both good and bad. I think it shows the battle between the big Wall Street monopolies trying to swallow up individual businesses like mine that work hard, build communities, and pay taxes.
Let's look at the details. So, last week we learned that six MLS ...Let me back up . Last week we talked about how Compass sued CRMLS, a local California listing service, over rules they had agreed to with their members, including some Compass members. It looks like bullying: you know, there are rules, and they don't want to follow them.
So the six MLSs, to their credit, fought back and have now filed a lawsuit against Compass. Of course, none of them are CRMLS, none of them are my local company, but they are well-known structures. I really admire them and want to support their stance when they say, "Hey, these are the rules." If you are a member of an organization and want to remain one, you play by the rules.
And if you don't want to, then don't play by the rules. So, why is this important? I think one of the reasons is that MLS is truly one of the great success stories of American business. You know, I had a photo of what MLS looked like in the 1930s, I think . I'm not sure exactly when that was. But when the original MLS was founded, you could see little boards with pictures.
These are realtors who receive photos of properties. They had a chalkboard in the back with all the latest announcements and little tables. People came and went about their business. This was old America, where business was done long before Zillow, long before Compass. Things were done that way . And that meant a small independent broker, working together—yes, we were competing, but we were also collaborating.
The customer had a better experience because all the facilities were accessible . They were all available for everyone to view. They received maximum attention to achieve the best price. And then those of us who competed made a living helping clients , and they hired us to do the work. So Wall Street comes along with a "better" idea.
You know, we're just going to use the money and crowd out all the small companies, intimidating them with lawsuits and the scale of the funds we have, losing money for so long that they can't compete. And that's exactly what happened with Compass , and I think ultimately that's why it feels like unfair competition.
Compass CEO complains that every CRMLS board member is a competitor of Compass. I don't know if that's true. I don't know if there are Compass members on the board, but almost every MLS has local realtors who are on the board. Any member of the organization can usually run for office. On my board, which is CLAW (Combined LA Westside), three of the six directors who are realtors are on the MLS board.
So Compass says, "Your rules are not fair." They have half the influence on the entire real estate community, as it is Compass and its related structures. And James Dwiggins, president of NextHome, aptly noted in a LinkedIn post last week, addressing the president of Compass: "Hey, if you don't like the rules, don't join the organization.
But you can't sue an organization just because you don't like the rules. You nominate your members, vote, win, lose, and move on." And so, I think, that's the part that I think Wall Street doesn't want to discuss. This is Compass' financial report. In 2023, they lost over $300 million, which means they don't pay taxes.
In 2024, they lost about $150 million and don't pay taxes. In 2025, they lost, I don't know, $50 million , and they don't pay taxes. They may start earning in 2026, but they won't pay taxes until they make up for all the lost tax money, totaling $400-500 million a year. This means that I pay for electricity here, for safety in America, and for all the services that allow businesses to operate.
Compass does none of this , and they attack every company. I'm not against competition, even unfair competition. We have rules, they are members of associations, but they don't want to play fair . And all of this has led to Wall Street allowing companies like Compass to compete, losing money year after year, and when small businesses close, they raise prices and make more money.
Here's what happened. Remember bookstores? We had many bookstores. Now they are almost gone. If you find an independent bookstore, support them. But Amazon put them all out of business. Why? They have been losing money for years. They didn't pay sales taxes , they were sued, eventually they started paying them, but by then all the small players had already gone bankrupt.
I think Compass has the same plan of action. So how did this lead to them paying people to not have ads? Well, Compass' CEO thinks playing by the rules is unfair to them . They want to join MLS, but they don't want to follow someone else's rules. They want to have their own rules. They can hide ads on their site, then place them on a site that makes them money but hides them from others , and then they want to get into the MLS.
Well, you can't join an organization without following the rules. So, here's what happened: the president of Compass said they would pay about $1,000 for an agent. Let me step back. There's a new service in New York called, uh, I forgot. It's Sky something there. Yes, Easy Street. StreetEasy. It allows agents to mark properties before they go on the market outside of MLS.
And it's owned by Zillow. Well, Compass doesn't want to lose to Zillow, so they're actually paying their agents who would rather list on StreetEasy $1,000 to not list there. So you have agents who thought it was a good idea, selling properties worth a million, two, five, ten million dollars. They thought it was a good idea to put them on StreetEasy, but Compass says, " No, for 1,000 bucks, don't use this product." And now the question is: does this $1,000 go to the agent?
Does the agent spend that $1,000 on promoting the property? Or does that $1,000 go to the seller as a commission rebate because Compass agents are now advertising the property worse by not listing it on every available site? What's up with that? So the answer is: I think Compass pays its agents because for Compass, everything comes down to money, and they try to play on the greed of their agents.
This is just terrible. $1,000 for taking your client's item , which you are trying to sell for the highest price. Why do they do this? This is obvious. So their only… Let me briefly explain how MLS actually works. You have a real estate agent who enters information into the MLS, creating a database of properties and posting it all over the internet.
The MLS sends this data— if I, as my client's agent, allow it— to Zillow, Redfin, realtor.com, homes.com, and 50 million other sites. I do n't even know where they all are. But I'm getting calls or texts from people all over the place that I've never heard of before. This is the power of the internet, the power of how MLS distributes ads.
Now, at the request or with the consent of my client, I may not list the property on Zillow or other sites. This is a choice we make. This is a rule we already have. What we are not allowed to do is to list the property on websites and advertise it publicly to get buyer leads, because that is just lining our own pockets at the client's expense.
That's how the system works, and this is the system that has been working in America for, I don't know, a hundred years. I mean, of all the businesses in America, people seem to be quite happy with the way houses are selling. Only the media seems to constantly raise this issue. So the real question of monopoly is who controls the ads .
I mean, that's Zillow's plan. They want to post the item on their own website and check the price, that is, not show it to anyone. Then, if they realize they made a mistake, they can either lower the price without letting the market know they were there, or let the market know without lowering the price.
Then they place it in Compass in the second phase as "Compass on sale soon ". Again, hidden from most, but enough for Compass to try to line its pockets and pull a double deal. And if that doesn't work, they allow their sellers to put the property on the open market. This is Compass' marketing plan .
And I think it's not just them, because if they get away with it, other companies will say, "Well , if it's legal to scam customers for money, I'll never do that." Because I don't do double deals. I sell real estate only on behalf of my seller. I don't represent buyers in listings unless there is some strange reason to do so.
One exception in a hundred . But I don't do that. Whereas most companies like Compass, like most Compass agents, want to do dual real estate deals. That's why they hide the lists. That's why they list them as " coming soon" so buyers call them instead of a local agent. So what does all this mean? Well, I know I worked in business when I started in 1986.
We had MLS. Each agent worked in conjunction with the others. They all got along well with each other. This is truly amazing. Unlike today, when all these big companies are suing everyone. Home ownership rates were higher than they are today. Why is that? Zillow didn't exist then. And we think of Zillow as a company that provided data to the real estate industry.
The truth is that the data was provided by the Internet. Zillow simply dominated the internet in real estate. And that's why today he's stifling competition . Compass is trying to fight Zillow on its own terms as a global monopoly, using money from Wall Street, losing money, and investing in the future.
Meanwhile, the American dream flew away. Fewer people are buying houses today. Housing has become less affordable. And one of the reasons, obviously, is that if you reduce competition, you raise costs. There are many factors here, but one of them is: if there is less competition, buying real estate will become more expensive.
So I want to thank these six companies who are effectively standing up for every other agent in America, including those who work for Compass and don't have the courage to speak out against their president. And also related companies that Compass acquired in an attempt to create a monopoly. These six MLSs deserve recognition for stepping up and saying, "Hey, if you're joining MLS, we have rules for everyone." And just because your CEO is suing people and threatening to sue others, we will not allow this to continue.
And so, as a result, I want to say that I am firmly on the side of letting sellers and agents decide for themselves how they want to sell real estate. If you want to be in MLS, play by the rules. Don't want to be in MLS—don't play by the rules and don't belong in MLS. The MLS, which I belong to, makes them competitive .
My MLS is very competitive. They give me all the flexibility to best serve my clients and get the best deals. So let's see what you think about it. Let's continue with the usual news of the week. One of the news stories of the week: despite all the talk about raising interest rates, they dropped slightly at the end of the week.
Second week in a row—slight decline. If you look at the end of the graph, you'll see that the peak was at the end of September, around 7.6 on the Fannie Mae rate, and now we're at around 7.33. That is a drop of a quarter of a percent from the peak. Will this continue? I don't know. It seems like the international hype has died down, but we'll see.
But overall, despite the rates, we have good buyer activity in our market here in Los Angeles. Real estate prices are set correctly. There is activity. I will say as a listing agent: I have to work harder, make more calls to buyers' agents to maintain their interest. On the other side of the equation is inventory, that is, the seller's side.
Inventory, which was declining last year , is starting to increase slightly compared to last year, which means there are a little more homes on the market. More sellers may move. There are more properties to choose from for buyers. I think that's good. If you look at this graph, you will notice that all the years at the bottom are the years of the COVID pandemic.
Sorry, COVID years. This means that this is the highest level of inventory since COVID. So the situation is a little better than in previous years. But you don't see the lines above them that correspond to the pre-COVID years— we're still well below the stock levels. We still have an unbalanced real estate economy.
The situation is improving, but very slowly. Due to life factors, but undoubtedly the inventory is moving in the right direction . Here in Los Angeles, because the market is very local, our market index is 34 according to Altos Research, they are doing great. They take into account all market factors and come up with one number.
We've been gradually moving from, you know, 40 to 39, 38, 36 over the past year, and 35, 35 this year, and now 34. We're moving towards a more balanced, even market , although it's still somewhat of a seller's market. So, we'll see if this continues as the holiday season begins, it's hard to say . Okay, some new stories that I found fantastic.
Uh, just to sum it up. The first one—I saw this amazing graph comparing the money, uh, the number of homeless people in America and the amount spent on solving this problem. And look at this. We have a 41% increase in homelessness over the last 11 years. These numbers are tracked by the federal government.
And we have payments to non-governmental organizations. These are the very ones who were exposed for stealing bribes worth hundreds of millions and billions of dollars. Billions have disappeared in Los Angeles. But you see that payments to NGOs have increased by 180%. So , the amount of money paid to them has increased , doubled, and homelessness, uh, has only increased by 50%.
So what does that tell you? This suggests that more money spent on homelessness prevention will lead to more homeless people. Because businesses, they call them NGOs, non-governmental organizations, the businesses that receive our tax dollars to fight homelessness, have a vested interest in creating more homelessness.
Here's another very interesting story I saw on Zillow. They prepared the report together with Thumbtack, a service I have used several times. It's kind of like an online service like DoorDash for handymen, I guess. The data identified the hidden costs of home ownership. What they call hidden is up to $16,000 a year for a home in America.
Of course, in Los Angeles our expenses are higher, it's about $22,000. Now they include insurance and property taxes in these hidden costs , although I don't know how hidden they are, as you get a bill in the mail every month for both, or property taxes every 6 months. But what I found fascinating is that about 2/3 is for maintenance.
They estimated that a property in Los Angeles has about 22,000 hidden costs. 15,000—this is maintenance, money spent, or deferred expenses. And that's what I wanted to emphasize: you have to think about the house in this way. If you have a house that you don't do anything with , you can say that the mortgage is inexpensive, but you pay insurance and property taxes, albeit small ones.
You also pay opportunity cost because you are not using this asset to generate income. You risk encountering squatters, fire, or other troubles, and in addition, you will have to maintain the property ( the average house in Los Angeles is about $15,000 per year), or postpone repairs until later. If you don't repair your roof, you're not saving money in the long run, but rather losing money, as the damage will only get worse faster until it's repaired.
So I want anyone who has an empty property to consider these costs: $15,000—that's about $1,200 a month. This is part of the cost of owning a property. When I talk to sellers whose properties have been on the market for 6 months while they decide what to do. If no one lives there, you still pay these costs.
You pay opportunity cost, property taxes, insurance, and maintenance costs. And if you don't do maintenance, you will pay for it when you sell it, because the condition of the property will not be the best. Here's another interesting story that struck me as important because of the way journalists are covering it.
Keller Williams was sued for charging a flat brokerage fee of $650 on top of the base commission at all of their Pennsylvania branches. Honestly , I'm not against companies doing this. Many real estate agents pass on the transaction coordinator fee to the client . I do n't do that. I only charge a fixed percentage.
It's easier for me to explain and calculate this way, trying not to complicate things, but I respect the right of any business to be competitive by structuring the payment as a percentage plus a fixed cost. This is a way to do everything accurately. What's interesting, and I consider this a positive sign, is that all the press I've seen about this lawsuit has called it a brokerage commission , not a "garbage collection." There was one non-profit organization that conducted research on " garbage collection" in real estate.
I made a point to them in last week's episode and they got back to me. They told me, "We are not a propaganda site, as you called us, we are serious researchers." "And I told him: 'If the title of your report is 'garbage commissions,' you already consider these commissions to be garbage a priori.'" How can you study this and claim to be unbiased?
This is a brokerage commission. Now, if the buyer doesn't want to pay for it because he considers it "garbage," that's his right. But I would never belittle someone's source of income by calling it trash. I believe you can either use their services or not. In Los Angeles, my bill has a bunch of fees from DWP, the Department of Water and Power, for water, electricity, trash removal, all sorts of “garbage” taxes and fees.
But I wouldn't call someone else's business a " garbage commission." You either pay if they are competitive or you don't. And as I said to this researcher, you know, you can take 2.5 % or, let's say, 2% plus $650, whatever is better for the client. So sometimes a brokerage commission is a better cost structure, it allows the agent to make a fair profit, and it can be better for clients.
Again , I think the positive signal is not just HousingWire, I looked at 20 different news coverage of this topic on Google. And the only difference is the brokerage commission, which has been called "garbage " for the last few years to minimize the opportunities for people to have competitive rates, which, in my opinion, is a big mistake.
I think we are adults. So let's just, you know, do the work and make the decision to use them or not. Let's not belittle business. These are my thoughts. I would be happy to hear your comments. Call, text, or email me if I can be of any help. On social media I am @billgrossprobate. As always, make today the best day of your life. Thank you very much.
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