The four-day hearing began Tuesday with testimony from Compass CEO Robert Reffkin about his company’s lawsuit against Zillow’s rules that prohibit agents from listing homes on the platform that are publicly marketed outside the MLS.
Compass sued the aggregator in June in an attempt to block what it deemed “anti-competitive” policies after the company rolled out a new marketing strategy that starts with listing their homes on Compass’ exclusive private listing network.
Some of his top New York City agents joined Reffkin in the courtroom, including the firm’s chief evangelist Leonard Steinberg, Litvak team leader Eugene Litvak and Heather Domi, who co-founded the New York Residential Agent Continuum.
Reffkin and his lawyers repeated arguments from the lawsuits, including that Zillow’s updated rules, called the Zillow Ban, were adopted specifically “to destroy the threat posed by Compass,” the company’s lawyer, Kenneth Dintzer, said in court.
The next day, Zillow CEO Jeremy Wacksman took the stand from the company’s headquarters in Seattle, pushing back against the idea that Zillow was implementing its listing rules to focus solely on Compass. He also rejected Dintzer’s attempts to frame Compass as one of Zillow’s direct competitors.
If you ask the two companies involved, the battle playing out in court isn’t just a clash of corporate egos. It is also about the future of the way in which real estate agents do their business and who gets a hand in this. (Although it’s really about the potential millions of dollars both companies could lose if the other gets its way.)
Manhattan is a fitting location for the two companies to duke it out. Not only does Compass have its headquarters here, but if Reffkin prevails, he will expand a home-based marketing system that already exists to some extent in New York City and other luxury markets.
The city runs on deals that come from stock exchange platforms. Earlier this month, a mansion in Gravesend, Brooklyn, sold for $32 million, setting a city record without ever hitting the open market.
With new developments, developers often start signing contracts for units before a listing ever makes it to StreetEasy or Zillow. Take Atlas Capital’s Zeckendorf Development and 80 Clarkson. Rumor has it that a significant portion of the apartments have already found buyers, but the sales team has not yet placed a single advertisement.
The city’s market relies on well-connected agents who facilitate transactions for high-profile or wealthy clients behind closed doors. The city’s market thrives on relationships and access, and with the right dose of both, agents prove their worth. Reffkin’s vision reflects this environment: Agents working with Compass, soon to be the largest brokerage by far, have access to the most inventory, which they can (and are likely already using) to bring more buyers their way.
Despite the fact that many off-market deals are taking place in the city, the majority of sales are still the result of properties coming onto the open market, and it is likely that this will continue. Even Compass’s own data shows that most homes marketed as private exclusives end up on MLSs, and thus on aggregators like Zillow.
Not so fast…
A New York City-based proptech startup just secured a new venture capital injection.
Tulu, which allows renters to rent items such as vacuum cleaners, virtual reality headsets and Play Stations through an artificial intelligence-powered app, closed its Series A funding round with $37 million in investments, including $17 million from GreenSoil PropTech Ventures, Bosch Ventures and New Era Capital Partners.
The new round of funding for the startup — which counts among its clients major city landlords such as Related, Brookfield and RXR — comes after venture capitalists largely shied away from investing in proptech startups.
Funding for proptechs hit an all-time high in 2021 as investors pumped approximately $9.5 billion in the industry to support enterprises such as residential agent back-end service Place, and data platform CompStak.
But the capital flow turned out to be exaggerated. Several once-promising startups went bankrupt or showed major signs of collapse, scaring off venture capitalists looking to throw their support behind an emerging industry. Funding for proptechs fell by more than 14 percent in the first half of 2024 compared to the same period in 2023, according to data from the Center for Real Estate Technology and Innovation.
But earlier this year, Brendan Wallace, CEO and CIO of venture capital firm Fifth Wall, said The real deal that the tide could turn. He may have cited his own company’s actions as evidence — including CBRE’s acquisition of Industrious, a company Wallace is backing, in an $800 million deal — but he was firm in his prediction of a “momentum shift.”
NYC deal of the week
The most expensive deal to hit city records last week was an apartment at Extell Development’s 50 West 66th Street. Unit 42E, which has eight bedrooms and eight bathrooms, sold for just under $45 million to a buyer whose identity is being shielded by an LLC known as Pipedream 66.
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