Lately, the battle for supremacy in the mortgage/real estate world has heated up tremendously.
First, we saw Rocket acquire real estate brokerage Redfin, and most importantly, their heavily-visited portal.
Then we saw Lower Mortgage scoop up Movoto, another online real estate portal that isn’t quite as notable (or large) as Redfin.
Rocket then doubled down by acquiring loan servicer Mr. Cooper to complete its so-called flywheel.
And now real estate brokerage Compass has agreed to swallow up rival brokerage Anywhere Real Estate to take on the big portals.
Anywhere Brands includes Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Corcoran, ERA, and Sotheby’s International Realty. So it’s quite the acquisition.
Oddly, it may inadvertently make Rate (formerly Guaranteed Rate) an even bigger mortgage player in the process.
Compass Is Growing Its Private Real Estate Agent Network to Take on Big Portal
First, a quick background on this deal from a real estate perspective. Compass has been shaking things up with its so-called 3-Phased Marketing Strategy.
Compass argues that Big Portal (my own words) “has put sellers at a disadvantage.”
They argue that sites like Zillow and Redfin display things like days on market (DOM), price drops, and home value estimates, such as the Zestimate and Redfin Estimate.
These apparently make it harder for a home seller to unload without being subject to increased scrutiny from home buyers and their agents.
Compass’ solution is to test the listing with a smaller audience via a “Compass Private Exclusive,” known as Phase 1.
This apparently creates “urgency and generate buyer interest without accumulating days on market or damaging public price drops.”
The listing is seen by Compass’ 37,000 agents (and soon to be Anywhere’s 300,000+ agents as well).
Phase 2 is the Compass Coming Soon listing, where your property is publicly launched on Compass.com to gain additional insights and to feel out the market.
Finally, there is Phase 3 when the property is listed on the MLS and all third-party websites, including the likes of Zillow and Redfin, where most home buyers tend to go first.
Compass refers to the whole process as “pre-marketing” and argues that such homes sell for 2.9% more, are 20% faster to contract, and 30% less likely to drop in price.
And puts a bow on it by saying, “Your Home. Your Choice.”
Personally, I think it’s mostly a roundabout way of Compass realizing it’s facing an existential threat from the portals, meaning it needs to “own” the listing going forward.
On the other side of this argument is Big Portal (Zillow), which has basically said the opposite and recently launched an ultimatum that if you don’t list immediately with them, you’ll never get the chance.
That’s a big blow to potential home sellers, who will probably not tolerate their listing being absent on such a major platform.
Redfin did the same thing in a show of force, though with this merger news, it appears Compass isn’t ready to roll over.
With this acquisition, Compass is expanding their network in what appears to be a direct fight with the portals.
Arguably, if they can garner more eyeballs, the portals matter less. And it will devalue the portals as well, one of which was just acquired for billions of dollars.
Of course, that’s up to the people to decide and it’s still very early innings on this. But Redfin and Zillow should certainly be on high alert.
Will Rate Benefit as the Preferred Lender for Compass/Anywhere?
Where it gets interesting from a mortgage perspective, which is the point of this article, is that Rate (formerly Guaranteed Rate) is essentially the preferred mortgage lender for both real estate brokerages.
Assuming the combined company gets more traction via this link-up, and sticks with Rate as their lender of choice, they’ll benefit as well.
In similar fashion to Rocket getting top of funnel mortgage leads from Redfin, and Lower doing the same with Movoto.
And Zillow sending as many of its visitors to its in-house Zillow Home Loans division, Rate can grow from a growing, exclusive real estate network.
The Chicago-based lender is already the sixth largest mortgage lender in the nation, behind only United Wholesale Mortgage, Rocket, CrossCountry Mortgage, Chase, and U.S. Bank.
It’s possible they could move up into the top five as they were only slightly behind U.S. Bank.
With regard to their preferred lender status, they have formed multiple joint ventures with these real estate brokerages to snag the home loan along with the real estate listing.
The JV with Compass, formed in mid-2021 is called “OriginPoint” and the JV with Anywhere Real Estate formed in 2017 is called “Guaranteed Rate Affinity.”
Rumor has it they will consolidate those names to just Guaranteed Rate Affinity to perhaps bolster the name recognition and simplify. And most importantly, grow.
They too can create a flywheel effect with RE agents syncing up with loan officers and keeping more and more business in house.
In the process, mortgage lender choice will continue to consolidate at the top.
If you’re a home buyer, continue to put in the time to shop around to ensure you get the best deal on your mortgage.
