Compass’s recent spree of acquisitions, culminating in its just-announced acquisition of Anywhere, landed like an offshore earthquake — barely felt at first, but powerful enough to trigger a tsunami. And that wave is already racing toward the shoreline of the real estate industry.
On one side of the fault line sits Compass, scooping up brokerage-type businesses in a strategy aimed at horizontal domination: amassing agent count, expanding its geographic footprint and doubling down on scale.
On the other side, Rocket’s acquisition of Redfin reflects a different philosophy — vertical integration — where mortgage, title and brokerage services are stacked to control the consumer’s entire journey. These two models are more than deal structures; they are competing visions of the industry’s future.
Although Compass and Anywhere’s announcement sent shockwaves through the industry last week, it shouldn’t have caught us by surprise.
Andrew Flachner, CEO of RealScout and host of the Playmakers podcast, predicted as far back as 2019 that brokerages would leverage market share to gain what he called “competitive superpowers,” pointing specifically to Compass’s use of exclusive “coming soon,” off-market, and in-house transactions to create a FOMO effect among consumers and agents — and even suggested that Anywhere might eventually accelerate this strategy.
How will this wave of real estate consolidation impact the industry?
But the aftershocks don’t stop there. Independent brokers, already squeezed by margin pressure, are consolidating to hold onto relevance and market share. Demographic shifts add another layer of pressure, as aging mom-and-pop broker-owners look for a viable exit strategy amid massive industry and economic upheaval.
Even cloud-based brokerages — previous disruptors themselves — could be acquisition targets for traditional firms looking to blend digital reach with brick-and-mortar infrastructure.
If Compass, now armed with Anywhere’s office footprint, decides to absorb a major cloud model — like Real, for example — it won’t just be about adding agents. It will be about re-engineering how value is delivered across multiple hybrid platforms.
Technology adds another destabilizing force: Compass’s in-house tech ecosystem has changed the competitive standard, forcing smaller rivals to decide whether to build, buy or partner just to stay in the game.
Some tech platforms have only been viable because of their relationships with Anywhere brands. If Anywhere adopts Compass’ tech, some of those providers will need to collaborate, possibly combining their services to create a cooler, stronger product.
Compass’ history with NAR comes into play
And the ripple effects are unlikely to remain confined to brokerages. It’s easy to imagine industry associations combining forces to deliver greater value at scale while increasing non-dues revenue.
Compass’ fractious history with the National Association of Realtors (NAR) is well-known, and the growth in agent count it will experience through this merger now gives it unprecedented leverage in dealing with the trade organization.
Will Compass follow Douglas Elliman to the American Real Estate Association (ARA) and get in on the ground floor, building the new professional group to its specifications or use its overwhelming agent numbers to change NAR from within?
The tidal wave is rolling in
This is not a single tidal wave of brokerage deals. It’s an industrywide tide, surging across technology, associations, portals and service providers. And remember: With tidal waves, the first surge is often followed by smaller, but equally disruptive, waves.
Who’s next? Don’t be surprised if Zillow, which already holds brokerage licenses in multiple U.S. states and Canadian provinces, steps in to acquire a brokerage, extending its consumer portal dominance into direct client service and agent control. With its capital, name recognition and online footprint, it could instantly surpass the brand impact of almost any player in real estate.
Expect Compass to keep hunting cloud-based brokerages. And watch for players who’ve sat on the sidelines to realize that inaction is its own kind of risk. That may push them to rush into hasty corporate marriages that they’ll regret down the road.
The market is recalibrating fast, and those who treat M&A as an optional growth lever may find themselves already underwater.
However, those who treat it as the current itself — a rising tide carrying the industry forward — will be the ones positioned to ride the waves, rather than being swept away.
But what should everyone else be doing? Who needs to make the next big acquisition? What types of companies should be thinking about M&A? And what companies should they target?
Smaller brokerages, for instance, may find that they’re stronger together in the years ahead. While many smaller broker-owners value their independence, M&A offers a way to provide more service to both clients and agents.
Here are some other questions to consider:
- Will eXp buy Keller Williams?
- Should BHHS buy Real?
- Will Zillow buy Realtor.com or another portal?
- Will we see someone from outside the industry acquire Home Services/BHHS?
Finally, what does the Compass acquisition mean for the brands that it’s acquiring? Do they really want to be a franchisor, or do they sell off brands like Better Homes and Gardens to reduce their newly acquired debt?
Do the franchises that are in the look period of their contract consider not renewing their agreements? Do they go independent? Do they go to a different franchise or switch to a cloud brokerage ?
What are your thoughts, questions and predictions for what comes next? Let me know in the comments, and weigh in on the speculation.
Troy Palmquist is the founder and principal at HomeCode Advisors. Connect with him on LinkedIn.
