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Compass 2Q Report

Yesterday was the Compass 2Q earnings call (transcript here) and as usual, the headlines focused on the net loss of $101.2 million – more than half of which was stock-based compensation for agents.

Compass has been very generous in their support of agents nationwide, and management is finding ways to effectively scale it back a bit. For example, they won’t be offering stocks as a recruiting tool any more.  But we, the existing agents, aren’t affected by recruitment, and we’d be fine if they didn’t hire another agent! So while the stock may get battered, the agents are doing well.

I’ve mentioned that our annual contract is up in July. There was a time when we discussed Kayla joining Compass in NYC, and during that discussion our CEO offered us a 2-year contract. I brought it up again last month, and he agreed to it.  We signed a two-year extension a couple of weeks ago – we are happy here!

Here are the Compass internal comments about the earnings call:

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Compass #1 in San Diego in 2021

Compass has been in business locally for four years! Last year, we averaged 7.5 sales per agent.

It’s remarkable how Compass and eXp came into a rather staid and unchallenged brokerage environment and hired away nearly 2,400 productive agents so quickly.

Compass #1

A remarkable achievement considering that Compass has only been a nationwide company for 3-4 years.

It will matter more later too.

CoStar is going to change the search-portal landscape, and if they spend enough advertising money to get all the eyeballs, the buyer-agents will be cooked. Unlike Zillow and Redfin who encourage viewers to contact their own set of agents, CoStar will direct people back to the listing agent of each property.

You can imagine the advertising that could change everything:

“Would you rather be represented by a third-party who doesn’t know a thing about the house in question, or do you want to speak to the listing agent who knows everything about the property – including how to get you the best deal?”

CoStar got a head start when they bought homes.com, and are rolling out their first version this summer in New York City.

Buyer-agents will be forced to join realtor teams who have the listings, or just fade away.

Who has Compass been recruiting for the last four years? That’s right, the realtor teams.

Stay Tuned!

Private Exclusives

One sign isn’t going to change the world, but it’s an example of how home sales will be changing in the future. If/when homes are sold in-house (not exposed to outside brokers and buyers) like commercial properties, Compass should extend its dominance in San Diego County – especially north coastal.

I can’t control how this turns out; I can only roll with it!

Compass #1 in San Diego County

In less than 4 years, Compass has become the dominant residential-resale brokerage in San Diego County, and it’s not close. Even if you added the two CBs together, their market share is less than half of ours.

It’s been the aggressive recruiting of top agents that built the sales force, and the vast majority of those agents came from the other brokerages on this list.  It tends to be a zero-sum game too – as we get bigger and better, the others are going to struggle to keep up.

Want to be a part of the Compass juggernaut?  The Klinge Realty Group is hiring!

Did you know that 87% of new licensees quit during their first year in the business?

Your training is critical to your success!  Whether you have a few years of experience or are just getting your license, we can help you build a solid real estate practice.  Contact us today!

Compass at One Paseo

Compass has opened the regional headquarters at the multi-use One Paseo in Carmel Valley.

“The move for Compass to One Paseo was an easy decision,” said Shana Pereira, San Diego general manager of Compass.

“What One Paseo represents in holding onto the community feel of Carmel Valley, but bringing a futuristic and modern vibe, is synonymous to what Compass stands for — being a full-service real estate brokerage and fostering our real estate agents’ businesses, while embracing the modern advancement of technology with the goal of making their lives easier,” Pereira said. “We hope that the move of basing our regional HQ (headquarters) at One Paseo shows our commitment to San Diego and the people that live here.”

She said Compass expects to have more than 100 agents in the One Paseo offices.

Here’s my brief tour of One Paseo:

We had the all-Compass virtual meeting yesterday where is was noted that the brokerage has made record income for five months in a row, and was profitable in 3Q20. Another 300 support people have been hired in the last three months, with another 200-300 expected to be hired by the end of the year.  No mention of the IPO yet, but it has to be in the works.

San Diego Top 5 Brokerages

The local recruiting effort by Compass has been very effective, and it’s really starting to show up in the numbers. With 1,200+ productive agents in San Diego County now (I was #160 in July 2018), we are taking away market share and becoming the dominant brokerage – especially in the coastal markets.

How will it all play out?

There could be a tectonic shift in the business if this lawsuit prevails.  The result will be that the commission rate paid by the seller to the buyer-agents will be revealed publicly (can’t find them now), and it could end up that buyers will have to pay their buyer-agent’s fee, instead of the seller:

https://www.seattletimes.com/business/real-estate/a-challenge-to-real-estate-commissions-gains-ground/

This training video from a realtor seminar is expected to be a key piece of evidence:

If buyers have to pay their agent’s commission, hopefully they will take more interest in their qualifications, and ability to give good help! We’ll see which brokerages can survive then.

Compass Anniversary

We’ve been working at Compass for two years now!

Compass hired the first San Diego agent in January, 2018, and by the time we signed in July, I was #160.

Today there are 1,028 Compass agents in San Diego County!

Here are my first two blog posts as a Compass guy (with many comments):

https://www.bubbleinfo.com/2018/07/23/klinge-realty-powered-by-compass/

https://www.bubbleinfo.com/2018/07/24/compass-day-one/

Our reader Another Investor has been supportive of the blog throughout the years.  Her comment from the second link above still makes me wonder about the future:

We’ve already seen how the natural real estate cycles have been crushed, and now here we are in the middle of a world-wide pandemic, rampant unemployment, and racial/political unrest AND PRICES STILL KEEP GOING UP.  There is nothing natural, normal, or historical about it – we are living in a different world.  Today’s real estate market is tailored for the elite, and their insiders.

The days of individual realtors helping families with achieving the American Dream are just about over, and as AI said, ‘the Klinge era of service to clients is coming to an end’. All I can do is to try and help as many people as I can before I get pushed out.

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