The traditional way of selling homes has been picked apart for years now, and the players of the future are emerging. It’s shaping up to be a competition between full-service brokerages vs. Redfin vs. ibuyers.
This article describes the power play, and features Compass as Case Study #1:
Compass has traded capital for rapid growth, raising a reported $1.2 billion and a valuation of $4.4 billion. With these resources at its disposal and not shy about losing money for the moment, Compass has been catalyzing growth by offering significant sign-on bonuses, investing deeply in technology, and doubling down on M&A.
Many observers have a hard time understanding how any brokerage can invest so aggressively, often complaining that “it’s not sustainable” – “it makes no sense” – “it’s not a profitable way to do business”.
It does make sense, however, if you consider the superpowers that a company gains by reaching the tipping point first and thus becoming a single, dominant company that can 1) grow by making the market and 2) differentiate and dominate through data.
For Compass, San Francisco is ground zero for this strategy, where the firm has about 36% of the market. Compass has expanded its local footprint quickly through acquisition, the latest being the March acquisition of Alain Pinel with its1,300 agents and $12.2 billion in 2017 sales volume—the third such acquisition in 8 months. According to Compass, the company is not only the biggest brokerage in the Bay Area, “it is now the largest residential brokerage in the country by sales volume, growing from $15 billion to more than $35 billion between January 2018 and January 2019.”
Compass has realized that market share makes their brokering power bigger. With more listings and more buyers, they can bolster your exclusive “coming soon,” “off-market,” and “in-house” transactions that the competition can’t match, creating a “FOMO” (“fear of missing out”) effect in both customers and agents.
If you’re a consumer or an agent looking at the screen below from compass.com, which shows Compass’ exclusive off-market and coming soon listings, how could you not work with Compass?
These tactics fuel the incentives for buyers to work with Compass because Compass has the exclusive listings. And that means sellers have to work with Compass because they have all the active buyers working with their brokerage. And finally, agents will have to work with Compass because that’s where the action is. Boosting agent recruitment then brings in more listings and buyers, fueling that superpower growth loop.
If you want access to the market, you now have to go to the company who has the greatest ability to make the market, and that, in San Francisco, is clearly Compass.
Compass is working off this specific strategy:
Hire the top listing agents in each market area.
Create a search portal that rivals Zillow and Redfin.
Offer Compass Concierge to get homes in top condition prior to selling.
Offer exclusive listings on compass.com for days/weeks in advance of MLS input.
Use strategy to attract buyers & sellers, and recruit more listing agents.
The not-so-obvious critical step is the creation of a national search portal that intends to be the dominant real estate website in America. The current version has a ways to go before deserving that attention, but after another year or two of development it could be worthy.
Notorious Rob explores Andrew’s article further here:
Are you thinking of selling your home, and curious about the idea of out-fitting it for a multi-gen buyer? Or want help in getting the home into top condition in order to sell it for top dollar?
We’re here for you!
The Compass Concierge program is willing to pay for repairs/improvements to your home, and be reimbursed at the close of escrow. At first, the program was just for the basics, but it’s been expanded to include virtually everything!
And it’s free – the service comes with listing your home with us, at no extra charge!
Here are examples of what’s been done lately:
In Los Angeles, an agent used Compass Concierge to buy — not stage, but buy outright — $900,000 worth of furniture in order to win two listings, one worth $23 million and the other worth $87 million.
In Philadelphia, an agent was in the midst of a contentious divorce sale. The husband and wife weren’t talking and neither wanted to pay for the staging, painting, and cosmetic repairs the home needed. So the agent pitched Concierge as the solution, and solved the problem!
There was a buyer looking at a million-dollar property listed by a Compass agent that needed a lot of work, but the buyer couldn’t afford to pay a $200K down payment and then shell out another $200K in cash for remodeling. The seller and buyer came to an agreement that the seller would use Concierge to do a $200K remodel first — raising the sale price to $1.2 million but only increasing the down payment by $40K. The buyer was floored.
A brief spin around the house while listening to upbeat music, which is just enough to pique your interest, and make a buyer want to schedule a tour of this 6,115sf estate that Brett has listed for $11,495,000:
Yesterday, we met briefly with Peter Jonas, president of the west region of Compass. He likes to reach out to agents to stay in touch with what’s happening on the ground, which is commendable.
We talked about the criticism received about the story that implied Compass doesn’t have a clear strategy for turning a profit, but the specific question was regarding the ancillary services of escrow, title, and mortgage, not the company in general.
He said that once Compass has reached 20% market share in the 20 largest markets, then they will put more focus on the next step in building the platform. While there has been a few escrow companies acquired that were owned by brokerages that joined Compass, there hasn’t been any other effort to build the ancillary-services division yet – but it’s coming.
We also discussed the I-News report that said Compass was going to implement 70/30 commission splits – which are the norm in New York City, according to Kayla. Peter confirmed that there are no plans to do that here. He said, “If we did, we wouldn’t have a brokerage!”, to which I agreed.
We marveled at the incredible growth of the local team.
Compass hired the first local agent in January, 2018.
I was #160 when we came on board in July.
Today there are 498 realtors and assistants at Compass San Diego. We also have 62 local Compass employees to support us.
I think we all can agree that changes are coming to the industry. The agents who expect to be around a while are figuring it out – you’ll need to be on the right team, just to survive.
The agent-population growth suggests that Compass is one of the best choices!
Going to work at Compass came with expectations of high-tech, big-game, etc. on my part, but underneath it all has been a quiet and humble fit for us among the family of experienced agents who appreciate being on the right team.
All three recipients today (Donna on our behalf) mentioned how it felt like we are in the right place, at the right time with a brokerage who cares.
In one of the most curious things I have ever seen in my career as a realtor, Compass doesn’t award agents based on production. In truth, it kind of bugs me because competition is what drives me.
Instead, what is rewarded is those who champion the culture of being a team player, which is commendable.
You can probably guess that Donna had everything to do with this recognition, and it’s true. She is the ultimate team player, and deserves to be recognized by the staff of Compass for this honor. Thank you team!
Saturday is the grand opening of One Paseo, the master-planned community in Carmel Valley that has been 13 years in the making. Here is my video, and their video which includes a cameo of Becca from Bachelorette Season 14:
Buyer-agents are heralding this as the Big Turning Point is real estate because the lawsuit aims to ‘break up the cartel’ and unbundle real estate commissions.
There is a whole legion of agents that offer a fee-for-service menu who think they are doing the consumer a favor. But it is a great dis-service to tempt consumers to select their agent based on their fee. This is where NAR and others have failed us miserably because nobody talks about how important it is for consumers to identify the skill level of agents they are considering.
Agents offer a discounted commission/rebate/fee-for-service because they don’t have the skill level to earn a higher fee. In effect, they ‘buy the business’ with lower cost/less service, and the consumer gets what they pay for.
But if this lawsuit prevails, causing MLS companies to be run out of business and ‘broker cooperation’ to get dismantled (seller paying the buyer-agent fee), the buyer agents will be the first casualty.
On this blog we talk about street-level impact.
Here’s an example that happened to Kayla in Manhattan, where the rental market is so hot that tenants have to pay their broker directly – and the typical fee is two months of rent.
Kayla is showing rentals to her old college roommate plus one other woman. The listing agent is present, and when Kayla goes into a bedroom with one of the women, the listing broker pulls the other aside and says, ‘if you don’t want to pay Kayla’s fee, just go through me directly’.
The two women rented the apartment directly through the listing agent, and burned Kayla.
We’re sliding into single agency, where buyers/tenants will just go directly to the listing agent. They will never know if they saved any money, they won’t know if they got proper representation (unlikely), and they will just take what they get.
The reason disintermediation worked in the travel business because consumers don’t worry about a bad vacation costing them an additional five- or six-figures in resale costs (and major disruption of life) to unwind one.
Without constant reminders of how important it is to Get Good Help, buyers will be left to their own devices and just go directly to the guy who has the product – the listing agent.
Single agency is not what’s best for consumers or agents – yet the market forces are heading in that direction without recognizing the ramifications. Watch what you wish for!
Obviously, my rantings on this topic have done nothing to slow down the trend, so joining Compass was the best way to position myself for my clients.
The real estate industry has never felt the need to create a powerful search portal in response to Zillow. There should have been an industry-wide effort to create a realtor-centric website to support our business, but NAR and others just shrugged it off.
Traditional realtors should be demonstrating why our experience, our advice, and our gravitas is a better solution for consumers.
It starts with realtors having the best real estate search portal – and Compass has committed to producing it! Our website will make it clear who the actual listing agent is on each listing, regardless of company.
There is another benefit – we put our Coming Soon listings in the front of the search, which will hopefully cause consumers to keep coming back, and help build the traffic faster.
From our CEO:
The future of the real estate industry will be defined by the company that creates the best experience for buying and selling a home. I believe Compass is going to be that company. To achieve our mission of helping everyone find their place in the world, we must make it as simple and straightforward as possible for people to navigate the process of buying and selling a home. We must also put the person who knows how to create a world-class customer experience front and center: the agent.
Many technology companies are doing the exact opposite. They’re confusing consumers and taking advantage of agents in order to maximize their own profits. They most commonly do this by hiding the true listing agent and monetizing the client lead in a variety of ways.
At Compass, we are not just looking to elevate ourselves, we are looking to elevate the industry. Being the first company to show the true listing agent on every listing will not only help bring clarity to the home-buying process, but it is the right thing to do.
It is part of a 3-step strategy to win the consumer:
Make the Compass website and mobile app just as good as the best aggregators by end of summer 2019
Invest millions of dollars advertising our Coming Soon inventory to consumers around the country
Put the listing agent on every listing, making Compass.com the only site in the country where consumers can always find the listing agent
It means we are gently nudging consumers towards connecting with the listing agents directly, making that trend more obvious to all. If the business is going that way anyway, we might as well be out in front of it. JtR
I’m excited to announce that as of today Alain Pinel will be joining our growing team in the Bay Area!
Measured by sales volume, Alain Pinel is one of the ten largest brokerages in the country, according to Real Trends. Over the last 30 years, they have become industry leaders known for their luxury offering, tight-knit culture, and the same entrepreneurial, agent-centric values as Compass.
By partnering with Alain Pinel, we welcome 33 offices and 1,300 agents. With them, we deepen our presence and the reach of our brand, introducing hundreds of additional Compass signs across the Bay Area. Together, in the Bay Area markets we serve, we sell more dollar volume of homes than any other company.
Thank you all for your continued trust and support, and please join me in welcoming Alain Pinel to the Compass family.
If I was Compass management, next I’d poach every decent Coldwell Banker agent just to teach NRT Guy a lesson he’ll never forget.
"Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community... more "
by Ann Romanello
"Jim educated us, helped us find the perfect house, and then negotiated us a great deal. I would hate to be sitting across the negotiating table from ... more "
"Jim is thorough and will be brutally honest about the homes he shows you. He provides great service and follows through until the very end and even ... more "
"I highly recommend Jim as a buyer’s agent. Working with Jim, we closed this week on a San Diego condo. Jim prepared a list of comparable sales to ... more "