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:
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.
Let’s note that searching for homes and actually moving are two different things – which goes for the previous Zillow article too about searches being equal to last year.
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.
An interesting conversation yesterday with the guy who made one of the biggest deals in the history of residential brokerages when he sold his company with 1,700+ agents to Compass in 2018. His team developed the graph above on March 31st, and it looks like they are guessing that the selling season will just be delayed a couple of months. He will update it next week with more-current projections.
In this discussion, he talks about how today compares with 2009 when he purchased PUI from GMAC when it had 400 agents, and a $900,000 per month overhead. He thinks the market will bounce back quickly, and that it’s time to go on the offensive (IOW: many brokerages aren’t going to make it through this):
When we joined Compass in the summer of 2018, it was clear that the evolution of residential resales was trending towards off-market sales. I said then, “we have to make sure that we’re on the right team”.
The National Association of Realtors tried to affect the outcome with their Clear Cooperation policy by making off-market sales acceptable as long as they are done in-house with no public marketing. Like all policy-making done by ivory-tower types who don’t relate to the reality on the street, they have legitimized a new opportunity for gaming the system.
I think the intention of NAR was to allow for the occasional private sale by celebrities. What they must not have considered was that all brokerages would design their own in-house system to provide privacy for anyone who wants it.
Then the coronavirus starts sweeping the country – won’t every seller want their privacy today? Are you going to let dozens of strangers into your house? You and your family could die! You need to sell your home privately.
The NAR policy makes sellers and listing agents pick a path – either the property gets listed on the MLS within 24 hours after public marketing begins, or you sell it off-market. If the private sale doesn’t work, sellers can opt for the more-public MLS sale later, so trying the safer route will be an easy choice for many.
Who do you list with?
What brokerage has the best chance of selling your home for top dollar now?
Compass has the in-house system, over 800 of the top agents in San Diego County, and we are ranked #1 in market share in Carlsbad and Encinitas. We are ideally suited to serve the private-sale market, and now we’re advertising it publicly.
Eventually, the MLS (and Zillow) will become the online marketplace of last resort like Loopnet, and buyers will be forced to work with an agent in every brokerage if they want to see all the inventory.
Compass intends to comply with NAR’s Clear Cooperation Policy MLS 8.0. In addition, the corporate staff will work the MLS to see if we can create a Coming Soon section, like many other areas are doing.
The 8.0 policy legitimizes the Coming Soon marketing, and allows for the Office Exclusives, which is already set up on our internal website. This is why we went to Compass, because it was clear that the game was changing, and the biggest brokerages with the best listing agents would be the most successful – while the little guys get squished.
After less than two years in business, here’s how Compass is doing in Encinitas. Year-to-date sales:
Robert is committed to building the end-all platform for real estate – more details on the AI feature haven’t reached the west coast yet, but the game plan is clear. Hire the best agents, give them the money to spruce up the properties, and feature those new listings on the company’s website first to build the audience.
We used the Compass Concierge to pay for improvements at our new listing in Auberge just for the convenience. It meant that the seller didn’t have to bother with arranging and paying contractors – we took care of that for him, and Compass will get reimbursed out of the proceeds at closing.
The program has become very popular, and was just expanded:
Concierge Approval Guidelines for Residential Resales:
For new residential resale listings under $3 million, Concierge requests up to $150,000 are guaranteed to be approved if:
(a) the request is 5% or less of the list price (up from the previous 3%);
(b) the equity in the home is at least 2x the budgeted Concierge amount; and
(c) the home will be ready to list within 3 months of when Concierge starts paying vendors.
It makes sense to spruce up a home before putting it on the market, but it also works after we find the buyer because we can repair/improve/customize the home to their needs to help justify them paying a higher sales price.
The program is helping to grow the Compass brand too.
There are now 650 Compass agents in San Diego County, with six main offices and several satellite locations too. Here’s a look at the new office downtown:
