Friday Flash: The end of Compass

Compass, the VC-funded real estate brokerage with a sleek brand and sexy technology, has made a splash in every new market it has entered.

But this week they jumped into San Francisco cannonball-style.

I live in the Bay Area, and my wife is an agent here, so I’m hearing all the rumors and buzz:

$500,000 signing bonuses for a couple of agent whales.

A cool million for a mega-team.

Stock options galore.

Promises of support and coddling that would make a pop diva blush.

A dazzling spectacle.

On the flip side, I hear that the tech looks great but is hardly revolutionary. I know an agent who signed with Compass in L.A. only because she was planning to retire in a year and wanted to stack as much paper as she could on her way out.

Brokers I’ve talked to in New York City, where Compass launched in 2013 with a rental focus and salaried agents, say they’re no longer worried about competing with them. And skeptics abound.

But still: are the VCs who poured $210 million into this real estate brokerage stupid? The last $75 million came in at valuation of over $1 billion dollars, which sounds insane to me, but apparently sounded just fine to people paid to be smart with money.

Who’s the sucker in this story? The naysayers and incumbents or the people treating a new real estate brokerage with the same basic business model as all the old ones like a fat-margined SAAS business?

The only way to answer this is to figure out the end that could possibly justify such mind-bending means. Why would Compass throw money at top producers in new markets who are likely to be unprofitable for them long-term anyway? Why would they spend a fortune on high-dollar office space that will be a drag on profitability for years to come?

What’s going to make this pencil… at some point? Until I see an answer to that question, put me in the skeptic camp.

I assume Compass knows its end game, but just hasn’t shared this publicly. It can’t be that they are arrogant or delusional enough to fashion themselves a real estate Amazon, deferring profits in a calculated march toward a dominance that will, at some point in the future, create a breathtaking money-making machine.

Can it?

…

I believe climate change is a big real estate issue. I have believed this for some time.

I hesitated to write that. You might think I’m getting “political.”

To me, it’s an empirical matter. But let’s say you view it as a political thing. Don’t we think about, and plan for, political contingencies in real estate all the time? We discuss, plan and act on the possibility that the MID might be curbed. We mobilize against the possibility of new transfer taxes. Why would we not approach climate change the same way?

Until Zillow released an alarming research report on this issue last month, there had been almost no discussion within real estate about how a changing climate could possibly destroy or devalue big swaths of our housing stock. Or how shifting patterns of deluge or drought may impact where people live. Or, thinking positively, how such events could present the biggest real estate business opportunity since the rise of the suburb after World War II.

The discussion needs to continue. People outside our industry are starting to think about housing and climate change seriously. Shouldn’t NAR be a leading voice here?

Maybe we’ll figure it out as we go along. Maybe.

…

OK, that was a little heavy. So let’s end with some creepy-cool animated gifs.

Enjoy the weekend.