You can say that Dave Liniger rode the 100% commission business model into the industry like a wild-eyed desperado, turning real estate forever into an agent town.
You can say that Gary Keller’s intellectual contributions (“The Millionaire Real Estate Agent“ is our industry’s Great Book) have been at least as impressive as the growth of his franchise.
You can say that Realogy’s Richard Smith mastered a mix of financial brilliance and brand caretaking in franchising’s mature years.
You can say that Glenn Kelman is real estate’s redeemer, leading Redfin on a long crusade to give the consumer a better deal.
Whether or not you or I align with these people doesn’t matter. Their distinctiveness, and their achievements, are clear.
But what can you say about Compass, the high-flying real estate brokerage that just announced another giant funding round while touting industry-changing ambitions?
This is where I’ve always become stuck.
Compass is, in almost all ways, a real estate brokerage like most others. It splits commissions with agents. It has offices (fancy, expensive ones). It employs a staff to support the agents in those offices.
The company makes a lot of the fact that it builds its own technology – and recently announced it is building its own CRM from scratch – but a room full of top-flight devs is hardly an assurance of agent adoption, let alone productivity.
It is true that Compass is targeting expensive markets. A high average sale price can make profitability possible even with scary leases, monster signing bonuses and upside down splits. A nationwide client network of affluent homeowners could be leveraged in interesting ways in the future. I gotta think these things feature prominently in the company’s investor deck.
But still: a $1.8 billion dollar valuation? How can we make sense of that?
It could just be a matter of style.
Real estate agents are people. And people like things that look good, sound good and feel good. Compass scores a perfect 10 on all three. They have mastered image in an industry that cares about image a lot.
It’s a very attractive package, and maybe that’s enough.
I’ve talked to agents here in the SF Bay Area who are seeing a big flood of buyers into the market right now (as if there weren’t enough!). These buyers are rushing to get ahead of the proposed cut to the mortgage interest deduction. The stakes are high in a market where starter homes can cost more than a million dollars.
Sale prices, which were showing signs of levelling off in recent months, will spike yet again.
It makes me think that our real estate market over the past decade is like a sweating, dependent patient being fed speed and vitamin B injections by a quack doctor.
There was HAMP. There was the homebuyer tax credit. There’s our long recent history of “historically low” interest rates. Now there’s an MID whiplash goosing prices in already-sky high markets.
I know next to nothing about economics, and I’m not a public policy geek, but I wonder if coming down off this high isn’t gonna be rough.
This real estate company in Sweden released an album of homebuyer-focused relaxation tracks called “Homefulness”. Gimmicky for sure, but not entirely stupid.
It would be nice to see more of this kind of inventiveness in real estate company marketing. It’s something we always try to bring to the table at 1000watt: the thing or two you never would have thought of. Most never see the light of day, but some do, and everyone’s better, in any event, for having pushed beyond the commonly accepted range of consideration.
This reminded me, too, of a post Marc wrote here 10 years ago – “Imagining a new real estate brokerage“. It’s a playful but dead-serious daydream about things “Davison Real Estate” might try. Branded aromatherapy candles? Damn straight. Would you like an imported cheese snack? Why, yes, of course you would.
Keep pushing, and enjoy the weekend.