Is Compass the Next Big Thing in Real Estate Tech?

Written by Ashley Sutphin Posted On Monday, 12 April 2021 00:00

The Chief Executive Officer of Compass, Robert Reffkin, has worked in the White House, at Goldman Sachs, and for McKinsey & Co. Now he’s hoping to become a tech real estate mogul. Compass was founded by Reffkin in 2012, and it’s a tech-centric brokerage. It recently raised $450 million for its initial public offering, but the sale was cut in half from the previous target because of the declines in tech shares across the board in March.

Reffkin hasn’t yet turned a profit with Compass, and it's now up to him to show that Compass’s $7 billion valuation is worth it.

So what is it?

Because of funding from SoftBank Group and changes likely driven by the COVID-19 pandemic, Compass has become the second-largest brokerage in the U.S.

It has seen significant investor demand because of the housing boom fueled by the pandemic. However, as it filed its IPO, there were skeptics who said it hasn’t been able to differentiate itself from traditional real estate companies or outline a clear path forward to become profitable.

Reffkin says his company is one meant to elevate real estate agents who work as independent contractors. He wrote a letter to investors saying that the entire group of independent contractors working in real estate is underserved, even though, according to him they play a major role in the housing industry.

Reffkin has said he was inspired by his mother Ruth to start the company. She was a single parent working as a real estate agent, and he said she never had the right tools or support to start her business.

So how does it work?

Compass is a real estate broker that harnesses the power of the internet and technology for marketing. Compass serves as an employer for more than 20,000 agents who earn a percentage of the selling price. They then give 15 to 30% of their earnings on each sale to Compass.

Currently, Compass focuses on luxury homes in high-end markets.

The company provides software to real estate agents, and they are the first company that built a proprietary app for agents to use.

There are 20 markets where Compass currently operates, including Washington D.C., Dallas, South Florida, Los Angeles, The Hamptons and Newport Beach.  

The Compass company says they are innovative in that they empower agents to have more time to work directly with clients.

There are a few core services offered by Compass. For example, the Compass Concierge program helps in the selling of a home because it covers the cost of making improvements to get it ready to go to market.

Compass Bridge Loan Services offers access to bridge loan lenders that will front up to six months of loan payments when a home is sold using a Compass agent.

The technologies include Compass Collections, which is a visual workspace where both agents and clients can work together to monitor the market and have a central place for conversations.

Compass Insights is a dashboard with the data points an agent would need to develop targeted marketing strategies.

The Marketing Center is a digital design studio where agents can go to make personalized marketing materials that are locally driven.

Finally, there’s the Compass Markets App, with real-time real estate data.

It’s an interesting concept, and how it fares going forward since the filing of its IPO is an unknown, but it does offer compelling features for independent agents, particularly in luxury markets.

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