4 ms·

$270M loss on $3.7B in revenue. If they can get opex down, there's some serious money to be made and a lot of growth left here. In my neighborhood I'm seeing mo

$270M loss on $3.7B in revenue. If they can get opex down, there's some serious money to be made and a lot of growth left here. In my neighborhood I'm seeing more and more houses go up for sale with Compass signs.

nknealk 6y ago
Their single biggest expense is “commission and other transaction related expenses” which clocks in at just over 3B. I don’t know how much control they really have over commissions.
- choppaface 6y ago
  True but maybe the “industry standard” agent cut is open for “disruption.” (Personally I can’t fathom what the agents do today that adds $10k-$100k of value). They’ll find some data to support that they make agents more efficient and then reduce their cut. And when the agents complain, there aren’t going to be many people crying for them, especially the ones on Bravo.
  - rossdavidh 6y ago
    If you're making a purchase/sale of several hundred thousand dollars, having someone with you who has done this many times before is easily worth 5% or so. Is every agent good? Well certainly not. But it's a high-stakes transaction that most people have never done before, or have done only once before, so having a veteran of many such transactions walk you through it is easily worth a few percent of the total cost.
    - webdood90 6y ago
      > easily worth 5% Easily worth a couple grand, maybe. A percentage like that? No chance in hell.
      - bostonsre 6y ago
        Why haven't commission percentages gone down over time? It seems like a massive margin that should be trimmed down by competition. I would think there would be more than enough room to under cut the standard rates, cover costs and still make a healthy profit. Is there a low supply of realtors that causes them to be in high demand and helps them keep up their commissions or something like that?
        nrmitchi 6y ago
        The National Association of Realtors controls a huge percentage of real estate transactions, and works to make sure it doesn't drop, to the point where there are multiple open anti-trust lawsuits. For example: https://www.justice.gov/opa/pr/justice-department-files-antitrust-case-and-simultaneous-settlement-requiring-national https://www.justice.gov/opa/pr/justice-department-files-anti... Basically, if you don't play the Realtor game and agree to pay those commissions, it's difficult to participate in the market at large.
        wombat-man 6y ago
        Yeah I mean you're kinda paying to make everything go smoother and ideally their experience in the market will help prevent you from making an expensive mistake. As long as you have a good one, of course.
        bostonsre 6y ago
        Ah, thanks.. that makes a lot more sense then. Hopefully the justice department stops that BS rent seeking crap.
      - exclusiv 6y ago
        Can you negotiate 5%+ more salary if you know what you're doing? Yes. Yes you can. That's easy. Half goes to buy side though normally. Although some firms try to "double pop" it and represent both sides. That should definitely be illegal everywhere. There are a lot of terrible agents though that aren't worth it. It's a low barrier to entry with a very high upside. Not many career opportunities like it. Buy side can be a ton of work though for the same payday as sell side. Agents and owners offer commission to the agents to make it worth their while. If there weren't any buy side commissions, you'd get less interest, because no buyers agent would ever refer you to a house they can't make money on. Unless they had a conscious AND they hadn't already spent a bunch of time on you. But at some point if you want a house that had no buy side commission and you locate it (Zillow or a sold by owner site), you're going to buy it without your buyer's agent. So it could easily head the way of the hotel industry where the buy side is virtually non-existent.
    - jankassens 6y ago
      I'd love to see the typical breakdown of where those 5% go in a hot market like San Francisco. At a median price of $1.5mil, that's $75k in commission. I never bought a home, but that seems like it should buy a lot of services.
      - choppaface 6y ago
        In a market like SF, or on Million Dollar Listing, I think the argument towards the commission is that the agent will either save you that much through negotiation (or earn you more through inflation) and/or they will get you something that you couldn't get otherwise (e.g. an unlisted property or a celebrity buyer). That said, I imagine the agents' return-on-arbitrage is actually even higher at the top price points, and even harder to quantify because deal details can be obfuscated (e.g. through LLCs etc).
        lawnchair_larry 6y ago
        Agents don’t negotiate on your behalf. They present all offers.
      - tamade 6y ago
        The typical 5% is split 50/50 between the buyer and seller brokers and paid by the seller. If the agent represents both sides, there's usually a discount, e.g. 4% total. Additional broker incentives, e.g. extra 0.5% to the buyer broker, may increase the commission
    - lawnchair_larry 6y ago
      No, it really isn’t. The price only exists because of the MLS cartel, which is finally starting to crack.
  - adeelk93 6y ago
    Redfin is that disruption you’re describing, not Compass. Having worked with both, Compass tries to come off as more “premium” than “economical.”
- deleted 6y ago
  [deleted]
- honopu 6y ago
  If they drive leads, they can capture a percentage of leads they generate for in house agents. This is why Zillow went commission split on transactions, it’s much more lucrative once you have a lead pipeline.
- onethought 6y ago
  Running realestate commissions through your books to pump your "revenue" seems a bit crappy... So really they have 700mil revenue.
  - twostorytower 6y ago
    I think it's actually correct in accounting terms, but their COGS will be high.
- dmode 6y ago
  Isn’t the revenue number kind of misleading ? Essentially it seems like it is the total value of the transaction and their revenue should essentially be the take rate from the transaction.
- username2021 6y ago
  The broker controls commission splits so they have all the control. The problem is that if they don’t offer fantastic commission splits to agents then the agents will go work for another brokerage. At some point, it’s advantageous to work for a different broker because they’ll offer a better commission split and enable them to standout apart from the crowd.

nknealk 6y ago

Their single biggest expense is “commission and other transaction related expenses” which clocks in at just over 3B. I don’t know how much control they really have over commissions.

choppaface 6y ago
True but maybe the “industry standard” agent cut is open for “disruption.” (Personally I can’t fathom what the agents do today that adds $10k-$100k of value). They’ll find some data to support that they make agents more efficient and then reduce their cut. And when the agents complain, there aren’t going to be many people crying for them, especially the ones on Bravo.
- rossdavidh 6y ago
  If you're making a purchase/sale of several hundred thousand dollars, having someone with you who has done this many times before is easily worth 5% or so. Is every agent good? Well certainly not. But it's a high-stakes transaction that most people have never done before, or have done only once before, so having a veteran of many such transactions walk you through it is easily worth a few percent of the total cost.
  - webdood90 6y ago
    > easily worth 5% Easily worth a couple grand, maybe. A percentage like that? No chance in hell.
    - bostonsre 6y ago
      Why haven't commission percentages gone down over time? It seems like a massive margin that should be trimmed down by competition. I would think there would be more than enough room to under cut the standard rates, cover costs and still make a healthy profit. Is there a low supply of realtors that causes them to be in high demand and helps them keep up their commissions or something like that?
      - nrmitchi 6y ago
        The National Association of Realtors controls a huge percentage of real estate transactions, and works to make sure it doesn't drop, to the point where there are multiple open anti-trust lawsuits. For example: https://www.justice.gov/opa/pr/justice-department-files-antitrust-case-and-simultaneous-settlement-requiring-national https://www.justice.gov/opa/pr/justice-department-files-anti... Basically, if you don't play the Realtor game and agree to pay those commissions, it's difficult to participate in the market at large.
        wombat-man 6y ago
        Yeah I mean you're kinda paying to make everything go smoother and ideally their experience in the market will help prevent you from making an expensive mistake. As long as you have a good one, of course.
        bostonsre 6y ago
        Ah, thanks.. that makes a lot more sense then. Hopefully the justice department stops that BS rent seeking crap.
    - exclusiv 6y ago
      Can you negotiate 5%+ more salary if you know what you're doing? Yes. Yes you can. That's easy. Half goes to buy side though normally. Although some firms try to "double pop" it and represent both sides. That should definitely be illegal everywhere. There are a lot of terrible agents though that aren't worth it. It's a low barrier to entry with a very high upside. Not many career opportunities like it. Buy side can be a ton of work though for the same payday as sell side. Agents and owners offer commission to the agents to make it worth their while. If there weren't any buy side commissions, you'd get less interest, because no buyers agent would ever refer you to a house they can't make money on. Unless they had a conscious AND they hadn't already spent a bunch of time on you. But at some point if you want a house that had no buy side commission and you locate it (Zillow or a sold by owner site), you're going to buy it without your buyer's agent. So it could easily head the way of the hotel industry where the buy side is virtually non-existent.
  - jankassens 6y ago
    I'd love to see the typical breakdown of where those 5% go in a hot market like San Francisco. At a median price of $1.5mil, that's $75k in commission. I never bought a home, but that seems like it should buy a lot of services.
    - choppaface 6y ago
      In a market like SF, or on Million Dollar Listing, I think the argument towards the commission is that the agent will either save you that much through negotiation (or earn you more through inflation) and/or they will get you something that you couldn't get otherwise (e.g. an unlisted property or a celebrity buyer). That said, I imagine the agents' return-on-arbitrage is actually even higher at the top price points, and even harder to quantify because deal details can be obfuscated (e.g. through LLCs etc).
      - lawnchair_larry 6y ago
        Agents don’t negotiate on your behalf. They present all offers.
    - tamade 6y ago
      The typical 5% is split 50/50 between the buyer and seller brokers and paid by the seller. If the agent represents both sides, there's usually a discount, e.g. 4% total. Additional broker incentives, e.g. extra 0.5% to the buyer broker, may increase the commission
  - lawnchair_larry 6y ago
    No, it really isn’t. The price only exists because of the MLS cartel, which is finally starting to crack.
- adeelk93 6y ago
  Redfin is that disruption you’re describing, not Compass. Having worked with both, Compass tries to come off as more “premium” than “economical.”
deleted 6y ago
[deleted]
honopu 6y ago
If they drive leads, they can capture a percentage of leads they generate for in house agents. This is why Zillow went commission split on transactions, it’s much more lucrative once you have a lead pipeline.
onethought 6y ago
Running realestate commissions through your books to pump your "revenue" seems a bit crappy... So really they have 700mil revenue.
- twostorytower 6y ago
  I think it's actually correct in accounting terms, but their COGS will be high.
dmode 6y ago
Isn’t the revenue number kind of misleading ? Essentially it seems like it is the total value of the transaction and their revenue should essentially be the take rate from the transaction.
username2021 6y ago
The broker controls commission splits so they have all the control. The problem is that if they don’t offer fantastic commission splits to agents then the agents will go work for another brokerage. At some point, it’s advantageous to work for a different broker because they’ll offer a better commission split and enable them to standout apart from the crowd.