Compass is getting into the title and escrow business — two ancillary service lines that could boost its earnings as it works toward profitability.
On Monday, the residential firm said it signed a definitive agreement to buy Modus, a title and escrow startup that’s raised $12.5 million. Terms of the deal were not disclosed. In a statement, Compass said Modus’ software would be added to the collection of tech tools that make up its “end-to-end” real estate platform.
Based in Seattle, Modus was started in 2018 by Alex Day, Jai Sim and Abbas Guvenilir. The company, which develops digital closing software, currently has 60 employees, and it claims to have facilitated more than $1 billion in purchases. Backers include Trulia co-founder Pete Flint, Rambleside Real Estate Capital and Second Century Ventures, the VC arm of the National Association of Realtors.
Compass CTO Joseph Sirosh said in prepared remarks that Modus’ digital title and escrow tools would save agents time by “simplifying the entire closing process.” The Modus deal extends Compass’ platform beyond the core real estate transaction, the statement said.
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As it looks to become a one-stop shop for real estate transactions, Compass has acquired two other software companies in the past 18 months.
In February 2019, it bought Contactually, a popular customer relationship manager, reportedly paying in the “mid-eight figures.” It later acquired the team behind Delectica, an artificial intelligence and machine learning company.
Founded in 2012, Compass has around 18,000 agents who sold $91.3 billion worth of real estate last year, according to Real Trends. The SoftBank-backed firm has raised $1.5 billion from investors and was most recently valued at $6.4 billion, after a funding round in July 2019. But like other well-funded startups, the company as a whole is not profitable.
Last year, CEO Robert Reffkin told the Wall Street Journal the company planned to make money by offering clients access to title, mortgage and insurance — services offered by many traditional brokerage firms. Two years ago, Reffkin said by 2028 he wants agent commission to account for only a fraction of their earnings — with the rest coming from a vast “referral economy” of services.
For example, Compass bridge loans link sellers to lenders; if the client sells the home with a Compass agent, they can also get up to six months of the loan payments fronted. Compass Concierge fronts money to sellers for home repairs. Sellers repay the firm when the home sells.