Amid a global pandemic and massive economic uncertainty, Compass is scaling back its Concierge and Bridge Loan services, The Real Deal has learned.
The SoftBank-backed brokerage is “proactively” restricting the programs at the behest of lending partners, according to a March 16 email to agents that was seen by TRD.
“We partner with leading financial institutions and lending partners to drive the Concierge program and based on what they are seeing in the overall market, they have strongly recommended making these temporary adjustments,” read the email from Mark McLaughlin, president of Compass California.
According to the email, Compass is restricting approval for Concierge — which fronts money to homeowners who want to renovate their homes — to $30,000 on homes under $3 million. The program will no longer be available in certain-second home markets, including Napa and Sonoma counties and Malibu.
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Compass is also “temporarily pausing” its Bridge Loan Advance program. McLaughlin said the new policy would not impact loans already applied for or approved.
In a statement, a Compass spokesperson said the changes were “a result of COVID-19.”
“These temporary measures are being put in place to ensure the continuity of these programs during this time of market uncertainty and will be removed once our lending partners feel comfortable in the larger market,” the spokesperson said.
In a March 16 email to agents, CEO Robert Reffkin sought to reassure agents navigating the pandemic. He said Compass would be more video conferencing and would supply agents with additional training, best practices and tools to stay in front of clients. Last week, the company rolled out a virtual open house template.
“If you’re in a position to work and are looking for support and encouragement, I hope these resources are helpful to you,” Reffkin wrote. “But let me also reiterate… what matters most is your health, safety and well-being right now.”
Amid the pandemic, the Dow Jones saw its worst drop since 1987, plummeting nearly 3,000 points on Monday. Residential brokers have been divided on how to proceed in uncertain times.
Compass introduced its Concierge program in October 2018 and rolled out its Bridge Loan program in October 2019.
As part of the bridge loan program, Compass itself does not provide loans. Instead, the firm partnered with Better.com and Freedom Mortgage to provide loans. Compass also worked with Notable, an independent lender, to front customers six months of bridge loan payments.
From the start, both programs irked rivals who said Compass’ model was not conducive to becoming profitable.
“I definitely keep my eye on competitors who are doing more desperate things and are willing to lose money and don’t seem to have a path to make money,” Realogy CEO Ryan Schneider told the Wall Street Journal last year.
In recent months, sources said Compass has sharpened its focus on profitability. Although Compass executives have taken steps to distance the firm from WeWork, another SoftBank-backed company, it has faced increased scrutiny on unprofitable startups with sky-high valuations.
Having raised $1.5 billion from investors at a valuation of $6.4 billion, Compass has grown exponentially across the U.S. At the end of 2019, the brokerage had 15,500 agents across 325 offices.
The brokerage said it sold $88 billion worth of real estate in 2019. According to real estate data firm Real Trends, Compass is the No. 3 brokerage in the U.S. based on 2018 sales volume of $45.5 billion, up from $14 billion the year prior.
Write to E.B. Solomont at eb@therealdeal.com