Inside the Compass tech platform

Brokerage says it spent $900M on tools execs say can make it profitable and help recruit agents. Will it be enough?

Compass' Robert Reffkin (Getty, Compass)
Compass' Robert Reffkin (Getty, Compass)

How does $900 million worth of technology stack up in the path to profitability for a residential brokerage?

Compass is eager to find out after spending nearly half of the $2 billion it raised from investors, including its public stock offering, to deliver a platform for agents to use alongside integrated mortgage, escrow and title businesses.

“The impact of these tools is starting to be felt,” the executive said of the new offerings. “That will eventually manifest itself in financial outcomes.”

Compass recently demonstrated its technology platform to The Real Deal, following what CEO Robert Reffkin teased in September’s second-quarter earnings call as the launch of “a significant set of new features.”

Its highlights include agents’ ability to create a list of for-sale properties called “Collections” to email to potential buyers. The platform ingests listing data from the MLS (and Rebny’s listings in New York, which has no MLS).

A “likely to sell” tool predicts which of their contacts are serious about selling with a 9 percent success rate, which Compass says is three times that of Zillow. Artificial and human intelligence reviews the paperwork for compliance before being returned to the broker.

Newer additions to the platform allow brokers to manage their business by ordering media kits to market the homes they want to rent or sell, and track clients by uploading contact lists. If a potential buyer is looking for homes in a new location, a Compass agent will be among the first to know — as long as the prospective buyer logs into the Compass website first.

Brokers can schedule follow-up emails on a regular cadence to send to their clients automatically. They can also send homecare reminders to their clients to stay in touch with them in perpetuity, and buy closing gifts like a bottle of champagne through Compass’ platform.

The brokerage plans to add a text analysis tool that provides anonymous, high-level insight into what clients want to know when they’re looking at a property.

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On top of that, Compass executives believe the platform will allow the brokerage to keep recruiting agents without offering equity or cash incentives. State licensing data show the company has grown its broker headcount in New York state roughly 5 percent.

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Compass’ strategy is similar to plays by iBuyers like Opendoor and Zillow in their efforts to achieve profitability. The plan is to integrate its mortgage, escrow and title businesses into the CRM, a development which would allow the company to collect all the fees and charges associated with closing on a home, though a spokesperson for the company said there’s no firm date for a finished product.

On a million-dollar sale, a broker would take home a $30,000 commission, they said. Compass’ typical cut on a commission is 25-30 percent. That transaction would come with another $20,000 – $30,000 in mortgage, title and escrow fees, the executive said, with a take rate of 80-90 percent for Compass.

“Imagine doubling the revenue and 3.5 times-ing the margin,” the executive said.

Other companies have had mixed success adding services onto sales. Opendoor’s attach rate varied dramatically by state for title insurance when analyst Mike DelPrete took a look in 2020. Its mortgage attach rate in Arizona and Texas was roughly 2 percent.

As a brokerage, what Compass has achieved is unique. Its competitors — traditional brokerages — are more likely to rely on third-party software from companies such as Sky Slope, Dotloop and Rechat, whose software Douglas Elliman rolled out to its agents in 2021.

Unlike third-party software providers that license technology products for a fee (like the Bloomberg Terminal), Compass has positioned its technology as an agent recruiting and retention tool.

Our tech is better, company leaders reason, therefore agents will prefer to work with us. The company has agent testimonials to that effect, but whether Compass can use its technology to make real financial headway — amidst a market-wide downturn, no less — remains to be seen.