Latest news with #Reffkin
Yahoo
3 days ago
- Business
- Yahoo
Year in review: Cash-flow positive Compass faces resi headwinds
Could Compass be suffering under the weight of its own expectations? The firm spent much of its first cash-flow positive year buying up competitors and duking it out with major industry players over private listings, generating positive headlines and stock moves for its financial and strategic wins. Compass reported its first-ever cash flow-positive period in the second quarter of 2023. It was an important milestone after a year-long cost-cutting campaign and a first in its life as a public company. It kept positivity in the following quarter, but fell into losses while finishing the year. It returned to cash flow positivity in the first quarter of 2024 and marked a full year in its results announced in May. Compass upped its free cash flow in the first quarter to $19.5 million and narrowed its net losses by $82 million to $51 million — only for its stock to fall 19 percent the following day. While Compass continued to improve many of its key operating metrics, the company's ability to return on its massive investment remains unclear, while CEO Robert Reffkin's continues big swings against Clear Cooperation Policy. Compass put up by far the worst May of its publicly-traded competitors, watching its stock fall to $5.91 from $7.81 to close the month, down 24 percent. Douglas Elliman was the only other brokerage to see its stock price swing double-digit percentage points, but its value went in the other direction. The beleaguered brokerage saw its price jump over 60 percent, from $1.69 to $2.72, on news that it received a merger offer from Anywhere Real Estate. The offer for Elliman — which some have speculated could be a target for Reffkin's firm as well — comes after Compass had added a number of brokerages in the last year, including @properties and Christie's International Real Estate. In March, there were reports that Compass was nearing a deal for Berkshire Hathaway HomeServices, which were later denied by HomeServices executives. After arguably exceeding expectations for most of 2024, Compass opened 2025 with a bit of dud, missing consensus estimates on revenue and earnings per share, according to Yahoo Finance. Analysts responded by moving full-year breakeven projection to 2026 from 2025. 'We took down our forecasts pretty massively,' said Needham analyst Bernie McTernan, noting much of that was related to a weak housing market. But in a critical moment for Compass being able to cut its way to profitability and create a flywheel for agent growth with its recent inventory push, 'I don't think the thesis is shaken,' he added. A Compass spokesperson said that the 'miss relative to consensus was largely driven by volatility that we began to observe in mid-March as the news around tariffs caused a pause in activity.' They added that the reduced analyst forecasts were driven by lower-than-expected overall market growth. The company also suffered a blow on a strategic front when Zillow unveiled an updated listing policy that appeared to target Compass' three-phased marketing strategy, which involves listing homes without publishing them on the MLS. 'It definitely seems like Zillow took one of the legs out from under the stool,' McTernan said. Compass, which has taken in over $2 billion in equity investment and has an earnings multiple more in line with a tech company than a brokerage, also has more pressure to perform like a growth stock. Although Compass managed to hit a profitable second quarter last year, it ended the year with a net loss of over $154 million. The company has splurged on a number of acquisition deals in the past year, which has been a major revenue driver and helped increase its market share to a record 6 percent. For Reffkin, a housing market boom could be the thing that vaults the company into profitability as its gross profit numbers can finally begin to outstrip its operating expenses — but that bull market appears further and further away, raising questions about how Compass will continue to float its losses in the meantime. 'When they're growing revenue, fixed costs are great,' McTernan said. One workaround for the company has been the use of stock-based compensation to incentivize employees and recruit agents, which CFO Kalani Reelitz said he expects to be managed down to $100 million per year. But the company still has over $277 million in unrecognized stock-based compensation, all of which will weigh on the company's long-term trajectory. 'We have a well-defined path to reducing our annual stock-based compensation over the next three years,' a Compass spokesperson said. 'The $277 million is factored into the $100 million target we expect over the long term, so it is not a concern for us.' The company recognized over $30 million of stock-based compensation in the first quarter of last year, down slightly from the year prior. While Reffkin has maintained that he will be aggressive in seeking M&A opportunities, the less costly growth trajectory relies on continued organic agent recruitment. On the earnings call, Reelitz said that he continued to hear that Compass' 'inventory strategy, the depth of inventory [and] the three-phase marketing' have helped in agent recruitment. Last year, Reffkin said that in 2025 Compass would have more off-MLS and make-me-move inventory on than any publicly searchable active market, incentivizing buyers and agents to work with the firm. Halfway through this year, that expectation looks all but shot as Zillow and a number of MLSes have challenged Compass' hegemony play. Earlier this year, Compass sued Seattle-based Northwest MLS for interfering with the company's private exclusive model, claiming at one point the listing service shut off its access to the listing service's data feed until Compass removed all of its private exclusive inventory from the market. At the Compass' annual retreat held in early June, Reffkin confirmed to agents that Zillow would 'say every private listing is banned' if Compass didn't remove references to private exclusive listings from its website. 'Does it feel to anyone that we've been discouraged from our private listings, or is it just me?' Reffkin asked the audience, claiming that listing services have flouted a National Association of Realtors' policy that prohibits listing services from discouraging the use of office exclusives. Last month, the California Regional MLS voted in approval of a NAR amendment that would remove the office exclusive carve-out that currently allows Compass' private exclusives to exist. The conversation shift has put Compass on the defensive for the first time since it began waging its battle for the repeal of the Clear Cooperation Policy. Now the company is simply fighting to maintain what existed one year ago. For Reffkin, the solution remains the same — just keep growing, which is what he told over 1,200 Compass agents at the firm's annual retreat. 'If every one of you doubles your business, if every one of you doubles your listings, we can't be bullied anymore,' he said. 'That is the path.' Compass scored first cash flow positive year in 2024 Compass narrows losses amid surge in deals, mergers This article originally appeared on The Real Deal. Click here to read the full story.
Axios
01-04-2025
- Business
- Axios
What's driving secret Boston-area home sales
Boston's hellish housing market could soon get even trickier to navigate. Why it matters: Some real estate companies want to list homes on private networks, fueling fears that buyers might struggle to access them. How it works: Right now, most homes for sale are widely viewable online and on multiple listing services (MLS), the databases brokers use. Some brokerages are pushing for more leeway to privately share listings with their agents and clients before advertising them publicly on the MLS. The National Association of Realtors is considering a rule change this month that could allow it, per HousingWire. Between the lines: Homes sold outside the MLS typically went for nearly $5,000 less than those listed on the MLS, per a Zillow study analyzing sales over the past two years. Off-MLS listings often include ultra-luxury and celebrity properties, plus houses sold directly by owners or builders. (Zillow's research excludes new builds and home sales above $10 million, among other caveats.) Zoom in: Homes in the Boston metro area typically sold for $26,500 less (4% lower) than those listed on the MLS in 2023 and 2024. In Massachusetts, homes sold off the MLS typically sold for $20,000 less (3.4% lower) than those on the MLS in that same time frame. What they're saying: Sellers should have "a choice of where, when, and how to advertise their home for sale," Robert Reffkin, CEO of Compass, one of the largest U.S. brokerages, tells Axios. Private listing advocates like Reffkin say the status quo hurts home values by making sellers reveal details such as price drops and time on the market. Reality check: Some real estate experts and consumer advocates warn that moving listings to private networks could not only prevent sellers from getting top dollar, but also limit buyers' access to an already short supply of homes.
Yahoo
26-03-2025
- Business
- Yahoo
It's about to become a lot harder to find your dream home
Shopping for homes online once had the feel of an open-air market: crowded and sweaty, maybe, but free for anyone to drop by and see what's for sale. The experience these days, though, is quickly turning into that of a nightclub, with the hottest new listings sequestered behind velvet ropes. If you want to party with the cool kids — in this case, score access to homes before regular folks — you better know a guy. The wide-open nature of the housing market has been breaking down for a while. Most real estate agents have traditionally taken a maximalist approach to marketing homes, sharing listings widely through local databases known as multiple listing services. Agents browse the MLS to get details on homes available for sale, while search portals like Zillow pull the data onto their own websites for regular home shoppers to scroll through. The thinking is simple: More eyes on a listing means more potential bidders, giving a homeowner the best chance of selling quickly and lucratively. This model is even backstopped by the National Association of Realtors, a powerful industry group that sets the rules for most MLSes around the country. NAR instituted a rule in 2020 known as the clear cooperation policy, which says that once a real estate agent starts marketing a home publicly — on a website, through an email blast, or even with a "for sale" sign in the front yard — they must list it on the MLS within one day. The rule was meant to prevent freeloading and encourage participation in the MLS, keeping listings in one place for other agents and their clients to see. In recent years, however, the clear cooperation rule has been challenged by some of the biggest players in the game, who want to act as the new bouncers for VIP rooms filled with exclusive home listings. In particular, Compass, the country's largest real estate brokerage by sales volume, wants to take charge of the aforementioned velvet rope. Compass agents are increasingly hoarding their listings internally, shunning the MLS and making homes available only to buyers who work with other Compass agents. The company's founder and CEO, Robert Reffkin, has also been crusading against the clear cooperation policy. Reffkin argues that sellers should reject the one-size-fits-all approach of the MLS and exert more control over how their home is marketed. His campaign has stoked fierce infighting among real estate agents and raised a fundamental question: Who should be able to see the homes for sale in the US? For now, the fight is ongoing. After months of debate, NAR said Tuesday it would leave the clear cooperation policy intact while adding another rule that functions as a small concession to Compass. The apparent attempt at compromise will probably end up pleasing no one. But while clear cooperation remains in place for now, the housing market continues to hurtle toward a decidedly uncooperative future. Those in favor of clear cooperation argue the rule is responsible for America's uniquely transparent housing market — the reason you can hop on Zillow or and get the lay of the land. The policy was supposed to stem the rise of so-called "pocket listings," homes marketed for sale but unavailable on the MLS. If agents stop contributing listings to the shared databases, many in the industry warn, a once unified housing market could break up into silos, with home listings distributed among clubby groups of brokers known as "private listing networks" or gatekept within brokerages like Compass. Everybody benefits when we all pool our listings, and we do so in a timely manner. And people are hurt, potentially, when we don't do that. In this world, some agents will have access to a lot more properties than others. Pick the wrong rep, and you could unknowingly miss out on your dream home. And while there are good reasons someone might not want their house touted on the MLS — a celebrity like Brad Pitt, for instance, probably doesn't want their business aired out for everyone to see — conventional wisdom says sharing a home widely is the best way to get top dollar. "Everybody benefits when we all pool our listings, and we do so in a timely manner," Saul Klein, a longtime real estate executive who's the CEO of the San Diego Multiple Listing Service, previously told me. "And people are hurt, potentially, when we don't do that." But it's become increasingly clear that the advocates for the open system are losing. Yes, NAR kept the clear cooperation rule in place, but it also introduced an option for privacy-conscious sellers to list on the MLS while delaying their listings from popping up on sites like Zillow or the landing pages for other brokerages. The idea is to give sellers more flexibility to market their homes as they see fit, catering to those who may prefer to "premarket" their home before blasting it out widely. The move doesn't go nearly as far as Compass would have liked, but the company still frames this as a validation of its rallying cry for more seller choice. "With NAR introducing a new MLS policy to 'expand choice for consumers,' they acknowledged the clear cooperation policy restricted home seller choice," Reffkin said in a statement. "Expanding choice means that NAR is still not letting homeowners choose precisely how to market their homes, but this is a small step in the right direction." Compass may not be totally happy with NAR's most recent decision, but the company has already succeeded in shaking up the real estate landscape. The brokerage has made plenty of hay by exploiting a glaring loophole in the clear cooperation rules. While an agent has to add the listing to the MLS database once they publicly put the home up for sale, the rule allows agents to share new properties within their brokerages without adding them to the MLS. This method, which Compass dubbed the "Private Exclusive" route, essentially creates a walled garden with homes that can't be found anywhere else. Compass drives traffic to its website, collects a commission from both sides of the deal, and can lure both agents and clients by offering access to its inventory. Private exclusives have become a key strategy for the brokerage giant: Reffkin told analysts in February that 35% of the company's active listings nationwide were only available by working with a Compass agent or visiting This isn't just some self-serving maneuver, either, Compass execs argue. They say sellers benefit from spurning the MLS and marketing their homes within the safe confines of the Compass network. The MLS and search portals like Zillow show how long a house has been on the market and whether the price has been slashed, data points that buyers can use to put pressure on homeowners in negotiations. The Compass website doesn't show price cuts or days on the market, theoretically allowing a seller to test their ideal price without any repercussions if they have to backtrack. And if they don't sell that way, they can always turn to the MLS and go the conventional route for maximum exposure. Compass likens this strategy to beta testing a product with a smaller audience before launch. "We firmly believe that homeowners should have full control and flexibility in choosing how they market their home, period, full stop," Ashton Alexander, the head of strategy at Compass, tells me. Brian Boero, the CEO of 1000Watt, a brand and marketing agency for real estate companies, doesn't buy it. Compass, he says, is really after control. Under the existing rule, the company may be free to pursue its "Private Exclusives" strategy, but it can't, for instance, publicly market a home on its website without also contributing to the MLS. "They want to make a destination where they control the inventory publicly, and they want to have free rein to continue to expand their private listings program," Boero tells me. "So they didn't get what they wanted." Everybody loses here, in a way. Nobody's happy. Compass is far from the only large brokerage to employ this kind of strategy — Coldwell Banker, for instance, has "Exclusive Look," Howard Hanna has "Find It First," and one large Keller Williams franchise, KW Go, has dubbed its offering "Private Collection." More companies have threatened to follow the lead and keep listings off the MLS if it helps them compete for agents and clients. The clear cooperation policy has always been tough to enforce, too, with the onus placed on local MLSes to keep agents in line. Some MLSes, fearing litigation, have already backed off enforcement, tacitly allowing agents to market homes however they like. This could enable private listing networks — groups of typically high-achieving agents from different brokerages who share off-MLS listings among each other — to flourish. NAR's decision to keep clear cooperation is a small victory for those who favor the status quo, but it will hardly end the practices fracturing the housing market. Compass hasn't ruled out the possibility of litigation over the rule, either. For now, the real estate industry is stuck in a sort of limbo. No one doubts that secret listings will continue to rise, but the fight over the clear cooperation policy isn't going anywhere. "Everybody loses here, in a way," Boero tells me. "Nobody's happy." James Rodriguez is a senior reporter on Business Insider's Discourse team. Read the original article on Business Insider
Axios
19-03-2025
- Business
- Axios
Homes for sale could become harder to find
This tough housing market could soon get even trickier to navigate. Why it matters: Some real estate companies want to list homes on private networks, fueling fears that buyers might struggle to access them. How it works: Right now, most homes for sale are widely viewable online and on multiple listing services (MLS), the databases brokers use. A few brokerages are pushing for more leeway to privately share listings with their agents and clients before advertising them publicly on the MLS. The National Association of Realtors is considering a rule change this month that could allow it, per HousingWire. What they're saying: Sellers should have "a choice of where, when, and how to advertise their home for sale," Robert Reffkin, CEO of Compass, one of the largest U.S. brokerages, tells Axios. Private listing advocates like Reffkin say the status quo hurts home values by making sellers reveal details such as price drops and time on the market. Reality check: Other real estate experts and consumer advocates warn that moving listings to private networks could limit buyers' access to an already short supply of homes. It may also prevent sellers from getting top dollar, Stephen Brobeck, senior fellow at the Consumer Policy Center, tells Axios. Listing on the MLS gives "sellers exposure to a wide range of buyers and [provides] buyers access to a wide range of properties," Brobeck says. Between the lines: Homes sold outside the MLS typically went for nearly $5,000 less than those listed on the MLS, per a Zillow study analyzing sales over the past two years. Off-MLS listings often include ultra-luxury and celebrity properties, plus houses sold directly by owners or builders. Zillow's research excludes new builds and home sales above $10 million, among other caveats. What we're hearing: "The marketplace is transparent. Private listing networks are the opposite of that," Zillow CEO Jeremy Wacksman tells Axios. "They are brokerages looking to keep listings out of the public so that you have to work with that brokerage to get access to them," he says. The other side: Compass cites research showing that homes " pre-marketed" with a Compass agent before hitting the MLS sold for almost 3% more on average. The bottom line: legal settlement last year.
