As a result of the recent market shifts and shelter-in-place mandates in response to the COVID-19 pandemic, Compass—a SoftBank-backed real estate brokerage—is showing signs of struggle.
Earlier this week, SoftBank announced a $41 billion assets sell-off, which would take place throughout 2020 to decrease its debts and buyback shares, as well as increase its cash reserves.
Compass CEO and Founder Robert Reffkin told Forbes that his “focus isn’t on SoftBank. It’s on the over 15,000 agents we have, our customers, our 2,500 employees. All my focus at this time is on them.”
According to TechCrunch, Compass has experienced a 60 percent decline in real estate showings, forecasting a six-month drop in revenue of 50 percent. Additionally, Compass is seeing 80 percent reduction in its concierge business, a drop related to the virus spread. The company began scaling back its Concierge and Bridge Loan services, temporarily suspending advances and limiting the programs, following recommendations from its lending partners.
This week, Compass laid off 15 percent of its employees.
“As we continue to hope for the best, we need to prepare for the worst,” Reffkin wrote in an email to his staff on Monday, according to Forbes. “So we are joining thousands of other companies across the country in making the heartbreaking decision to let some members of our team go.”
Last week, Reffkin submitted a letter to House representatives, asking Congress to support agents, including the 15,000 under the Compass umbrella.
“As you craft your recovery proposals, I ask that you not forget about the particular plight of real estate agents and other independent contractors,” states the letter. “Though often misunderstood and undervalued, real estate agents are entrepreneurs and small business owners who personify the American dream and represent the backbone of the U.S. economy.”
Other real estate companies, particularly iBuyers, are facing similar pressures. Zillow recently suspended its Zillow Offers program after multiple states—such as California, Illinois, Louisiana, Ohio, New York and Nevada—imposed mandatory restrictions for all non-essential business, which includes some real estate-related practices. Redfin, Opendoor and Offerpad have also paused their home purchases at this time.
As the coronavirus and its impact on the industry unfold, RISMedia is providing resources and updates. Get the latest.
This is only the beginning. Dominos will fall, as they always do when retraction of economy rears its ugly head. My thoughts go out to these folks as my dealings with Compass have been very good to this point.
I think this is a misleading headline. As an agent for Compass in California Bay Area, we are definitely not hitting any pause button when it comes to serving our customer base. We have many transactions still in place, due to close. Those are not on pause. We have many sellers ready to list their home and will do so. Most people are thinking this is just a very short term issue. Most seller’s are not dropping prices. Many are withdrawing or cancelling their listings which only brings our inventory further down. 15% Layoff is not massive. No real estate agents are being laid off. Although the government has set new guildelines for non essential businesses, Compass, California Association of Realtors and National Association of Realtors are working diligently to get some of the guidelines softened for essential business.
Compass…..has lost their way?!!
Ralph Liza asked a very valid question that a lot of high rise apartment communities living in the urban areas are desperate to get answers for their clients. Please share your answer to him with me. Thankyou.
Your article is very informative and helpful.
Maybe they will stop destroying the industry and crawl back under their rocks and the clients will be served again by people who care.
So the pixie dust blows away. Sorry, a tech company? No, just another real estate company that now has to sell real estate.
Hi Stan,
News information just received today regarding the market.
I never believed they had a sustainable business model with all those highly paid software engineers. Brokerage margins simply can’t support that much overhead. This was never going to be a company built to change the world. It was built in the hopes of finding a greater fool to sell it off to.
The Compass concept is not sustainable long-term and is already realizing it short-term!
It’s hard to have emphatic feelings for a group of people that are always bragging on social media about how well they are doing in life. Credit and income “maxed out” and making fun of the less fortunate because they can’t afford their over priced listings. Maybe they should have been saving some of those “million dollar club” commissions!
Compass could not have kept up with their offerings of bridge loans, repair homes , stage homes etc…
they should have focused on real estate instead of gimmicks to beat their competitors. Backfires every time.
The plight of our industry has never been more evident than now. Real Estate has always lead recovery in national and world economy. Sadly, we’re seeing and hearing of Companies and Collegues and all the spokes if the wheel that run the real estate industry, suffering as result of this catastrophic world event.
a great spin.. blaming covid 19 as the reason they need to reduce expensaes…. “if it weren’t for that darn pandemic.. we would have been golden!!” Maybe it was the flawed business model the whole time? Interesting we haven’t seen other major companies announcing such drastic changes. poor employees that were duped… and poor agents getting duped now…bait and switch the whole time
Consumers need real estate sales professionals to guide them through the complexities of buying and selling homes Real estate agents need experienced broker owners committed to supporting their agents and clients. Compass was a tech company masquerading as a real estate company. I feel badly for the agents who believed in a business model which made no sense.
Margaret Its not a tech company its a classic roll-up strategy that has failed over and over again in many industries. A bunch of slick VC guys buy up a bunch of smaller companies and throw around promises of things like IPO’s, market domination, economies of scale and changing the world. These guys are slickest salesmen on the planet and a bunch of realtors are easy fodder for these sharks. Soon the blood in the water will be theirs. How ironic