Things on the Inman Connect New York stage heated up Thursday as Rory Golod, the president for Compass’ North East and California divisions, Thaddeus Wong, the co-founder of @properties, and Leo Pareja, the chief strategy officer of eXp Realty, took to the main stage. Touted as a “real estate battle royale,” the panel got into the weeds about popular misconceptions and assumptions made about their respective brokerages — and did not disappoint.
Occurring just a week after Wong threw shots at Compass during an episode of The Real Deal’s The Closing, Golod and Wong got right into things.
Wong’s main gripes about Compass center around how the firm advertised itself and was valued as a technology firm, and how the firm sold stock shares to agents at discounted prices.
“Compass doesn’t scale their technology beyond their organization. Therefore, there is no inflection point, and there is no scalability, and you take that with big layoffs, profitability in the third quarter of last year, [and] significant agent loss, I think it is a disingenuous valuation of the company,” Wong said.
While Golod acknowledged the drastic drop in Compass’ stock prices, he said when viewed in the context of the stock market as a whole, it is not so bad.
“The world right now is 50% lower than it was a year ago,” Golod said. “Those companies aren’t 50% worse — that is just indicative of the world and market we are in.”
Golod also addressed some of the criticism Compass has come under fire for, including using incentives to encourage agents to join the brokerage, a practice the firm stopped in August 2022.
“For a long time, people said agents only come to Compass for financial incentives, and they only stay for the financial incentives,” Golod said. “Since August 2022, we have hired nearly 1,000 agent who have come to Compass, not only for no financial incentives, but the majority of them are paying Compass more than they were paying their prior firm. People are coming to Compass for the value the company brings.”
While Compass is no longer offering financial incentives, the main incentive Wong disapproves of, the firm’s agent stock option is, and will continue, impacting Compass agents.
“It is not giving shares to agents and it’s not giving a trickle-down tree if you bring on agents. It is actually luring agents in to invest money,” Wong said. “I personally know an agent that took 25% of their commission to buy stock that lost it all, and he can’t leave because he owes money from the contract. If you read the contract, you can’t leave unless you pay the money back.”
Despite the challenges Compass and its stock are currently facing, Golod remains optimistic about the future of Compass.
“The valuation of Compass will not be determined by if it is a tech company or if it is a real estate company,” Golod said. “It will be determined by EBITDA and free cash flow. I am highly confident that the stock investment will be one of the best decisions agents made.”
While much of the debate was centered around Compass’ agent recruitment practices, some shots were fired at Pareja’s firm, eXp.
“The rumor I hear most often about eXp is that all you guys do is recruit, and you don’t even sell houses,” Jeff Lob, the CEO of SparkTank Media and the panel moderator, said.
In response, Pareja cited the numbers, highlighting that, as of Q3 2022, eXp had sold roughly 400,000 houses.
“The recruiters are influences and are the ones that build the company, which allows us to focus on giving the agents the best experience,” Pareja said.
In addition, Pareja highlighted that all of eXp’s agents work under one umbrella — unlike other firms that franchise — giving the firm a greater opportunity for growth.
“With the franchises, if somebody else buys the territory next to you, they might be flying the same flag, but you are actually at war with these people,” Pareja said.
Although the brokerage firms and their executives may have their differences, the panelist stressed that agents need to find what works best for them.
“There is something for everybody — consumers, agents, brokers,” Pareja said. “Find the place that you are going to thrive and build the business you want to build.”
