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The biggest real estate tech companies — Zillow, Compass, and Opendoor — have set their sights on agent commissions as a source of revenue and profit growth.
Why it matters: Agents remain the backbone of the industry, generating around $100 billion in commissions annually.
- That commission pool is a rich target for big tech companies to tap into.
Zillow’s new strategy (Zillow 3.0: Back to Basics) is centered on extracting an additional $1.5 billion from agents by 2025, for a total of $2.9 billion annually.
Compass wants to pay agents less. In its own words, Compass has a demonstrated track record of “improving economics with agents” of one percent per year.
- Compass provides multiple slides that highlight its plans and ability to reduce commission splits paid to its agents over time.
In other words, if you’re a Compass agent, the company’s plan for profitability hinges on reducing your commission split over time. Sorry!
Opendoor continues to use its scale to push buyer agent commissions — one of its biggest expenses — lower.
- In Atlanta, Opendoor has experimented with buyer agent commissions ranging from 1.5 to 3 percent, having finally settled on 2.25 percent.
- Interestingly (and I don’t think I can take credit for this), Opendoor dropped its lowest 1.5 percent buyer agent commission ten days after I published about the iBuyer War on Real Estate Commissions.
Some perspective:
- Opendoor sold 20,000 houses in 2021. A 0.75 percent savings in buyer agent commissions is about $53 million annually.
- Compass’s medium-term goal of a 2.5 percent commission split improvement on its 2021 revenues is $160 million annually.
- Zillow wants to generate an additional $250–$300 million from agents per year.
Yes, but: These companies aren’t simply raising prices; they’re offering increased value to agents.
- Opendoor promises partner agents increased deal flow and less time spent on each transaction.
- Compass promises its agents increased deal flow and efficiency from its brand and tech platform.
- Zillow provides agents with exclusive access to pre-qualified buyer leads.
The bottom line: Big Tech has big plans to extract hundreds of millions of dollars from real estate agents in the coming years.
- Amidst a landscape of new models, disruptors, tech innovation and “super apps,” there remains one consistent way to make money in real estate: commissions.
Mike DelPrete is a strategic adviser and global expert in real estate tech, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.
