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As 2024 enters its final quarter, it’s worth remembering the big real estate story that almost was: recruiting. Back in the spring, Inman ran a series on brokerages’ efforts to attract agents. The idea was that a persistent slow market was forcing companies to get more creative in their quests for talent.
Then, of course, the year ended up dominated by stories about commission lawsuits, settlements, and other battlegrounds such as Clear Cooperation. But that doesn’t mean recruiting ever went away as a major theme. In fact, the upheaval of 2024 only intensified the battle for talent.
To get a sense of how recruiting has played out in these tumultuous times, Inman is reaching out to leaders across the industry. First up in these conversations is Rory Golod, Compass’ president of growth and communications. In a wide-ranging phone conversation, Golod talked talent retention, commission settlements, Clear Cooperation, franchising, and name-dropped the companies from which Compass is most commonly getting agents.
The takeaway from this conversation — which came on the eve of the latest earnings season — is that Compass believes recent tumult in the industry has actually improved its ability to recruit new agents. Compass also believes it’s pulling ahead while rivals fail to adapt.
What follows is a version of Inman’s conversation with Golod that has been edited for length and clarity.
Inman: Talk to me about sort of the trends you guys are seeing right now and your recruits.
Rory Golod: Right now we’re experiencing really strong organic growth. The industry is obviously in the midst of the lowest number of annual home transactions that we’ve seen in many decades. And we’ve seen how that’s created a lot of challenges for brokerages. It’s created challenges for individual agents. We’re seeing agents leaving the industry. We’re seeing brokerages close, consolidate, sell.
And against that backdrop, brokerages have cut the minimum investment they were making. So they’re really struggling to create any tangible value for their agents.
I think the question is why are we seeing organic growth now? I think one, we have been very fortunate that we spent the last 10 years and over a billion and a half dollars building out this incredible technology platform. Having that, and then on top of that being the number one brokerage by sales volume, having the most active referral network in real estate, having the offerings that we have, it’s allowed us, I think, to create this incredible distinction between our competitors.
We’re seeing remarkable success in attracting agents from all firms, but a few in particular. One is The Agency. Over the last year, we’ve recruited agents from The Agency that represent collective annual sales volume of $689 million, and one-third of these agents are agents that are returning to Compass.
Why The Agency? There are other good agents at other companies.
I think it’s consistent among a couple of firms. At Douglas Elliman, this year alone we’ve recruited almost $1.2 billion in sales volume. We’ve recruited a number of agents from Coldwell Banker. We’ve recruited a number of agents from other companies as well. We’ve recruited many hundreds this year.
I think what the examples from The Agency or Douglas Elliman underscore is that firms that were considered traditional brokerage models focused more on the luxury segment seem to be struggling to retain their agents. And I would venture to say there are two reasons why. One is just that Compass can offer so much more than these companies can to their agents and so much more that’s tangible.
And second, I think these companies are struggling to create that value in a down market because they don’t have the capital, they don’t have the infrastructure. If I’m an agent and I’m looking around the industry and I see consumer search portals doing all sorts of things, I see iBuyers doing all sorts of things, I see all sorts of things happening in technology, AI, ChatGPT, Facebook, Instagram, you name it. The MLS.
I’m looking at my brokerage and I’m saying, “Well, what are you doing?” And I don’t think, unfortunately, these companies have great answers to that other than a brand, a logo on a door and a physical office space.
Does that create acrimony? I know [Compass CEO] Robert Reffkin and [The Agency CEO] Mauricio Umansky are both on the same side in the Clear Cooperation debate. Does that create tension?
For the greater good of our industry, it makes sense to collaborate and partner with other brokerages because, at the end of the day, we all benefit from things that improve the life of an agent. But our sole purpose as a company is to help agents grow their business and be more successful. That’s the reason we exist.
Our competitors are the companies where agents are currently. So those are the companies that we compete with. And if we’re going to compete, we’re going to compete at the highest level. And we’re not concerned and thinking about making friends. What we’re focused on is what’s in the best interest of agents.
Robert [Reffkin] has probably been the most vocal voice in the industry on Clear Cooperation. I’m curious if that intersects at all with recruiting.
One of the reasons that we’ve seen an uptick, I think, in recruiting momentum is our competitors are scaling back investments, and it’s really deteriorating the experience of their agents. But Compass has continued to build and invest and grow. And culture is another big one.
But what we’re also seeing as a factor is industry advocacy and protecting and supporting agents. And it’s in two areas. One, after the settlements were announced in March, we mobilized quickly in terms of our training and preparing our agents for the new rules and the new structures and how they would be implemented.
The other part is agents have been saying resoundingly that they so appreciate Robert’s advocacy for the industry, seeing Robert out there as the sole brokerage leader who’s fighting for the interests of homeowners and the interests of agents.
Agents want Clear Cooperation repealed. It’s not in the best interest of their sellers’, and they have a fiduciary responsibility to support and help their sellers. And so when they see that he’s willing to do that, that’s another reason why we’re seeing momentum.
I’m also curious about the commission lawsuits, the NAR settlement and Compass’ settlement. Are you guys having folks come to you and say, ‘Hey, we like the way you handled this. That’s why we’re coming’?
No, I’m not hearing any agents say that the way it was handled or the settlement itself is why someone joined a firm. What I am hearing is this: Agents are realizing that many of their firms are not well capitalized, don’t have a lot of cash available, and these settlement costs are really significant.
Because many of these companies are not generating a lot of cash, or any, it’s hard for them to regenerate the cash that they’re spending on this. And so what happens is that then manifests itself in a reduction of spending by the companies. That means fewer offices, less human support and less of the things that agents need.
After Compass announced that we were going to be settling, there hasn’t been one thing this year operationally that we have reduced, cut back on or changed due to a settlement. We don’t have to pass along the settlement costs to our agents. There are a lot of companies that are doing that.
What about franchising? Didn’t Robert mention the possibility of franchising a while back?
We said we were going to look into the business model, but that just meant we were going to look into it. Is that happening? We’re not focused on it. We haven’t spent any time on it. There’s too much opportunity with the owned and operated business.
If we were to go down that route, we would do it in a way that protects the Compass brand. We would do it in a way that doesn’t alienate agents or create negative impacts. But no, we haven’t done any work on that.
I’m also curious if we’re seeing consolidation, similar to retail. It used to be that there were 100 stores on Main Street. Now you’ve got the Amazons, the Targets. Is that where the brokerage world is going?
Absolutely. And just to be clear, it’s not necessarily the direction I personally like. I love boutiques. I’m from Cold Spring Harbor, a small town on Long Island. I grew up with small businesses everywhere.
But unfortunately, the world in which we live in is one where, especially in our industry, you need size in order to be significant. You need the capital that comes with size, you need the market share, and, most importantly, you need the listings and the inventory. The fact that the market is so anemic right now is driving further and further consolidation.
What people historically haven’t liked about consolidation is that the companies that consolidate don’t offer any additional value. But when I think about Compass, and I think about what we’re doing, it’s very different.
The companies that we’re acquiring, their retention rates are still very high. That’s because, in most of those cases, the companies are coming to Compass and their leadership is staying intact. They’re now getting the benefits of Compass. They’re getting our technology platform. They’re getting access to our inventory.
If you were to come to Compass, and then all the things that you loved about your current company went away, that wouldn’t work. And we are very aware of that fact as we grow. The main job we have is to make a big company feel small.
