In an aggressive and controversial tech-based attack on the real estate market, a well-funded, ambitious New York-based firm has launched in Atlanta, vowing to snare 20 percent of the lucrative market within two years.
Compass, which is reportedly backed by more than $800 million raised from venture capitalists and other investors, opened its Buckhead office in mid-August, hiring more than a dozen people, including several real estate professionals.
Although it was born in technology and money, Compass is, in essence, a real estate brokerage, with agents who may emphasize the latest tech tools as they work with buyers and sellers.
When asked last week for comment about the company’s plans, a Compass spokeswoman two days later emailed an Aug. 16 press release. She declined to speak for the record or to make a representative available for an interview.
But other people have been talking.
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Compass, which has been sued for its tactics in other cities, quickly drew fire from some industry veterans in Atlanta as well.
“They are trying to displace actual knowledge and any true connection with a viable person’s experience,” said Jenni Bonura, chief executive officer of Harry Norman Realtors. “Hopefully, they will fail.”
There’s an awful lot of money betting that they won’t.
Like many tech-centric companies – especially those led by people who have already made fortunes in technology – Compass sees opportunity in lucrative markets long dominated by what they see as less innovative competitors.
Technology is key, according to the company’s Aug. 16 release: “Compass was founded in 2012 on the insight that the real estate industry lacked the technology necessary to help real estate agents run and grow their business on one end-to-end platform.”
Bonura scoffed at the Compass rationale – as if the industry had not noticed computers.
“All these companies claim they offer proprietary technology, but they don’t really offer anything different,” she said. “Everybody has proprietary technology.”
Yet the company leadership is tech-heavy.
Among top officials are former executives at Twitter, Priceline, Microsoft and Spotify. In contrast, real estate references on company bios are rare, although one founder obtained a real estate license during college and the company’s “chief evangelist” formerly ran a real estate company.
But then, the Compass strategy calls for more than tech savvy.
With its deep pockets, Compass has moved into some markets by simply purchasing other brokerages, including California-based Pacific Union International, one of the nation’s largest. The company this year has purchased the Hudson Company and Conlon Real Estate in Chicago, Paragon Real Estate in San Francisco and ICS Realty in Aventura, Fla., according to an arm of the Williston Financial Group that tracks real estate.
In a number of markets, Compass has snapped up agents from competitors, often luring them with large bonuses.
Certainly the market target is tempting – and Compass is not the first to notice.
Real estate is a more than trillion-dollar market nationally. In Atlanta, home sales add up to about $50 billion a year, according to the Atlanta Realtors Association. The local market has already drawn companies like Opendoor, Offerpad, Knock and Divvy to Atlanta, but none of them seem to be snapping up local expertise as aggressively as Compass.
In Atlanta, Compass has not yet acquired a potential rival, but it has hired at least three real estate professionals in Atlanta: Jim Getzinger and Jere Metcalf, both formerly of Atlanta Fine Homes Sotheby’s International Realty, and Jason Wieloch, formerly of Keller Williams.
Compass says it is recruiting. Competitors call it poaching – the company has been accused of unfair tactics by rivals in Boston, New York and San Francisco. Whatever the ethics, the strategy is aimed at rapid growth: The company chief executive said he wants 20 percent of the market in the top 20 cities by 2020.
But local companies should not be intimidated by the money, argued Kristen Jones, a broker/owner at RE/MAX Around Atlanta in Sandy Springs. “I don’t think that any one disruption is going to put someone out of business if you are doing the right thing. At the end of the day, we have to provide value or shame on us.”
It’s a big market, she said. “I believe there’s enough business for everyone if you are doing the right thing.”
Atlanta is a big market, but the number of home sales is not growing rapidly, so if Compass succeeds, it has to take business from someone.
Then again, maybe the 20 percent goal will prove to be too high a bar, said Bill Murray, president of the 9,000-member Atlanta Realtors Association as well as a senior vice president of Berkshire Hathaway HomeServices.
Right now, the top three companies together have less than 20 percent of the market, he said. “It is a difficult market to be in.”