Compass CEO Reffkin believes agents will still be valued in a post-settlement world


Robert Reffkin is confident that Compass and its agents have what it takes to continue growing and succeeding in the changing real estate environment.

“In down markets, the best agents and the best brokerages gain market share,” Reffkin, the CEO of Compass, told investors and analysts during his firms first-quarter 2024 earnings call on Wednesday evening. “We are a company of top agents.”

Year over year, Compass gained 26 basis points of market share, bringing its total share of home sales in Q1 2024 to 4.76%.

In addition to Compass’ market share gains, the firm also recorded a 10% annual bump in revenue to $1.05 billion. Executives attributed this to a 7.1% annual increase in the number of transactions closed by Compass agents, which came in at 38,449 sides for a volume of $40.1 billion.

Despite these increases, Compass still recorded a net loss of $133 million for the quarter. That is an improvement over its $150.2 million net loss reported in Q1 2023. Compass executives, however, were not deterred by this news as the firm yet again finished the quarter free cash-flow positive at $5.9 million, compared to Q1 2023’s free cash-flow loss of $59 million.

Reffkin noted that the firm is on track to remain free cash-flow positive throughout the rest of 2024.

“We have brought down expenses and continue to grow our agent count and inventory advantage,” Reffkin said. “The market will inevitably come back, and when the Federal Reserve cuts rates, we will be in a position to thrive.”

Additionally, Reffkin believes that Compass will meet its free cash-flow positive goal even after making the first payment on its commission lawsuit settlement agreement later this year.

The settlement agreement was naturally a hot topic during the Q1 earnings call Wednesday evening, but Reffkin reassured investors and analysts that he does not believe the settlement or the changes within the industry will have much of an impact on Compass.

Reffkin’s confidence came from what he called “five facts.” First, more buyers are using agents in 2023 than in 2003. Second, buyer agreements are not new. Third, Compass agents have doubled down on training to help them better communicate their value proposition.

Additionally, data from RealTrends shows that the average commission actually rose in 2023 to 5.5%, up from 5.1% in 2003. Lastly, Reffkin noted that since the Sitzer/Burnett jury verdict and the announcement of the National Association of Realtors’ nationwide commission lawsuit settlement agreement in March, the industry has not seen any rapid changes in consumer behavior.

“We reviewed the MLS data in the markets that generate the majority of our revenue since the announcement of the NAR settlement on March 15,” Reffkin said. “We found that more than 99% of new listings in March included offers to pay the buyer’s agent. Furthermore, more than 96% of all listings included offers of 2% or more, and more than 67% are offering to pay 2.5% or more. We are not hearing from agents that any of these numbers are coming down.”

In addition to believing in his firm’s ability to navigate the changes, Reffkin also told investors and analysts that he believes the business practice changes outlined in NAR’s settlement agreement will have little impact on professional, full-time agents.

He expects that consumers will continue to use agents to aid in their real estate transactions and that they will continue to be willing to pay for value, so the role of the quality real estate agent will not be displaced. Reffkin added that he also believes agents will have to sell their brokerage firm’s value proposition to prospective clients if they want to gain their business.

“Compass has the best value proposition for buyers of any brokerage firm,” Reffkin said. “For example, Compass has access to off-market exclusives through Compass Private Exclusives and Coming Soon, which is particularly important in a low-inventory environment.”

Reffkin also sees Compass’ soon-to-launch client portal as another value add being provided to both consumers and agents. Through the client portal, homebuyers and sellers will be able to track and see everything their agent does, including prepping comparative market analyses, scheduling tours, coordinating with home inspectors and negotiating with the listing agent.

“The problem the platform solves is that agents are almost too good at their jobs. They hide the clients from their pain because they are trying to not stress them out — there is so much going on,” Reffkin said. “This will take the majority of those events and put them in a beautiful client dashboard that will almost be like a visual receipt of all that the agent has done for them.”

While Compass executives acknowledged the headwinds currently facing the industry, they are optimistic about the firm’s future.

“Assuming we continue to add net agents annually, maintain or modestly improve our agent economics, and keep our $600 million or annual cost savings with minimal inflationary growth of 3% to 4% in 2025 and beyond, we believe that will generate hundreds and hundreds of millions of dollars in adjusted EBITDA and free cash flow as the market recovers to more normalized mid-cycle home sales level of 5.4 million to 5.6 million homes in 2026,” Reffkin said.



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