‘Selling Sunset’ Broker Says Compass Faces a ‘Hard Reality’ | Bot To News

  • Jason Oppenheim, who runs The Oppenheim Group, said the competitive brokerage compass is “incorrigible.”
  • He said Compass’ allowing brokers to keep so much of their commissions is “unsustainable.”
  • Compass told Insider that there is “no change to our split policy” in its current cost-cutting plan.

Superstar real estate broker Jason Oppenheim has charged against competitor Compass, saying the company has “destroyed the brokerage model for the entire industry” and is facing a “harsh reality.”

Oppenheim, known for his Netflix reality show “Selling Sunset,” told real estate news outlet Inman.

Oppenheim closed more than $429 million in sales last year as president of his own brokerage, The Oppenheim Group, a Los Angeles firm founded by his grandfather in 1889.

Oppenheim’s critique centers on “slices,” the slice a broker takes from an agent’s commission each time a home is bought or sold on behalf of a client. Brokerages use that money for everything from shared office space to marketing resources.

Splits range from 50-50 to 90-10, with agents paying 90% of the commission — which is typically 3% of a home’s sales price — and 10% to their agency.

Oppenheim said the splits on Compass were unsustainably generous, in the ballpark of 90-10, generating too little revenue for the brokerage to operate profitably.

Former Compass agents confirmed in a lawsuit that they were given 90-10 splits, and that some offer letters allowed brokers to keep 100% commissions on their first eight deals, The Wall Street Journal reported.

“If you have a broken business model, it doesn’t matter how many agents you have. It’s irrelevant. If you’re making televisions for $100 a piece and you’re selling them for $99, it doesn’t matter. You’re making more televisions — that doesn’t fix your business model.” Oppenheimer told Inman.

Compass, meanwhile, told Insider that it doesn’t expect to change its split policies.

“With no change to our split policy, we plan to keep our cost structure profitable in 2023 even with a 25 percent market decline,” a Compass representative told Insider in an emailed statement. “The market responded very favorably and many Wall Street analysts project that the compass split will remain profitable without any change in policies.”

In a call with Insider, Oppenheim broke down what he considers a very “stable and successful” split.

“The most successful agents at 80-20, and the new agents at 60-40,” he said. “So most agents are 70-30.” He declined to share the extent of the splits for his agents at The Oppenheim Group.

Oppenheim also argues that Compass has dragged down the rest of the industry.

“Other brokerages offer 90-10 and 85-15 splits because they have to compete with Compass,” Oppenheim told Insider.

Compass is in the process of cutting $320 million in costs after a shaky year

Compass was founded in 2012 by Robert Refkin, who had never worked in real estate before, and two entrepreneurs, Ori Allen and Avi Dorfman. The company has become the number one brokerage in the United States by sales volume, selling $251 billion in real estate by 2021. But after interest rates spiked earlier this year, the real estate market slowed dramatically, leaving many agents — and by extension, their brokerages — earning fewer commissions.

Compass, which went public in April 2021, has yet to turn a profit. It reported a loss of $154 million in the third quarter. Its share price fell from $18 on the day of the initial public offering to $2.69 on Tuesday. Since June, Compass has laid off more than 1,000 people, and executives announced $320 million in cost cuts.

Although Compass posted a 15% increase in its agent count in the third quarter, more than 13,000 agents were hired, and a handful of superagents have left the brokerage.

Oppeheim told Insider he hired “about 40” agents.

Oppenheim said in his Inman interview that he hoped Compass would “buy me out” at some point, but said the brokerage never responded to his inquiry.

“Compass is not focused on other companies or reality TV, we are focused on making our agents more successful,” a Compass representative said in an email. “Compass didn’t respond to Jason’s inquiries because he wouldn’t have been a cultural fit, so we didn’t want to waste his time.”

Oppenheim told Insider that he’s not rooting for Compass to fall. “I believe they will win, but time will tell,” he said.

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