Compass Points To Tech In Real Estate

Compass, a relative upstart in real estate, is trying to break away from the traditional brokerage model—most likely a reflection of its leaders' backgrounds in technology and Wall Street.

Launched in 2013, the firm is marketed as a technology-driven real estate platform." The founders are Ori Allon, who was director of engineering at the New York City office of Twitter, and Robert Reffkin, who was chief of staff to the president and COO at Goldman Sachs. One of the country's top luxury brokers, Leonard Steinberg, was brought in to serve as president.

Compass has been making dramatic inroads throughout the Northeast, at the same time taking a rather conventional approach by opening brick-and-mortar offices in New York City, Miami, Boston, Washington, D.C., and the Hamptons.

Locally it has opened one office in Bridgehampton, has one in East Hampton on the way, and it is scouting for a third location in Southampton—all in the last two to three months. Compass has also nabbed top regional brokers including Brian Buckhout and Tyler Mattson, from Douglas Elliman, as well as former Sotheby’s agent Ed Petrie, Evan Kulman from Corcoran, and just last week, Meg Salem from Saunders & Associates.

With so much movement in such a short period of time, it would appear that Compass, a boutique firm, is trying to assert itself as a worthy rival among the old-timers, some of which have been in this area for decades. When asked to comment, several brokers for more established firms declined or did not return calls by press time.

"The message we're trying to send isn't to competitors, the message is to agents," Mr. Reffkin explained. "It's very difficult for a boutique firm to provide the best-class service to agents, because boutique firms don't have the money to invest back into the agents."

However, Compass has a considerable war chest. In September the brokerage announced that it had raised $50 million on top of the $40 million it had raised more than a year earlier. The total capital raised to date is $125 million, and this money is reportedly going back into the business, in part to build its much-touted technological infrastructure.

"We're taking profits and capital and investing it into the business so it can become better for clients," said Mr. Reffkin, who added that most managers of firms the same size simply split the profits. "The traditional firm doesn't invest," he said.

Indeed, Compass has dozens of in-house engineers, product managers and designers, as well as marketing specialists.

"There's not a brokerage firm in the country that builds all of their own technology in-house," said Mr. Reffkin. "Every single one is outsourcing to engineers and paying for third-party systems. … You can never give your agents a great product if you're outsourcing."

Compass engineers are building proprietary marketing and software tools that give their agents access to better data, which ultimately better serve clients, according to Mr. Reffkin. A valuation tool, for example, helps price homes by analyzing surrounding properties, buildings and rentals.

The firm also recently launched an iPhone app called Compass Markets, which gives users access to thousands of "real-time" sales listings versus waiting for the quarterly housing report, said Mr. Reffkin. They can also view five years of sales history. The app is currently available in New York City only.

Some, however, take issue with the notion of being able to view "up-to-the-minute" stats on real estate.

Housing market numbers take time to roll in, mainly because the lag time between the contract date and the closing date is 60 days, argued Jonathan Miller, of Miller Samuel Real Estate Appraisers and Consultants, who publishes quarterly housing reports for Douglas Elliman. Therefore, he said, viewing these stats in the immediate is impossible.

The problem with promoting the notion of real-time stats "is that it is a bubble mentality that we had 10 years ago where everybody was trying to convert real estate to some kind of stock ticker because it was highly liquid … and that ended badly," said Mr. Miller. "Housing is not a rapid transaction."

In the meantime, Compass is getting attention. Earlier this year Corcoran sued the firm for poaching its talent. "To me, agents aren't employees, they're customers," Mr. Reffkin countered. "Agents literally pay the brokerage the money that firm makes."

The two settled the suit in August, and Compass continues to forge ahead with lofty goals.

"Our aspiration is to be in the 30 luxury markets in the world, and by July [2016] we'll be in the 15 luxury markets in the U.S.," Mr. Reffkin explained. Compass is launching in Los Angeles this month and plans to be in Chicago, San Francisco, Atlanta, Seattle, Palm Beach and Aspen by the middle of next year.

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