The Ups and Downs of Compass Real Estate

Compass Real Estate has experienced tremendous growth and success in just 10 years.

Since being founded in New York City in 2012, Compass has expanded across the country, now operating in locations like Washington D.C., Seattle, Atlanta, San Francisco, and Los Angeles.

In fact, Compass is now the fourth-largest real estate brokerage in the country according to this blog post, and the company is continuing to grow. However, Compass Real Estate has also experienced its fair share of difficulties, including losses during the pandemic and legal issues. So, what have been the ups and downs in Compass’s relatively short history?

Compass Real Estate was founded as Urban Compass in 2012 by Robert Reffkin and Ori Allon. The company initially focused on the rental market in New York City, and investors were drawn to this company due to the founders’ innovative vision and commitment to using technology to help real estate agents better assist their clients. Compass raised $8 million of seed funding from major investors like Goldman Sachs and Thrive Capital.

The key to Compass’s initial success was its different approach and use of technology. First of all, Compass disrupted the real estate industry by pledging to be more transparent and by offering agents a salary instead of taking a percentage of commissions. Additionally, Compass prioritized the development of real estate software and became the first company to create a proprietary mobile app for real estate agents. This software helps agents make more informed, data-driven decisions about things like house pricing and deciding when to sell.

When Compass changed its business model in 2014 to switch from salaries to taking a portion of agents’ commissions, the company managed to secure even more funding. This ensured Compass’s continued success, but more recently, Compass has faced some obstacles. Naturally, the coronavirus pandemic affected Compass and the real estate market as a whole because fewer people were buying and selling properties. In 2020, Compass lost $270 million, but since then, the real estate market has started to recover and Compass is continuing to expand.

Another obstacle that Compass Real Estate has faced over the past few years is a series of lawsuits from competitors and former employees. In 2019, Zillow filed two lawsuits alleging that Compass stole trade secrets and poached employees who had non-compete clauses in their contracts. Compass argued that these clauses stifled competition, but the two companies eventually reached a settlement. As recently as last year, Compass faced lawsuits from former employees alleging that the company defrauded them by making deductions from their commissions and misleading them about obtaining shares.

Despite these legal issues, Compass Real Estate continues to have glowing reviews from the vast majority of its real estate agents. In addition, Compass went public in April last year and was valued at over $8 billion, which is a testament to the company’s incredible success. So, if you’re hoping to buy or sell a property in the near future, then you’ll be in safe hands with Compass.