Should the Industry All Follow Compass?
“As it relates to technology, Compass truly revolutionized an industry that had become complacent and had fallen behind terribly. In 2015 roughly $1.8 billion was invested in real estate technology….by 2017, that number had exploded to $12.6 billion. Most real estate brokerages simply were not investing much back into technology while the rest of the world was, and agents suffered.” — Leonard Steinberg, President at Compass
Compass President Leonard Steinberg recently penned an opinion piece, “Before Compass, Technology Was Barely Mentioned in Real Estate” — is he right?
Steinberg’s piece clearly calls out an industry that he would likely characterize as lazy and incredulous to the obvious need for better technology in business. How fair is the claim that Steinberg makes that everyone in the industry should thank Compass for bringing this need to the forefront? Let’s talk incentives before we hand our bonuses.
Historically, there has been little incentive for real estate brokerages to spend money to develop world-beating technology. MLS’s created local barriers to entry, agents retained the lock-and-key to listing data, and consumers had no choice but to accept the process as it was.
However, with the advent of the internet this changed, but not as rapidly and in ways many predicted.
Before Compass There Was a Little Company Called Zillow
Zillow was supposed to crush the agent. It hasn’t. In fact, many would argue it’s simply changed the role of the agent, and made the agent more important. According to the National Association of Realtors, more people now are using an agent to find a home than when Zillow launched.
The opinion that Zillow hasn’t disrupted the real estate industry does not mean it’s a fact the industry hasn’t adopted new, awesome technology. Purely speaking from a technological development standpoint, Zillow introduced something new and forward thinking: something that was built not with agents in mind per se, but with consumers. This is an important difference to note in an industry that has traditionally built tools and processes around it’s agents, with what appear to be, at best, secondary benefits to consumers.
Take the MLS for example. MLS’s create fair competition among brokers and agents by establishing a set of rules. Presumably, these rules benefit consumers, but over the long run, the fractured nature of MLS’s across the country (standardization only occurred within MLS’s, not among them) deliberately led to the apparent need for a better consumer experience.
The fact that consumers cannot change their MLS search parameters is a perfect example of inadequate technology. Most MLS interfaces (all?) suffer from poor design and are incredibly un-user friendly. No wonder Compass looked around the industry and feels the way they do.
On the topic of MLS’s, there are companies that have been operating for a decade or more attempting to consolidate MLS data feeds for technology developers like ourselves. Examples include WolfNet, CoreLogic, and ListHub. These companies gave rise to national search portals and significantly better home search apps that agents have been using before Compass was born. Firms such as Redfin, Keller Williams, and @Properties were also focused on internally developed technology before Compass found it’s way.
What Compass Is Right About
Steinberg is absolutely correct that the real estate industry has historically offered technology that lags most others by a generation. The company has pushed agents to understand and embrace technology many thought would displace them: artificial intelligence. Not long ago, the mention of AI brought immediate visions of robots answering phone calls and doling out advice throughout an open house tour.
Instead, Compass — and others, including Homes.com, Zillow, and RealScout — are embracing AI to automate the mundane tasks, introduce new intelligence and design into the experience, and allowing agents to differentiate themselves to clients. These include the use of predictive analytics (or how the market will receive a new listing, marketing ROI projections, home recommendations), among others.
Whether you agree or not, Compass will likely continue to be a media darling as capital flows throughout the industry at historic levels (we’re doing it right now). For the rest, it is more important now than ever to carve out distinguishing features of your brokerage and brand: continue to focus on developing strong relationships, weave yourself into the fabric of your local community through more community engagement (NOT just sending postcards), consider partnerships and acquisitions, grow your business by hiring, and obviously scale your business with technology.
But Let’s Not Give Too Much Credit
The real question should be, “What does it matter?” We have yet to see Compass’s tech on full display. From a business standpoint, technology enables firms to do more with less, while Compass has been spending cash acquiring brokerages across the country. It’s too early to declare its technology industry changing, especially, as Steinberg clearly states, the bar has been set incredibly low. Are clients better off with Compass? Is Compass better simply because they’re buying up already productive boutiques in high-traffic markets?
Compass appears to benefit from timing as much as intelligence. There’s no doubt that Compass has amassed a talented team of developers and thinkers to sit atop the new wave of tech development. When you’re the loudest one shouting in a room it’s easy to think you’re the only one in there.
Simply put, without it’s predecessors and forces in the industry, Compass wouldn’t have been able to exist. If it wasn’t for the internet which created the ability to collaborate, which created the possibility of national portals, which forced the industry to rethink their role and technology, which led to a slew of agent and client apps, which enabled the acceptance of the value-add of Compass’s end-to-end platform, consumers simply wouldn’t value Compass. It is important sometimes to look down and realize you’re standing on the shoulders of giants.