Compass is a real estate startup that was created to alleviate the price and hassle of house hunting.
Things are even worse in New York City, where Compass was founded six years ago,because broker fees are commonplace even on rental apartments. An established, complacent industry that had grown rich by extracting fees while delivering frustrating results to consumers would seem like a fat target for disruption.
Compass’ idea was to pay its brokers—whom it called “neighborhood specialists”—flat salaries and bonuses based on customer satisfaction, rather than per transaction commissions. Listings would appear on Compass’ proprietary app.
But that vision of cutting out traditionally compensated intermediaries collided with the reality of the real estate industry. When it came to sales, Compass encountered a business where it’s almost impossible to dislodge traditional brokers.
Traditional agents weren’t too enthused about working on deals with Compass on the other side of the transaction, and it’s not surprising that they would be hostile to an upstart with the end-goal of upending the way they got paid. And in the short term, Compass simply couldn’t pay its “neighborhood specialists” as much as a traditional agent could make elsewhere, and so it was difficult to recruit agents, let alone make them work at the pace and intensity of commission-driven agents.
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