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Oppenheim: ‘There’s no fixing Compass it’s unfixable.”

Jason Oppenheim, who runs real estate firm The Oppenheim Group and stars in Netflix’s Selling Sunset, told Inman that “there’s no fixing Compass. It’s unfixable.”

Compass Real Estate Unfixable Business Model

The “unfixable” model he’s most notably concerned with is the real estate firm’s generous “splits” — which refers to the ratio of commission from sales kept by agents versus what portion goes back to the brokerage firm. Oppenheim called Compass’ splits “unsustainable,” as several of the firm’s agents keep about 90% of the commission — meaning only 10% goes back to the firm, which Oppenheim believes is too little for the brokerage to be profitable.”

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Jason Oppenheim – Real Estate

“If you are making televisions for $100 a piece, and you’re selling them for $99 a piece, it doesn’t matter that you’re making more televisions, it doesn’t fix your business model,” Oppenheim told Inman.

Oppenheim then shared with Insider what he believes to be a more successful split model: Superstar agents get 80% of the commission, newer agents 60% and the majority of agents 70%. However, he declined to inform the outlet of the split ratio at his own firm, The Oppenheim Group.

Oppenheim is speaking out about Compass’ model because of the impact it’s had on the rest of the industry. Other brokerages have had to adopt higher split ratios just to compete with the rival firm.

Meanwhile, Compass reported $154 million in losses in the third quarter of 2022.

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Despite his criticism, Oppenheim made it clear to Insider that he’s not rooting for the demise of the competing firm. “I hope they succeed, but time will tell,” he told the outlet.

Source: Entrepreneur

My real estate Compass thoughts

Compass stock today is at $2.00 a share, I wouldn’t be surprised if someday Compass is eventually bought out (takeover).

What’s interesting, that wasn’t mentioned in this article, is that Jason Oppenheim shorted Compass stock near its peak and apparently made a fortune.

As a Boston real estate owner/broker, I can’t see how giving agents such large commission splits could be sustainable. They spend enormous amount of money on marketing and prime retail offices with high rents to me seems unsustainable. So it is no surprise to me that these brokerages are headed toward either bankruptcy or very, very difficult times and probably little, if any, profitability for the foreseeable future.

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