Robert Reffkin, 40, was inspired to start Compass in 2012 by his real estate agent mother, Ruth.
Courtesy Compass
In an open letter addressed to House Speaker Nancy Pelosi and Republican Leader Kevin McCarthy, Compass Real Estate CEO Robert Reffkin asked Congress to support real estate agents, including the 15,000 who work for him.
“As you craft your recovery proposals, I ask that you not forget about the particular plight of real estate agents and other independent contractors,” wrote Reffkin. “Though often misunderstood and undervalued, real estate agents are entrepreneurs and small business owners who personify the American dream and represent the backbone of the U.S. economy.”
Reffkin’s letter is an acknowledgment—from one of the industry’s best known leaders—that the business of selling homes may be untenable in an age of social-distance and shelter-in-place orders. Industry groups representing airlines, restaurants, manufacturers and others have already requested more than $1 trillion in bailouts as the coronavirus pandemic has put the brakes on most economic activity.
“In a work from home world, with local governments putting on shelter-in-place policies, agents are unable to help sellers sell their homes or help buyers buy homes,” said Reffkin in an interview with Forbes. “When you can’t show property you can’t earn a living.”
In the San Francisco Bay Area, where Compass has about 85 offices, government restrictions already require residents to “shelter in place” and non-essential businesses to shut down. In Compass’ home state of New York ,Governor Andrew Cuomo has ordered non-essential businesses to cut their in-office workforce in half by Friday.
Reffkin, 40, was inspired to start Compass in 2012 by his real estate agent mother, Ruth. He’s raised $1.6 billion in venture capital funding to support his idea of a tech enabled real estate brokerage. In July 2019, SoftBank led a $370 million round that valued the company at $6 billion.
While Compass has about 2,000 employees, such as engineers, its 15,000 agents are independent contractors, paid via 1099. According to the National Association of Realtors, there are about 2 million real estate agents int he United States. The vast majority of them are not employees of the brokerages that hold their licences. That means agents only earn a commission if they sell a home and do not receive employer benefits such as health insurance. According to Reffkin, the median agent earns $48,100 before taxes and 63% of agents are over the age of 50.
With mortgage rates hitting a record low this month, real estate brokerages hoped common sense measures would allow the spring buying season to carry on. In early March, for instance, Seattle-based Redfin advised its agents to avoid shaking hands with customers and rolled out virtual home tours.
On Wednesday, Redfin CEO Glenn Kelman, who has been publishing regularly coronavirus updates, wrote in a blog post that “the housing market took a turn for the worse.” The same day, Redfin, which is publicly traded, filed paper work telling investors it is discounting its on-demand home buying product.
“We remain as committed as ever to giving homeowners the option of an instant offer, but only when we can know what a fair price for an offer would be,” said Kelman. “With whole cities shutting down nearly all commerce, no one can say what a fair price is right now, so we’re not making any instant offers.”