Ryan McKeveny: That’s very helpful. And apologies if I missed this one, I think last quarter, you talked about expecting to launch the first phase of Compass Client Dashboard in ‘24. Any updates in that regard? Thank you.
Robert Reffkin: Yes. So, we are launching our pre-release test in Q4. And we are very excited. Thanks for asking about it. I believe it’s going to be a transformational moment for the company, for agents for sure. It’s going to give them a huge edge. And it will be great for clients. It will be the first thing, 95% of what we built, you can’t go to compass.com and see as a consumer, buyer, seller. It’s all for agents. This will be something that the public will be able to see. The problem is solved is that agents are almost too good at their job. They hide the clients from their pain because you are trying not to stress them out. And there is so much going on. And so at the end of a transaction, does the buyer or seller, do they remember all that the agent has done for them.
Do they remember all the phone calls, all the emails, all the texts, how quickly the agent respond, how early in the morning, how late at night. Do they remember how many evaluation reports, CMAs they created. Do they remember how many Compass collections they had, how many tours they took them on, how many open houses they performed, how many people came to those open houses they had to negotiate with, how many different people they had to schedule appointments with, how many people they negotiated on it that they negotiated for on their behalf. They don’t even tell them all the time they are negotiating, trying to make things happen. And so this, what this will do is it will put the majority of those events in a beautiful client dashboard that will almost be like a visible, visual receipt of all that the agent has done for them.
There will be three different buckets. One, the entire, for buyers and second one for sellers. But the first bucket, we call it timelines and tasks. So, the entire process timeline, remember we talked earlier about agents are actually project managers, managing a highly complex process across multiple months, across upwards of a dozen different people. The entire process will be there in a Gantt chart form. Just like when merger and investment bankers meet with people, when I was in investment banking, we had the Gantt chart, the entire process, and they would coordinate the lawyers and the accountants. That will all be visual in this place with all the tasks and who does what. The second are the documents. So, all the documents from the beginning, middle to the end of the transaction, living there in one place.
Lastly, it will be all of the things that the agent is currently sending to them by email will be living in there. And that would be all the digital tour sheets, the CMAs, the Compass collections, the listing insights, the open house report and feedback and much more. But we are really excited by that. Again, I believe it will give Compass agents a huge edge in helping to communicate their value. And I believe it’s the kind of thing that when buyers and sellers at the end of the transaction, that for them, it will be the kind of thing that will encourage them to even more refer our agents to their friends.
Ryan McKeveny: It’s great to hear. Thank you, Robert.
Operator: Your next question comes from the line of Ben Black of Deutsche Bank. Please go ahead.
Unidentified Analyst: Hi, this is Jeff Siner [ph] on for Ben. Thanks for taking my question. Can you just kind of give an update on how you are thinking on the commission split trends over the immediate to sort of long-term? Just given some of the moving parts, like recent broker acquisitions, the principal agent growth, and then maybe sort of what’s coming down the pipe with the regulatory front in the NAR settlement, to the extent maybe that that’s increased, you talked about increased training needs or increased red tape, any thoughts on how that could may or may not have an impact on kind of the commission splits going forward?
Robert Reffkin: I will let Kalani answer more broadly, but I do believe that brokerage firms will be more valuable to agents because of the NAR settlement than before. And here is why. Historically, almost every agent has a listing presentation, okay. And again, I am an investment banker. I meet with you. I am pitching myself. I am pitching the company. What can I do for you, what can the company do for you, or the company has international, blah, blah, our network, all that stuff and relationships everywhere. And then you go into the valuation and here is the process timeline. And the agents have a listing presentation where when you go with a seller, they say, here is why you want to work with me. I have been in the business for 10 years.
I do all of this in your neighborhood. Here is my team. Then they go to the brokerage. And the brokerage for a seller, we have international exposure. At Compass, we have more, we are number one in more top markets than any other brokerage firm in the country. And we have, for you as a seller, we have listing insights. We have open house app to give your feedback. We have collections for valuations and CMAs and all these different tools. We have Compass Concierge. We can front load the cost of staging to make your home move-in ready. So, that because people today want things, they want to pick up their bags from New York, go to Dallas and drop them in. They don’t want to renovate homes. And so they also need that. They don’t have vision to see what the space will look like, so you stage it.
So, it looks elegant. And then it will sell for more money in less time. And so those are some examples of in that listing presentation, how you talk about the company, and those words of Compass Concierge and the tools and the national network. But when it comes to buyers, historically, I would say less than 5% of agents, much less, less than 1% of agents have a presentation for buyers. I believe the reason why that is, is because historically agents weren’t asking for buyers to sign as much the compensation agreement upfront as they were, of course, with sellers. That’s where the money is. But now, that’s moving to buyers as well with the buyer representation agreement, where it will include compensation in all of these agreements. And so that is making agents feel like they need to have a buyer presentation that says, here is where you want to work with me and here is where I work with my company.
And that’s why I referenced earlier, well, you want to work with me and my company because, well, my company is a low inventory environment and Compass has access to more unique inventory than almost any other brokerage firm because of Compass Coming Soon and Compass Private Exclusives. Oh, I can also help you. It’s a highly complicated process. And a lot of almost all the other brokerage firms, they are just going to have to send you links of listings from different sites. It will be on your text message in WhatsApp. It will be very complicated here. Everything will be in Compass Collections. They will make it really simple for you. And by the way, if you want your spouse or your daughter or your mom or dad to be on it, everyone could be on and look at it at the exact same time, you could all comment.
It’s like a Pinterest board for the buyer process. And of course, digital tour sheets, so you know where you are going. It’s on your phone. After you have gone, it’s all recorded in the digital tour sheet and some of the other tools like client dashboard that are coming soon. And so I say all that to highlight that brokerages will be more valuable to agents going forward because you will need them not just for the seller conversation, but for the buyer conversation. And because of that, I think it will empower brokerages that have a good value proposition to buyers. It will empower them to charge a fair split. I will pass on to Kalani.
Kalani Reelitz: Yes, well said, Robert. I think long-term, for all the reasons Robert said, I do think as a brokerage, we will provide more and more value to agents. I think you should and we do expect margin over time to increase for all the reasons Robert mentioned, plus the mix as we continue to recruit the right set of agents and balance that portfolio, as well as our title and escrow and our overall integrated services continue to grow. We think there is a tremendous opportunity there. So, I think long-term, we see lots of tailwinds. I think as we think about short-term, we are going to kind of see headwinds and tailwinds, pretty cross each other out a little bit in the short-term, right. But the headwinds for us in from a rate perspective in ‘24 is going to be M&A.
So, the acquisitions that we did in September and including ladder bloom [ph] will have some impact. If you think about the decline this quarter, two-thirds of it was M&A that will continue. And then I think we do see some headwinds on just geographic mix. For example, the other third, the majority of the remaining drag on year-over-year is geographic mix really our East Coast, New York becoming a slightly smaller part of our portfolio and offsetting some of the favorable margins there. So, I think short-term, we can expect kind of headwinds and tailwinds cross each other out, but I definitely think over time and expect over time for margins to be accretive to us for all of those reasons as we drive more value for our agents.
Unidentified Analyst: Great. That was really helpful. Maybe quickly, just in a similar vein, given all the benefits, Robert, that you highlighted and maybe helping agent to navigate this regulatory landscape. And I know, obviously you guys have been acquisitive in the recent times. Do you think this regulation could almost be a drive of like industry consolidation going forward around the brokers who maybe have the capabilities or the ability to offer and provide that platform for agents to kind of succeed and sort of under the new rules?
Robert Reffkin: Yes, it’s hard for me to see a scenario where in the years to come, there is not near record levels of industry consolidation.
Unidentified Analyst: Yes, really helpful. Thank you.
Operator: And we have a follow-up question from Soham Bhonsle of BTIG. Please go ahead.
Soham Bhonsle: Hey guys. This is less of a question, more just something that we have been thinking about. And it’s around the idea that, look, historically, brokers, when they had a listing, it would go on the MLS, and then it would then get syndicated to the portals out there. But as we sort of go forward, I mean the power, I am just trying to think about the shift in power here, because at the end of the day, the listing sits with the brokerage and you guys can decide sort of where you want to put that. And if the MLS, debatable, right, what’s the value there long-term, right? Will agents continue to go there? I don’t know, maybe you have a view there, but I am just curious on your thoughts around, you touched on Robert’s sort of off-market listings and maybe private listing services and things like that.
So, I am curious, like, where do you see that going? Is there an opportunity here for you to maybe even monetize some of the listings in a different way than you ever did before? So, just curious, that’s an open-ended question.
Robert Reffkin: Yes. So, look, let me start by sharing why Private Exclusives are valuable for some sellers as well as coming soon. So, Private Exclusives mean that they are off-market, not searchable in the public domain. One of the reasons why is days on market is the killer of value. Forcing sellers to show price drop history is the killer of value, because if you are a seller, you wanted to aspirationally list it for a number. And then you have, the buyers aren’t there. You do a price drop. Buyers aren’t there doing the price drop, then the sharks come out. And so we have a fiduciary responsibility to our sellers to help them maximize value. And Private Exclusives allow you to test the market privately as opposed to publicly.
