The superstar real-estate broker Jason Oppenheim railed against an embattled rival firm, Compass, saying the company "destroyed the brokerage model for the entire industry" and faces a "grim reality."
"There's no fixing Compass," Oppenheim, best known from the Netflix reality show "Selling Sunset," told the real-estate news outlet Inman.
Oppenheim closed over $429 million in sales last year as the head of his own brokerage, The Oppenheim Group, a Los Angeles-based firm that his great-great-grandfather founded in 1889.
Oppenheim's critique centers on "splits," the slice that a brokerage takes from an agent's commission each time they buy or sell a house on a client's behalf. Brokerages use that money for everything from shared office space to marketing resources.
Splits can range from 50-50 all the way up to 90-10, with agents keeping 90% of a commission — which is usually 3% of a home's sale price — and giving their firm 10%.
Oppenheim said the splits at Compass are unsustainably generous, in the ballpark of 90-10, generating too little revenue for the brokerage to function profitably.
Former Compass agents confirmed in a lawsuit they were offered 90-10 splits, and The Wall Street Journal reported that some offer letters allowed brokers to keep 100% of their commissions on the first eight deals.
"If you have a broken business model, it doesn't matter how many agents you have. It's irrelevant. 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," Oppenheimer told Inman.
Compass, meanwhile, told Insider it doesn't anticipate changing its split policies.
"We are planning our cost structure to be profitable in 2023, even with a 25 percent decline in the market, with no change in our split policy. The market responded very favorably and multiple Wall Street analysts project Compass will be profitable without any change to split policies," a Compass spokesperson said in an emailed statement to Insider.
In a call with Insider, Oppenheim broke down what he considers a more "sustainable and successful" split.
"The most successful agents at 80-20, and the newer agents at 60-40. Then most of the agents will be at 70-30," he told Insider. He declined to share the range of splits for his agents at The Oppenheim Group.
Oppenheim also believes that Compass has dragged down the rest of the industry.
"There are other brokerages out there offering 90-10 and 85-15 splits because they had to in order to compete with Compass," Oppenheim told Insider.
Compass was founded in 2012 by Robert Reffkin, who had never worked in real estate before, and two other entrepreneurs, Ori Allon and Avi Dorfman. The firm rose to become the top brokerage in the US in sales volume, selling $251 billion in real estate in 2021. But after interest rates went up earlier this year, the real-estate market slowed down dramatically, leaving many agents — and by extention, their brokerages — earning fewer commissions.
Compass, which went public in April 2021, has never turned a profit. It reported a $154 million loss in the third quarter. Its stock price has steadily plunged from $18 the day of the IPO to $2.69 on November 29. Since June, Compass has laid off more than 1,000 people, and executives announced $320 million in cost-cutting.
A few superagents have fled the brokerage, though Compass touted a 15% increase in its number of agents in the third quarter, saying it employs more than 13,000 agents in total.
Oppeheim told Insider he currently employs "about 40" agents.
Oppenheim said in his Inman interview that at one point he hoped Compass would "buy me up," but the brokerage said it never responded to his inquiry.
"Compass doesn't focus on other companies or reality TV, we focus on making our agents more successful," a Compass spokesperson said in an email. "Compass did not respond to Jason's inquiries because he would not have been a culture fit and therefore we did not want to waste his time."
Oppenheim told Insider he's not rooting for the downfall of Compass. "I hope they succeed, but time will tell," he said in a phone interview.