NRT’s parent company Realogy is suing Compass over “unfair business practices and illegal schemes to gain market share at all costs.”
Gorman encouraged everyone in the audience to read beyond the headlines and take a full look at the lawsuit. He said after reading it, people won’t wonder why Realogy is suing Compass, but rather why it took them so long to do so.
He specifically pointed to Realogy’s allegations that Compass CEO Robert Reffkin, “personally solicited Realogy to enter into an illegal price-fixing agreement where the two companies would agree to limit agent compensation and ‘compete on brand,’ but not on price.”
“He proposed the most anti-agent thing I’ve ever heard,” Gorman said.
Peters reminded Gorman that at this point, it’s just an allegation that Reffkin could not respond to. Gorman replied, in his dry-humor style, that he expects a judge will indeed make Reffkin respond to that allegation.
Peters challenged Gorman, saying that Compass’ behavior walked a fine line between an illegal practice and an aggressive tactic. She admitted that it’s possible the collegiality of the industry is being undermined by these tactics, but she wasn’t sure what Compass was doing — in allegedly offering agents big signing bonuses to grab agents and interfering and disparaging competitors — was actually illegal.
Gorman quipped back, “It’s a fine line between shopping and shoplifting,” drawing audience applause.
(Reffkin had briefly discussed the lawsuit earlier in the day during a panel discussion alongside Keller Williams CEO Josh Team. In that conversation, Reffkin told Peters he had respect and empathy for Realogy, calling them good people working for clients, trying to create the best company that they can. “There is a subset of brokerage firms whose margins are declining and agents are leaving,” Reffkin said. “That puts a lot of pressure on people.”)
Peters’ wide-ranging conversation with Gorman also touched on the venture capital money flowing into the industry, which Gorman admitted is contributing to the “hype machine.” He said, with the enormous amount of money that that certain companies are raising, it takes much longer to tell what’s real and what’s BS.
“You can be wrong for a really long time with a billion dollars,” Gorman said.
Still, that hype machine has hurt NRT, Gorman admitted. He said it feels like there’s more movement in the industry than at any other time.
“We have lost some great agents who are studying abroad with another firm and we look forward to welcoming them home,” Gorman said to more audience laughter.
Gorman also addressed the drop in Realogy’s stock, which is currently trading around the mid-$5 range, despite the brief spike the company saw with the Tuesday announcement of a new partnership with Amazon.
He said he doesn’t pay much attention to the actual stock price and that often people confuse market cap with enterprise value. Realogy’s market cap on Thursday was roughly $625 million — but Gorman said the company’s enterprise value was more like $4 billion.
“We’re currently more profitable than the next 15 companies combined,” Gorman said, noting that the market trades on future expectations and people are betting against the company’s ability to grow the bottom line in the future. He added that people are always expecting the biggest player in each industry to be displaced at the top and that could be what’s contributing to the stock decline.
Gorman also spoke briefly about Realogy’s new deal with Amazon, which resulted in the launch of TurnKey, a platform that connects consumers to Realogy agents through Amazon’s website. Those consumers get a closing gift based on the price of the home from Amazon. The cost of that gift is covered by Realogy and agents pay a roughly 30 percent referral fee back to Realogy for the leads.
Gorman said it’s a way for Realogy to get closer to the consumer, and it’s the type of partnership that a company of Realogy’s size can pull off. Realogy is often dinged for its size and ability to move quickly, but Gorman said that the partnership with Amazon is just the start.