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During his more than three decades in the real estate industry, Mark McLaughlin has seen it all.
The former Pacific Union International CEO joined Compass in 2018, in tandem with the acquisition of his brokerage, as president of Compass California. In 2021, he decided to step away from Compass to focus on his real estate advisory company, McLaughlin Ventures.
But two years later, the brokerage reeled him back in — in July, McLaughlin rejoined Compass as chief real estate strategist.
This week as Compass holds its annual RETREAT in San Diego, McLaughlin is imparting his wisdom to the brokerage’s agents in a timely session that will cover some of the biggest topics the industry faces today, including how the recent Sitzer | Burnett verdict, and the lawsuits that have followed it, stand to impact agents and real estate as a whole.
In a recent conversation with Inman, McLaughlin shared some of the highlights of what he will discuss with Compass agents. What follows is a lightly edited version of that conversation.
Inman: Your talk at the Compass RETREAT is called “The Future of the Industry and Client Representation,” which seems more timely now than ever. What are some of the key things you hope to speak about during that session?
Mark McLaughlin: Picture a word collage. It’s about a 40-minute presentation and the collage represents everything that’s going on in the industry from why clients hire real estate professionals to what’s the impact of proptech? What’s the impact of the lawsuits and DOJ? What’s the impact of the consumer direct nature of the financial services industry? You know, it’s like, all the pressure points that surround us as a business.
And then what I do for the audience is I manage through that noise. Because at the end of the day, a client hires a real estate professional because they trust them. And that element of trust is like a loyalty card that [the client] gives to Mark because she trusts me and my experience, my advice, my knowledge; my recommendations are why people pay what they do to trade real estate. And you have that loyalty card that you’ve given to me and only you can take it away.
So my job as a real estate professional is to make sure that I communicate with you, I guide you, I give you recommendations to maintain that trust. And everything else, to the real estate professional, is really just noise when you just narrow it down to one client at a time.
That’s a 40-minute presentation in 90 seconds.
Perfect. Just to build off of some of what you just said, are Compass agents coming to you for advice or recommendations now, in the wake of this Sitzer | Burnett decision that recently came down? Are agents nervous? What have you been hearing?
So we brought our observations of not the legal and not the financial impact of the Halloween verdict, but the practical nature of it. Like, what does it mean to you as a real estate professional in a practical way? And we had been working on this for probably 10 weeks, and the day the verdict was out, 48 hours later, we scheduled two different webinars. And I think we had somewhere in the neighborhood of 9,000 people on the first one and 4,000 on the second one.
So half of our audience, half of our client base (our real estate professionals) were completely briefed on what behaviorally is going to change within 48 hours of the verdict. And the behavioral changes are really comforting once you understand them. And so I think what we delivered was a sense of calm and a sense of confidence that everything’s gonna be okay.
I’m sure that was appreciated.
Yeah. So the things that are going to [change] … it’s going to become far more obvious to the consumers who are in the market that commissions are negotiable. Now, they’ve always been negotiable, but it’s just going to become relatively more obvious. For the consumers who aren’t in the market, they don’t even know what’s going on, right? There are only 8 million people a year — 4,000 trades this year and a person on each side — maybe there are only 6 million people out of 120 million homeowners that are even in the market right now. So that’s going to be item No. 1, is that for those in the market, they’re going to know that their fees are negotiable.
The second thing that’s going to happen is that the transparency into who paid what is going to be much more pronounced on the closing statement. And what that means on a practical basis is — let’s say you hired me to sell your home. And my brother grew up with you and he’s a real estate professional, and he referred you to me. Well, on the closing statement, there’s gonna be a fee paid to me at Compass and there’s going to be a fee paid to him at Coldwell Banker (or his own brokerage) and then what Compass got paid and what I got paid. But if Zillow generated a lead to me to sell your house, Zillow is going to be on the closing statement. And the consumer is going to turn around and say, “What does Zillow have to do with this?”
So all the lead gen companies that are in the business, and nobody really knows this, are going to be evident to the consumer now. Is the consumer going to get to object at that point? No. If I’m your real estate professional, and I got you as a lead today and my first call to you is, ‘Hey, I want to get to know you and help show you some property’ and things like that, am I gonna say to you at that point in time, “Oh, by the way, I got my lead from Zillow, and now I’m gonna pay them 35 percent after you closed the deal?” No, that would be so awkward, right? Now, it might come to the time where, “Okay, we’re gonna make an offer and you just need to know that I was referred to you by Zillow, or by my brother, and if the deal does close, you’re going to see that he’s going to get paid.” That might be a little less awkward.
And then the last thing that I hope doesn’t happen is, I hope we don’t bifurcate the fees to the point that the buyer has to pay their own fees, because that would severely compromise the first-time homebuyer.
Yes, it would definitely be much more challenging for them.
Especially with some of the really incredible government programs that are out there, like the VA and FHA, and all those. Some of those consumers are putting 3 percent and 5 percent down. And if they had to come out of pocket with another 2.5 percent, I think the deal comes off the rails. So I hope that doesn’t happen.
Yeah. So when you think about 2024 and all of these things that agents have to face — and even more things that we haven’t discussed already — what do you think the biggest challenge will be for agents this year?
I think ’24 is going to be a year much like ’23, which are years like 2009 and 2010 in terms of units sold, and it’s been a tough year. I think next year will be tough as well. We might see some attrition in the ranks of real estate professionals in the United States. But, when I talk to agents and I say, “Are you having your best year ever or has it been one of your more challenging?” they say, “Oh, my God, this has been so challenging.” And I put up a graph of the number of homes sold in the United States, and it’s down to 2009. We’re back in 2009. And nobody really wants to go back there.
The difference is that housing prices have remained really strong. I don’t know what the national average is [right now], but I’ll bet it’s a 2 percent to 4 percent appreciation once we get through 2023.
Is there anything in particular you’re looking forward to at this year’s RETREAT?
I’ve been down here since noon yesterday, so we’ve had 24 hours. We’ve had a lot of different working sessions with smaller groups, and energy, it’s high. The art of collaboration is so important in our business, to sit with someone of your peer group from across the country or something, exchange ideas and notes. Everybody gets pretty fired up and that drives camaraderie and momentum and things like that. Robert’s big speech is in about an hour or something like that. So that’s coming up and that’ll really kick off the main event for today, tonight and tomorrow. But it’s more positive than the headlines of the news stories will tell you.
Good. Thinking again ahead to 2024, do you have any predictions about what we’ll see in the market?
Unless we see a change in interest rates of another 100 basis points from what’s happened in the last two weeks, I think the market units [of existing home sales] will probably remain in the 4.2 to 4.5 range. Back end of ’24 is when the economists suggest that the Fed [will start] dropping and then maybe we get rates down to 200 basis points, which would make a huge difference.
Those are the things that are out of our control. What is within our control is how we’re engaging with our people to drive share. All our programs and even our technology stack is improving the productivity of our people, and especially the AI and ChatGPT components are fairly unique to Compass. We put time back in people’s schedules when they can redirect [that time] into client relationships, which goes back to that trust issue we talked about at the beginning.