Michael Liebowitz and Guy Gal didn’t hold back on Compass’ planned takeover of Anywhere Real Estate, the push for commission clawbacks and the future of brokerage brands during a wide-ranging debate at The Real Deal’s Miami Real Estate Forum.
Both CEOs took jabs at the proposed deal that would turn the combined companies into a brokerage behemoth in a conversation moderated by TRD Editor in Chief Stuart Elliott on Wednesday.
Compass announced earlier this year that it plans to acquire Anywhere, the parent company for Corcoran, Sotheby’s International Realty, Coldwell Banker and Century 21, in an all-stock deal valued at $1.6 billion.
Douglas Elliman CEO Liebowitz suggested the $300 million in expected cost cuts that the merger would bring will push some agents to leave Compass and the Anywhere brands.
“These are very difficult businesses to integrate. The second you start taking things away from agents, there is no barrier to leave. You can just basically get up, leave and go to another firm, obviously have some clawbacks and all that,” said Liebowitz. “It’s just the reality of what happens anytime you do a deal. You have to realize you’re going to lose pieces of that deal after it’s done.”
Gal, founder and CEO of the white-label firm Side, jumped in to note that it is “incredibly hard” for a top agent to leave Compass today.
“We talk to Compass agents all the time who are looking to explore their options and then realize they really can’t, unless they’re coming out of pocket for a whole lot of money, to a point where we’ve had to set up what I affectionately refer to as the ‘Compass emancipation fund,’ where we’re advancing agents money at no interest,” Gal said.
Clawbacks are necessary, Liebowitz said.
“You can’t put all that energy and effort and dollars into the agents when they come on and not have that ability to do it,” he said.
Gal championed the agent side of the business. Side helps agents create their brokerage brand and provides them with back-end services. But if agents want to exit their deals with Side within two years of joining the company, then they have to pay Side back.
“I want to remind all the agents in this room … because you spend the whole career being indoctrinated and institutionalized to believe the complete opposite. But the truth at the end of the day is that you’re the value creator in this industry,” Gal said. “You wake up every morning, you connect invisible dots. You’re putting up your own time, your own money, your own opportunity, taking all the damn risk, and you are the ones that make it happen. And then you do a favor to all these other companies by slapping their logo on top of your name.”
Liebowitz, who became president and CEO of Elliman about a year ago, suggested his company’s $85 million sale of its property management arm to a subsidiary of Associa, one of the largest property management firms in the country, was timed right with Zohran Mamdani winning the mayoral election in New York.
“I’m not really being political, but we were in the property management business. It was a big business, and there’s a lot of issues with labor law in New York. I don’t think a lot of people realize that with that administration, it’s going to be more difficult,” Liebowitz said. “So it was really it kind of wind up between the Anywhere and Compass merger, between what was going on in New York, between getting a really top price. We really want to be a pure-play real estate brokerage firm, asset light.”
Gal and Liebowitz were also critical of the National Association of Realtors’ handling of the class action litigation centered around commission payments and buyer broker agreements.
Gal said the lawsuits “are a gift” to the industry.
“Just a year ago, you had a million agents out there that are averaging three closings a year pitching buyers. It’s free and no obligation, and that’s how they were getting deals done with actual buyers,” he said. “They can’t do that anymore… and that’s putting a lot of the larger brokerages at risk, because so much of their revenue and their income and their profits depend on those part time agents at very favorable splits to the house.”
Liebowitz said someone at NAR recently reached out to him to speak.
“Why the hell would I waste my time? You know what, I actually said, ‘I want the agenda before I get on the phone,’” he said. “I just want my money back from the settlement. We paid off all our debts, and now I would love to have that cash.”
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