by Mary Mancera | Aug 13, 2024 | Industry, News Feed
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There’s a lot of confusion around the particulars of the National Association of Realtors (NAR) commission lawsuit settlement and the resulting business practice changes. Compliance expert Summer Goralik is here to help clear up some of the looming questions so that we can move forward together as an industry.
This week’s question
NAR direction seems to be different than state-level associations, such as C.A.R. There seems to be utter confusion around what is required per the settlement and what the Department of Justice (DOJ) wants, can NAR and/or C.A.R. leadership not go directly to the DOJ to hammer this out rather than leaving the entire industry questioning every move? Is it possible to share/market a seller wanting to offer a concession? The messaging here is so mixed…
Compliance expert answer
This question resonates deeply, as I have been grappling with the same concerns. As we approach Aug. 17, the effective date for practice changes, we should have a clear path forward in place. In other words, our ducks should be lined up neatly in a row by now. Unfortunately, the closer we get, the more uncertainty seems to arise.
The initial shock of the new practice changes has been absorbed conceptually, but the practical implementation remains unresolved. The challenge lies in addressing the needs of a multilayered audience: Practitioners must comply with the NAR’s proposed settlement, satisfy the DOJ and appease consumers.
Additionally, we must consider private attorneys who may pursue litigation against licensees on behalf of the public.
To address this question about disjointed guidance between NAR, state-level associations and the DOJ, which highlights the challenges practitioners are striving to resolve, let’s review the available information. This response will focus on cooperative compensation and concessions, as these are areas where the messaging has become unclear.
Cooperative compensation
First, NAR’s frequently asked questions regarding the nationwide class action settlement state that real estate brokers may still engage in cooperative compensation with other brokers, but the multiple listing service (MLS) will no longer advertise or facilitate such offers.
This marks a significant shift from the traditional method of handling compensation offers through the MLS. However, NAR has clarified that cooperative compensation arrangements are still permissible under the settlement but must occur outside the MLS.
The confusion arises because some associations and the forms they have created for their members to help implement these changes are inconsistent. Initially, it seemed that listing and buyer representation agreements would simply exclude provisions related to the MLS and cooperative compensation.
But some associations, like the California Association of Realtors, have now removed any broker-to-broker offers of compensation provisions in such agreements altogether. Notably, it’s not just associations making these changes; some brokerages are creating their own forms for agents to use and have chosen an approach where cooperative compensation will not be practiced.
This raises a fundamental question and highlights an obvious inconsistency: If cooperative compensation is still allowed, why are some states abandoning it entirely? Why do some industry members claim that cooperative compensation may continue while others warn of the risks of maintaining past practices?
The answer likely points to the DOJ’s commentary on cooperative compensation and its efforts to decouple commissions, as well as the core issues of certain class action lawsuits across the country. This creates an undeniable conflict or disconnect that thoughtful practitioners are recognizing and attempting to resolve.
What should you do?
Broadly speaking, exercise caution. As a real estate compliance consultant, I always advise a conservative strategy. In this case, conduct thorough research, and take incremental steps.
It is crucial for real estate professionals to monitor developments in their local jurisdictions. One moment you think you know what to expect with proposed forms and MLS portal changes, and the next, a sudden shift in momentum causes further changes. The real estate industry, along with the homebuying and homeselling public, will be closely watching how this all unfolds.
If you are a broker, consult with legal counsel or experts familiar with the NAR settlement, state law in your practice area, and the DOJ’s statements of interest in various court cases. Vet any forms you plan to use, perhaps cross-checking them against the Consumer Federation of America’s guidance on home buying and home selling contracts. Ensure you understand these forms thoroughly and address any inconsistencies. Don’t hesitate to question your local boards, their leadership, and legal counsel for clarity. Once you have a firm grip on how to proceed, train your agents accordingly.
If you are an agent, speak to your broker and their trusted advisors about the forms you should use, which should hopefully be fully vetted. Seek extensive training from your responsible broker, local association or other organizations.
Read the proposed listing and representation agreements (along with any new compensation disclosures, which seem to be on the rise), and ask questions until you fully understand them and can confidently explain them to clients.
Concessions
The NAR settlement does not prohibit the advertisement of seller concessions on the MLS, provided these concessions are not restricted to, or contingent upon, the retention of or payment to a cooperating broker, buyer broker or other buyer representative. This also means that discretion and policy regarding the advertisement of concessions will be managed by individual MLSs.
As a result, some MLSs may choose to include concession fields in their listing portals, while others may not.
For example, the California Regional MLS initially decided to add seller concession fields to its platforms, allowing listing brokers to specify the amount a seller is willing to offer. But it has since revised this option. The concession field will now only include a simple “yes/no” question about whether the seller is willing to consider concessions.
What should you do?
Investigate how your local MLS (or any MLSs that you will be using) handles concessions, and be sure to read and understand the rules regarding these fields. Remember, even if these fields exist, they don’t have to be used.
If you are an agent, let’s not forget the advice and policy of your responsible broker. It’s possible that they might endorse a direction where agents should not be entering any concession information into the MLS, and allowing discussions about such details to occur naturally as the offer process transpires and terms are negotiated between the parties.
Furthermore, as an agent representing a seller, you must follow your seller’s instructions and always put their interests first. Ultimately, you will discuss these options with your clients and proceed according to their wishes.
Stay vigilant
Even if you don’t have all of your ducks in a row, the last thing you want to be is a sitting duck. Be an active participant in your business, especially during this period of critical change. Stay proactive and informed. Don’t just accept forms without understanding them and their compliance with the NAR settlement.
Don’t just use concession fields on the MLS because they are available. Call out and address any disconnects now, as incongruencies between what is required and what is practiced can lead to liability. Those who proactively consider potential problems and mitigate them through preparation and risk management will better serve their clients.
As time progresses, we may see the impact of these practice changes through further modifications to industry forms (so stay up-to-date), new litigation, DOJ commentary and enforcement actions, and potentially new state laws. Agents and brokers will need to navigate these changes post-Aug. 17 with a strong foundation of knowledge, education, training, vigilance and reliance on credible resources.
Equally important, pay attention to the war stories from colleagues in the field. I have always emphasized the importance of learning from others’ mistakes, as sometimes it can provide invaluable and cost-free legal advice.
Editor’s note: The opinions, suggestions or recommendations contained in this discussion are based on Summer Goralik’s experience working for, and knowledge of the laws enforced by, the California Department of Real Estate and must not be considered legal advice or relied upon as legal advice. You should consult with your brokerage, and/or appropriate legal counsel in your jurisdiction, for further clarification.
Summer Goralik is a real estate compliance consultant and former CA DRE Investigator in Huntington Beach, California. Connect with her on LinkedIn.
by Kevin Van Eck | Aug 13, 2024 | Industry, News Feed
There are a variety of reasons for making this shift.
Due to the commission litigation, “commission” and “compensation” have become hot-button words.
Sellers have repeatedly heard through the media that they only need to pay their half of the commission. Using the word “fee” opens up an infinite number of possibilities for how the sellers may choose to help the buyer — for example, a credit to repair the roof or to provide the buyer with an interest rate buy-down.
Buyers are more likely to push back on paying their own “commissions” because they may not be able to afford it, haven’t had to do so in the past or simply don’t like the idea.
Using the word “fee,” also encompasses the fee for service (menu of services) business model where the buyer may elect to pay their agent for completing specific transaction tasks, such as locating and showing the property, negotiating the offer, and/or handling transaction problems required to close the deal.
The Department of Justice (DOJ) and the Consumer Federation of America (CFA) want our forms to be “consumer-focused” rather than “Realtor-focused”
The new eXp Buyer-Broker Representation Agreement offers one possible way to address this concern. This document uses the term “broker fee” throughout the agreement.
It also references how the fee will be “paid,” i.e., not how the broker will be “compensated.” In fact, the word “compensation” is used only twice in the agreement:
COLLECTING BROKER FEE FROM THE SELLER:
Credit to Buyer, at Closing. Buyer may choose to negotiate that the Broker Fee be paid, in whole or in part, by the seller, through a seller-credit to Buyer, at closing. At Buyer’s instruction, Broker will write this request into Buyer’s offer to purchase the Property.
AND
Direct Seller-to Broker Compensation: Buyer authorizes Broker (eXp) to request that the Broker Fee be paid, in whole or in part, by the seller, to Broker (eXp), at closing. Any such arrangement will be memorialized in a separate compensation agreement as between the seller and Broker (eXp). Buyer understands that Broker (eXp) cannot communicate with the seller without first receiving the seller’s broker’s permission to do so.
Use ‘terms and/or conditions,’ not ‘concessions’
For decades, there has been a field in most purchase contracts where agents can write in additional terms or conditions their buyers want, such as “repairing the roof,” “buying down the buyer’s interest rate,” or “including the dining room chandelier in the purchase price.”
by Weichert Real Estate Affiliates Inc. | Aug 13, 2024 | Industry, News Feed
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Are you worried about doing fewer deals as a result of the National Association of Realtors (NAR) commission suit settlement and resulting policy changes? Many agents are. There are two ways to earn more income: sell more homes or sell higher price point homes. Almost every sales program focuses on selling more homes, but few teach how to sell more expensive homes.
After 33 years in real estate, I have learned what works and doesn’t work with affluent buyers and sellers. There is a misconception that luxury buyers or sellers are more sophisticated than your average client.
They are usually very good at one thing, which makes them successful, whether as attorneys, doctors or business owners, but they are typically less knowledgeable about real estate.
Also, because most affluent buyers are all cash, you don’t need to worry about financing issues or dealing with an appraiser who values a property under the asking price.
Have you ever wondered why some agents in your market sell more expensive homes? Have you been intimidated by working with more affluent clients, buying or selling $1 million, $2 million, or $5 million-plus homes? Below are some strategies for increasing your average sales price: getting higher-priced listings and buyers and increasing your commissions.
1. Define luxury in your market
What is luxury in your market? Many Realtors think luxury is multimillion-dollar homes. It can be, but it is best defined as the 10 percent most expensive homes in the market. For some markets, that could be $500,000; for others, it could be $20 million.
2. Make sure you look the part
Clothes, car, marketing materials. You need to be consistent so that whenever you are out, you look high-end but don’t overdress for your area.
For example, in Malibu, you would never wear a sports coat or a tie.
Things you would want to think about in Malibu are:
- Does your business card and logo match a luxury brand?
- Are your marketing and promotional pieces consistent with the clients you are trying to attract?
- Do your A-frame open house or real estate signs need a refresh or rebranding?
Visit higher-end open houses. Analyze the listing agents’ marketing materials, appearance and how they show the home. Does your attire match the picture on your website?
3. Consider your title
Everything. Most likely, your title is buyer’s agent, sales associate or some variation, especially if you are on a team. If you are on a team, check with your team leader if you can start using the sales partner title. High-net-worth individuals will be more comfortable with a sales partner, even if someone may be younger or with less experience.
4. Know your luxury market data. Take a luxury seminar or negotiation class
This is one of the most important lessons: Luxury clients need your expertise more than you think.
Know your luxury market, including average price, median, days on the market and cost per foot. Always use annualized data rather than monthly since with fewer transactions, especially at higher price points, using smaller amounts of data can skew your numbers.
Each area is very localized, so knowing what north or south of specific neighborhoods commands more money is critical.
Many affluent buyers and sellers have business managers, accountants, attorneys and handlers, whose main job is to protect their clients (and justify their worth), so they expect you to be very knowledgeable in real estate data and trends.
Research your central city as well as any neighboring cities you work in:
- What did the most expensive home sell for in 2021, 2022, 2023, 2024?
- How many homes sold in the top 10 percent for 2021, 2022, 2023, 2024?
- Look for any trends or unusual changes regarding prices or the number of sales.
Take an advanced negotiation class, such as Harvard Business School, the Karrass Negotiation Seminars, or RENE (Real Estate Negotiation Expert) classes from the National Association of Realtors, or a luxury real estate seminar or real estate designation (Luxury Home Marketing Specialist).
The Unsold Inventory Index is the best way to gauge a market. It will tell you if you are in a seller’s or a buyer’s market. To calculate it, you take the existing inventory and divide it by the number of homes that sold in the previous month.
Over five months is considered a buyer’s market, and under five months is a seller’s market. We have seen as low as one month and as high as 20 months. This is an excellent tool because it’s not uncommon in the same area to be in a seller’s market for entry-level price points (bottom 10-20 percent) while being in a buyer’s market for the luxury market.
In some markets, higher-end homes tend to sell off-market (due to the seller’s privacy concerns and not wanting open houses or a sign in front), so checking the public records or working with your title representative to access this information is essential.
Keep a list of off-market home sales to gain an even better understanding of the luxury market. This will also impress the luxury clients’ attorneys and business managers.
5. Know what your USP (unique selling points) are
What is your secret sauce? Something you do better than anyone else in your market. This will take time to figure out, and it’s even harder to articulate when working with buyers.
A few things to consider:
- Do you have a driver to pick up your out-of-town buyers from the airport?
- Do you have a large database of off-market homes?
- When showing them homes, do you find out what food or drink they prefer to have on hand?
- Are there any schools where you can set up tours for them?
If they have kids, arrange for them to meet other families with similar-age kids. If it is raining, bring extra umbrellas. Bring sandwiches and drinks in a cooler if you are tight on time. Preview all homes so there are no surprises. Take CubiCasa floorplans of the houses so you can show them the layout of each house.
6. Leverage the media
This is the most underutilized area yet has the highest return on investment. Start writing articles in the local paper and online on the most expensive home to sell in your area. You don’t have to be the one who sold it.
Start writing a blog about the top three homes each month, what they sell for, including where they sold, how long they were on the market and any key facts. Eventually, you will be viewed as the expert in the luxury space.
Research and create a spreadsheet of the real estate writers from your local paper, favorite real estate podcasts or radio shows. Set up coffee or Zoom dates with them to discuss what articles or topics they want. Think of creative and timely articles that would be of interest to their readers.
Start writing a few articles. Dictate, use ChatGPT for planning, or hire someone to help you write them.
Here are a few tips. When the media calls, answer them ASAP. Treat the media like a hot lead. They usually have very short deadlines. The ones they reach first get the interview.
Cultivate media relationships. Be a contrarian thinker. They love unique perspectives, like why spring is not the best time to sell your home. Use data whenever possible.
7. Meet luxury buyers and sellers
Sponsor or attend luxury events. Join a high-end networking group, clubs and charity boards. Start charitable giving programs. Think about getting involved with polo, equestrian, car shows, whiskey clubs, gourmet groups, boats, wine, cigars, golf or any place where people with money may congregate. You must have a genuine interest in the luxury event so it is authentic.
Review your door-knocking fliers. Are they seller-focused or more about you and your company? For high-end sellers, focus on topics like putting their home in a living trust, accessing HELOCs (home equity lines of credit), or helping them renegotiate with the county assessor to lower their property taxes.
Join a high-end networking group (comprised of attorneys and finance), ideally with minimum (high) income levels.
Consider paying for coffee for the next 30 people in line at the local Starbucks or a popular coffee shop in the affluent area you are trying to break into. Then, sit at a table with something identifying you in real estate, and ask the manager to let people know you bought their coffee. This is a relatively inexpensive way to meet people.
Try contacting and befriending Hotel Concierges, or if there are any guard-gated communities around you, befriend the guards. Bring them movie passes and coffee gift certificates in exchange for them passing out your cards.
8. Strategies to increase your average sales price
Aim to increase your average sales price by 20 percent and then strategize how to achieve it.
Use luxury marketing companies like Leverage RE to market your high-end listings. They advertise weekly in The Wall Street Journal, The Washington Post, Robb Report, Financial Times, Mansion Global, Barron’s, and Juwai.com (China’s largest MLS). They are the best investment for marketing high-end properties.
9. Confidence and believe in yourself
Do you have what it takes (confidence) to sell a high-end property or represent a celebrity or high-net-worth individual? You must have confidence in yourself, as successful people want confident people.
I’m not referring to being cocky or arrogant but knowing your data and being an expert with the relevant sales, knowing off-market properties and ultimately doing what is in the client’s best interest. That may be telling them to refrain from writing on a property that may be overpriced, hard to resell, or has some other issue.
Anthony Marguleas is the founder of Amalfi Estates. Connect with him at Instagram and LinkedIn.
by Bess Freedman | Aug 13, 2024 | Industry, News Feed
As we face change as an industry, it’s crucial to be able to face that change with confidence in order to be able to thrive, broker Joseph Santini writes. Here’s how to build a tolerance for change.
Inman Connect is moving from Las Vegas to San Diego in 2025, and it’ll be bigger, better and bolder than ever before. Join us for Inman Connect San Diego on July 30-Aug. 1, 2025 with the brightest minds in real estate to shape the future of the industry. Reserve your spot today for an exclusive discount.
There’s a lot going on in our industry right now, but as always, we know that the only constant in business and in life is change. The most successful people in our business, in any business, have one special quality — they are unaffected by change and uncertainty. They accept it. They have the ability to tolerate it keep moving forward regardless of what is thrown in their path.
They always seem to power through and get what they need regardless of any change and uncertainty surrounding them. Just what is it that makes these people so good at this, while others freeze up and stop moving forward when things go sideways?
Mastering change and uncertainty is a skill, and like all skills, it comes more naturally for some than others. Anyone can decide to get really good at this skill if they really want to. Taking the time to get good at it will serve you well in every area of your life, not just your business life.
Read on to find out how to be a master of change and uncertainty. These skills will serve you well as we are about to enter uncharted territory in the real estate business.
Be bold
The first thing to remember is that people who are really good at this have a high level of confidence. It’s the common denominator. They know that they will succeed, and they know exactly what they will achieve. These people have a great ability to see the outcome that they desire and not only see it but really believe in it.
These feelings are so strong that they override the negative feelings that change and uncertainty bring. Their focus on the positive end result is incredibly strong, which makes their other feelings secondary.
You can say that they are more wired like true entrepreneurs. They are not overthinking because if they did, the logic of the situation would always win out. Logical, even balanced people will struggle more with this as they analyze too much instead of having the blind faith needed to overcome change and uncertainty.
Believing that you will succeed will make you succeed regardless of any perceived obstacle.
Go for it
We all know the people who just go for things and think about them later. And we also know the people who analyze the possible outcomes so much that it doesn’t make sense for them to continue. Logic does them in. The same behaviors apply to mastering change and uncertainty.
Nobody likes change, and as we get older, it becomes even more of a challenge for many if we let it. Change makes us feel vulnerable, and our natural instincts tell us that it’s possible that danger may be near. We also get so used to doing things one way to the point that any change will create more work for us, and that upsets us even more.
Let’s look at young children. Do they mind change? They don’t because they haven’t learned to yet. Think back to the last time change didn’t matter so much to you. The only thing that has changed for you since that time is your mind and your perception of what is happening. It does not have to be this way, and you have the power to change your perception any time that you want to.
The key is to accept the change, tolerate it and learn to be comfortable being uncomfortable. It’s easier said than done but very doable.
Build a tolerance
Learning to tolerate uncertainty will give you the peace to keep moving forward as if everything is going your way. When you build this skill, you will become unaffected by any changes that come up, and of course, they will never stop coming up. Over time, you will build this muscle one change at a time, but you have to consciously build it instead of fighting the changes in your life.
Starting today, when you experience any change at all, decide how you will perceive it.
Practice with the little changes that occur each day, and work up to the bigger changes that we see in our lives, like a job change or moving to another state.
With these changes will come the feeling of uncertainty, so be sure to use your confidence and focus on striving toward the outcome that you desire and remember to feel comfortable in this transition. Learning to tolerate uncertainty should be your your new mantra.
We all have the same biological minds. The difference is how we choose to use our minds and our perception of what is happening. Make your mind your best weapon, and don’t let it turn on you and work against you.
So, to summarize, remember these three key elements the next time you are faced with change and uncertainty, and remember that you can master this any time that you decide to.
- Build your confidence, and be bold
- Learn to go for it
- Have a strong focus, and build tolerance
As we navigate some big changes in the real estate business in the next few months, choose to flow through it. And when the dust settles, you can look back and see that it was much easier than you originally thought it would be. Then continue to find other areas of your life to apply your new found skill to. You may never be the same again.
Joseph Santini is a managing broker at Coldwell Banker Realty in Boca Raton, Florida. Connect with him on LinkedIn.
by Dani Vanderboegh | Aug 13, 2024 | Industry, News Feed
Inman Connect Las Vegas 2024 was more than just a conference — it was a powerful testament to the real estate industry’s ability to adapt, innovate and thrive in the face of ongoing challenges. As the industry continues to grapple with market fluctuations, technological advancements and evolving consumer expectations, this year’s event served as a crucial platform for professionals to gather, share insights and chart a path forward.
“Real estate is facing a unique time right now, and we’re thrilled that we could celebrate the industry’s tenacity. Thank you to Inman for bringing the industry together. It’s the right time to think differently, and we loved introducing our new generation of software that empowers agents and brokers to grow their business in any market.”
— Jimmy Kelly, CEO of Lone Wolf Technologies
Navigating uncertainty with collective wisdom
Amid the uncertainty that continues to define the real estate landscape, ICLV stood out as a beacon of hope and resilience, bringing together leaders from across the industry to discuss practical strategies for overcoming the challenges ahead.
“During this time of uncertainty, it was reassuring to see the real estate industry come together at Inman this year to figure out a path forward. The talks and panels did not shy away from the challenges at hand and did a good job delving into practical approaches to navigate the coming changes. These are the leaders who are going to move us forward.”
— Will Greene, senior director, product at Realtor.com
Looking ahead: The future of real estate
As the real estate industry evolves, events like Inman Connect remain essential for fostering innovation and resilience. The insights, tools and connections gained at this year’s conference will help professionals navigate the challenges ahead and seize new opportunities.
ICLV 2024 not only highlighted the strength of the real estate community but also set the stage for the industry’s future. As we look forward to the next event, it’s clear that the real estate industry is not just surviving but thriving, largely thanks to the collective efforts of its leaders and innovators.
“We’re looking forward to next year!” as attendees echoed the anticipation for future gatherings where the industry can continue to come together, learn and grow.
We hope to see you at our next event, Inman Connect Austin!
by Lillian Dickerson | Aug 12, 2024 | Industry, News Feed
Inman Connect is moving from Las Vegas to San Diego in 2025 and it’ll be bigger, better, and bolder than ever before. Join us for Inman Connect San Diego on July 30-Aug. 1, 2025 with the brightest minds in real estate to shape the future of the industry. Reserve your spot today for an exclusive discount.
Real estate franchising giant RE/MAX reports that the number of open Motto Mortgage offices is shrinking for the first time ever as franchise sales slow and some existing franchisees cancel their agreements.
Launched in October 2016, Motto Mortgage doesn’t make loans itself but provides technology, training and marketing tools for mortgage brokers who work with wholesale lenders like UWM, the nation’s biggest mortgage lender.
Elevated mortgage rates have made it a tough time to be in the mortgage business. Motto Franchising LLC sold 27 franchise licenses in 2023, down from 64 in 2021, finishing the year with 246 open offices.
This year the number of open offices is in decline for the first time in the company’s history. Motto Franchising sold only nine franchise licenses in the first half of 2024, down 50 percent from 18 at the same point a year ago.
Motto Mortgage office count peaks
Open Motto Mortgage offices peaked at 246 in Q4 2023 and has declined to 239 as of July 31, 2024. Source: Inman analysis of RE/MAX Holdings Inc. earnings reports.
But the number of open Motto Mortgage offices has been shrinking this year, as some franchisees have terminated their licenses while new licensees require time to get up and running.
The number of open Motto Mortgage offices dropped to 243 at the end of the first quarter, to 241 as of June 30, and to 239 as of July 31, RE/MAX said in reporting second quarter earnings.
Motto Franchising President Ward Morrison said that even as Motto continues to sell new franchise agreements, there has been an increase in terminations, “for many different factors.”
Ward Morrison
“Obviously, as the volume of loans decreased within the market due to the macro economy, it’s tougher for offices to get some of those” loans, Morrison said on an Aug. 9 call with investment analysts. “They have to go out there and scrap on a daily basis to try and get refis in the market, try and get purchase in the market.”
A few Motto Mortgage franchisees have lacked the “wherewithal” to stay open in that environment, Morrison said, due to “their financial position, a lack of deals, [or] maybe they are not connected to real estate.”
While Motto has “seen some of those terminations increase during this past year, we feel like when the macro economy changes, we’ll be able to start regrowing that open office count and continue on the trend that we had prior to the macro.”
Another headwind for sustaining past growth in office count is that franchisees sign seven-year agreements with Motto Franchising, and 2024 is the first full year Motto has had offices come up for renewal.
In April, Motto Mortgage announced two original Motto franchise owners — Motto Mortgage Prosperity and Motto Mortgage Supreme — had renewed their licenses.
Since then, Motto has announced the opening of Motto Mortgage Royal and Motto Mortage INVICTUS in Florida; Motto Mortgage Sail Home in New Hampshire; and Motto Mortgage Premier Pros in North Dakota.
“While not all Motto franchises succeed, over the first six years of their existence, Motto franchisees have had a higher success rate than the comparable average small business operating in the financial services industry,” RE/MAX disclosed in its most recent annual report to investors.
The average fee revenue each office generates for RE/MAX has climbed steadily over the years, from an average of $3,000 per month in 2019 to $3,700 a month last year. RE/MAX also provides third-party loan processing services to mortgage brokers through another subsidiary, wemlo, which recently processed its 6,000th loan “clear to close,” RE/MAX CEO Erik Carlson said.
Erik Carlson
“Reaching this milestone is exciting for the wemlo brand because growth like this validates the benefits to mortgage brokers (of) providing our third-party processing services,” Carlson said.
New offices pay no monthly fees to Motto Franchising for six months after purchasing a franchise license. After that, fees are ramped up through escalating tiers that top out at $4,650 a month after 13 months. More than 9 in 10 offices (91 percent) were in the highest monthly fee tier at the end of last year, RE/MAX reported.
RE/MAX grows mortgage revenue and losses
RE/MAX’s Motto Franchising and wemlo businesses generated more than five times as much revenue last year ($14 million) as they did in 2018 ($2.5 million). But after inching toward profitability since launching in 2016, the mortgage segment’s adjusted EBITDA loss has been growing larger for the last three years, growing to $6.9 million in 2023.
At $3.68 million, Q2 2024 revenue from the mortgage segment was up 2 percent from the same quarter a year ago. But RE/MAX’s mortgage segment posted a $1.68 million adjusted EBITDA loss (earnings before interest, taxes, depreciation and amortization) for Q2, up 15 percent from the same quarter a year ago.
For the first six months of the year, mortgage revenue was up 7 percent to $7.3 million, and the $2.8 million adjusted EBITDA loss for H1 2024 was 30 percent less than the $4 million adjusted loss at the same point in 2023.
Morrison said Motto does “pick up some money” when franchisees terminate their licenses, “so that does sort of have a put and take.”
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