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Despite industry headwinds, Real believes it can continue growing agent count

With a 67% annual increase in agent count to 16,680 agents during the first quarter of 2024, it is no surprise that The Real Brokerage also recorded an 86% annual increase in revenue to nearly $201 million.

The uptick in agent count contributed to a 74% yearly jump in transaction count to 19,032 sides, good for a total sales volume of $7.5 billion and an 88% year-over-year increase.

“I am extremely pleased with our results this quarter and am looking forward to navigating the changes ahead from a position of strength,” Real CEO Tamir Poleg told investors and analysts during the firm’s Q1 2024 earnings call Tuesday morning.

The coming changes that Poleg referenced are the business practice changes outlined in the National Association of Realtors’ (NAR) commission lawsuit settlement agreement. Many in the industry believe these changes will cause industrywide agent attrition, which could clearly put a damper on Real’s impressive agent count growth.

“The NAR settlement requires some mechanical changes to industry practices, which are entirely driven by training, and when it comes to our agents, we are a training-first company,” Real President Sharran Srivatsaa said. “That means we believe a skilled agent will outperform an unskilled agent 10 to 1.

“For over a year now, we’ve been training out agents on our proprietary Buyer Mastery Program, equipping them with the skills, tools and materials they need to help serve clients in the post-NAR-settlement world.”

Real executives also noted that the firm’s recently launched Private Label and Pro Teams initiatives are helping Real attract even more agents and teams. Under the Private Label programs, teams and independent brokerages can join Real, use all of the firm’s tools and resources, and maintain their own brand identity. With Pro Teams, a team or brokerage firm is able to maintain its own internal economics and commission models.

According to Real, these offerings have been especially appealing to independent broker-owners and team leaders in light of the NAR settlement agreement.

“What we have found is that numerous independent brokerages are concerned about the potential liability and regulatory impact ahead,” Srivatsaa said. “Many have approached us to explore conversations about coming on board. Consequently, our pipeline of 100-plus agent teams considering making the leap to Real is at an all-time high, and we have high expectations for Private Label, along with our Pro Teams infrastructure, to be a differentiating factor in converting this pipeline.”

In addition to these offerings to attract agents and teams, Poleg also highlighted the firm’s “agent economics” as something that could help continue to drive conversions.

“By our math, in 2023, we paid out the highest percentage of revenue in commission splits and revenue share than any of our direct public peers,” Poleg said. “Given that agents are economically motivated business owners, those concerned about future commission rates would find that affiliating with any brokerage other than Real could mean missing out on significant earnings . … We anticipate the trend of agents migrating from traditional high-cost brokerages to more efficient high-value models, like ours, will likely accelerate in the years ahead.”

Poleg also took time during the call to address Real’s recently announced settlement of the commission lawsuits. While the settlement and the litigation leading to it resulted in $9.9 million in expenses — which the company said contributed to its $16.1 million net loss for the quarter — Poleg was still pleased with the decision to settle.

“We believe this decision was in the best interest of our company and our shareholders, allowing us to focus our time and resources on building the future,” Poleg said.

As the brokerage firm looks ahead, in addition to its Private Label and Pro Teams programs, executives were also optimistic about the future of Real’s title and mortgage businesses. Overall, revenue from Real’s ancillary businesses rose 104% annually in Q1 2024 to $1.5 million. The firm’s title business revenue grew 33% year over year to $795,000 and its mortgage business revenue soared by 427% to $696,000.

“These ancillary businesses typically command gross margins that are six to eight times higher than over-average brokerage gross margin, and we are pleased that the growth initiatives we have implemented are becoming more apparent in our results,” Poleg said. “Importantly, based on the strength we are seeing in both business lines, we continue to expect overall ancillary revenue growth to significantly outpace growth in our core brokerage business in 2024.”

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