Re/Max reported a strong first quarter, as revenue and agent count climbed and more affiliates set up mortgage brokerages under the company’s new Motto Mortgage franchise.
The real estate franchisor posted net income of $4.9 million for the first quarter of 2017, “essentially in-line with the first quarter of 2016,” along with a 6.6 percent rise in agent count and a 12.4 percent year-over-year boost in revenue to $48.2 million.
Building on previous momentum, the results come after the company announced its largest annual agent gain in a decade and a bank account that was $22.7 million in the black for full year 2016.
Re/Max added about 7,000 agents from the first quarter of 2016 to the first quarter of 2017, bringing its agent count to 114,000 agents.
83,000 of those agents operated in the U.S. and Canada, up 3.9 percent year over year.
“We started 2017 strong, underpinned by increasing agent count and double-digit revenue growth year-over-year,” CEO and co-founder Dave Liniger said in a statement.
“After acquiring six independent regions and launching Motto Mortgage last year, we are focused on successfully growing these strategic initiatives in 2017 and over the long term.
“During the first quarter, we experienced healthy franchise sales and agent count growth in the acquired regions. We’ve also more than doubled our Motto franchise sales since our last earnings release in February. With the spring selling season off to a promising start, we look forward to continued success throughout the year.”
Re/Max launched Motto Mortgage in October 2016 as a way for its franchisees to set up mortgage brokerages to work in unison with their agents and homebuyer clients.
Liniger has called Motto Mortgage the “most important new initiative we have undertaken in quite some time.”
The venture gained momentum in the first quarter of 2017, with sales of Motto Mortgage franchises more than doubling since February. There are around 40 Motto Mortgage franchisees at the moment, Liniger said in an earnings call today.
Motto Mortgage’s upfront franchisee fee is $20,000, but it’s currently discounting that fee to $15,000, said Re/Max Chief Financial Officer Karri Callahan in the call.
Franchisees can operate Motto Mortgage brokerages in the same office as their real estate brokerages and receive training, education and support. They can also can pay additional fees for technology.
New Motto Mortgage franchisees generally only have to begin paying a monthly franchisee fee after three months in operation, with that fee then escalating to its full amount over the next year, Callahan said.
Liniger said that an office generally needs a minimum of 20 agents to run a profitable Motto Mortgage, and about a third of its offices “easily fit within that.”
The success of Motto Mortgage has “been right along the expectations that we have” and the company expects it to accelerate as early adopters see results, Liniger said.
“Realtors as a group are fairly conservative,” he said. “There’s a wait-and-see attitude of a lot of people.”
Liniger cautioned that Motto Mortgage franchise sales could be uneven at times.
Re/Max indicated that net income was offset by increased operating expenses, “largely related to investment in personnel and operations associated with the acquired independent regions and the startup of Motto, as well as a decrease in revenue from preferred marketing arrangements.”
Caroline Feeney contributed reporting to this story.