Fathom Realty, a fast expanding, cloud-based, 100 percent commission brokerage, announced on Tuesday that it intends to file a draft registration statement with the Securities and Exchange Commission (SEC) to take the company public. The company expects to file documents for an initial public offering sometime in the second quarter of 2019.
The company, headquartered in Dallas but with no other official brick-and-mortar offices around the country, is partially owned by agents. Also like rival cloud-based brokerage rival eXp Realty, Fathom Realty gives agents stock for hitting certain marks like agent referrals and transactions closed.
Joshua Harley, the CEO and founder of Fathom Realty announced the move to take the company public at a company event in Dallas, to raucous applause from its agents.
“Fathom has been growing at a tremendous rate year over year,” Harley told Inman, when reached by email. “We believe taking Fathom public can allow us to accelerate our growth and innovation.”
“By creating liquidity, we will have more access to capital for possible acquisitions, improve our brand awareness across our markets, and better support and increase our market expansion,” Harley added. “Just as important, it will allow us to give back to our agents who are greatly responsible for our growth and revenue.”
Harley started Fathom Realty in 2010 and the company has since grown to cover 18 states states and 75 markets. At the end of 2018, the brokerage had 2,724 agents, a 65 percent year-over-year growth.
At Fathom Realty, agents pay the brokerage a fee of $450 per transaction for the first 12 transactions in a year. After that, agents pay a fee of just $99 per transaction and a yearly $500 transaction fee.
Harley said that he recognized in 2016, long before going public, that giving every agent in the company equity was the right direction.
“I recognized that our agents contribute greatly to our growth and revenue and therefore I felt they deserved to share in our combined success,” Harley said.
“Most people call a company like ours a ‘100% Commission Company,’ but I dislike the term,” Harley said. “I feel like it’s inaccurate but that is the name our model was given and not one we chose.”
Harley also said the terms, “flat-fee,” and “discount broker,” don’t exactly apply either.
“The term ‘flat fee’ makes more sense but that has been taken by companies like Purplebricks who charge a flat fee to the consumer and agents would confuse us for one of those companies,” Harley said. “The term, ‘discount broker’ identifies brokerages like Redfin who also discount their services to the consumer.”
“Fathom, on the other hand, does not discount our commission,” Harley said. “In fact, we do not tell our agents what they can or cannot charge.”
Harley said most agents charge a traditional commission, but due to the company’s flat-fee, agents actually have flexibility. Some agents offer a discounting listing rate and rebate model to their clients, which allows them to compete with discount brokerages.
Fathom Realty will join eXp Realty as a publicly-traded, virtual cloud brokerage. Redfin, RE/MAX and Realogy are also publicly traded real estate companies, although for the latter, all or a significant portion of their business is franchising. Compass has also said it will likely go public, although they have not put a time frame on that decision.
On its first day of trading on Nasdaq, eXp Realty crossed the $1 billion market cap threshold.