With the housing market slowing in many markets, RE/MAX is allowing its franchisees to defer or reduce fees for April and May, the company announced Tuesday. At the same time, the national real estate franchisor in enacting a number of cost-cutting measures, including a hiring freeze and the suspension of the company’s 401k match and company bonuses.
“Although we entered 2020 with momentum, the growing and rapidly evolving COVID-19 pandemic is increasingly impacting the worldwide housing market and our operations,” RE/MAX CEO Adam Contos said in a statement. “Factors such as social distancing, governmental stay-at-home orders, variances in whether real estate is designated as an essential service, and growing health and economic concerns are slowing the amount of homebuying, selling and borrowing activity typical at this point in the year.”
Franchisees can opt to defer 100 percent of the continuing franchise fees and advertising fees for their April, May or both, with zero interest. They would still pay their broker fee at the regular time with an additional 1 percent on top of the normal 1 percent broker fee. If the franchisee defers both months, the broker fee would increase to 3 percent, until the deferred fees are repaid.
Franchisees can also opt, instead, to pay just 50 percent of their continuing franchise and advertising fees for April and May, with the rest being totally waived. The broker fee is not changed in this scenario.
“We remain committed to providing best-in-class solutions to assist our affiliates at a time when they need to pivot and adjust quickly to constantly changing conditions and I am incredibly proud of our team’s efforts in this regard,” Contos said. “We continue to actively monitor the situation and evaluate the best way to support our affiliates and their businesses during this time.”
RE/MAX had previously announced the deferral of continuing franchise fees and advertising fees in March, but this announcement expands on that original decision. The company also announced a number of education and tech initiatives for agents, as part of that original announcement.
The company is anticipating cost savings from the elimination of the 2020 company bonus, the temporary suspension of its 401k match, the suspension of travel and events and the implementation of a hiring freeze.
Other companies in the space have been forced to cut staff and executive pay as a result of the slowdown. Realogy slashed executive pay, Redfin laid off 7 percent of its staff and furloughed 41 percent of its agents and eXp Realty and Compass both laid off 15 percent of their respective staffs.
The company reported that total agent count increased by 5 percent to 131,816 agents worldwide year-over-year and U.S. and Canada combined agent count increased 0.2 percent year-over-year to 84,191 agents in the first quarter of 2020. Total open Motto Mortgage franchises increased 34.1 percent year-over-year to 118 offices in the first quarter.
RE/MAX expects near-term housing results to decline materially, but, the magnitude and duration are unknown, as is the uncertainty around COVID-19.
“The strength of our brands, the resiliency and geographic breadth of our professional and entrepreneurial networks, and the hard work and dedication of our employees give us confidence in our ability to overcome current challenges,” Contos said. “With almost 50 years of experience successfully steering through myriad business cycles and market conditions, we believe that, together, with kindness, caring and empathy, we can manage through this historic event and flourish on the other side.”