Keller Williams President Marc King ended 2021 with a lot of hope and for good reason — the Austin-based franchisor had logged another banner year buoyed by unimaginable tailwinds that birthed ferocious buyer demand and record sales.
The company had worked out issues with its tech suite, launched several attractive agent education and training initiatives and took advantage of a robust jobs market to strengthen its leadership lineup.
“I look at Keller Williams as the Disneyland for the real estate entrepreneur where you can create anything,” King told Inman in December 2021. “We have a lot of great worthy rivals in our real estate sales space, but we are pushing forward to be the leader, to create our tools, systems, models, [and] technologies that will keep positioning the agent as the fiduciary of the transaction.”
However, rising mortgage rates, inflation and recession fears quickly turned the market upside down in 2022, forcing the industry’s largest players to begin preparing for a market shift unlike any other. Like its peers, Keller Williams made a series of difficult strategic decisions that include laying off junior staff, breaking ties with C-suite leaders and preparing agents for choppier waters ahead at its annual Family Reunion and Mega Camp conferences.
The franchisor also continued to bat off years-long speculation surrounding an initial public offering (IPO) and found itself in the midst of two headline-making lawsuits — one regarding former CEO Mark Willis’ attempted move to rival eXp Realty and the other having far-reaching consequences for the connection between buyers, sellers and brokers.
Going into 2023, King is still confident in Keller Williams’ path even as the market places a few more bumps, potholes, u-turns and forks on the road to becoming real estate’s “Disneyland.”
“As we embrace our fortieth year in business, we are truly reigniting a culture of supporting entrepreneurs,” he said.
A test of agility during an unusual market
With nearly 45 years in the industry, Keller Williams co-founder Gary Keller has experienced his fair share of market upheavals.
During Keller’s first four years in real estate (1979-1982), national home sales declined a record-breaking 50 percent as double-digit mortgage rates sidelined a generation of homebuyers. Eight years later, the U.S. plunged into a two-year recession that took home prices five years to recover. The market had its time in the sun for nearly a decade before the results of subprime lending and weak financial regulation came to roost in 2008 — causing the housing market to crash at a dizzying pace.
“When times are good, understand at some point, they’ll get tougher,” Keller said of the cyclical nature of real estate during his company’s annual Mega Camp in August. “And when times are tougher, at some point, they’ll get good. That’s just the way the world works.”
However, Keller acknowledged that with all of his experience, 2022 was a difficult year to get a grip on. After two years of booming buyer demand, home price growth and record home sales buoyed by record-low mortgage rates, the market was taking a turn that yielded mixed results.
“I would say this is the most confusing market I’ve ever seen in my entire 40-plus years in our industry. It’s confusing, and it’s only confusing because you have mixed signals,” he said in August. “Normally, you would expect all the signals to aim in one direction. And that’s not what’s happening.”
Three months later, the franchisor began to see the impact of the market shift on its transaction volume, new listings, projected closings, written contract volume and sales volume, which declined for the first time (-3 percent YoY to $341.8B) since the market began to turn in late 2021. Keller Williams is privately owned and not required to share its revenue, profits or losses.
“While we are less than pleased to report our sales volume is down by a low single-digit percentage year to date, there’s immense opportunity in this market for our agents,” King said in a sobering statement in November. “And we are leaning into our powerful culture, training and technology to enable our agents to map a growth trajectory for their businesses based on the new math required by this market.”
A month out from “less than pleasing” earnings, King told Inman the company’s morale is still high as the leadership doubles down on agent training and education and harps on the fundamentals of selling a home.
“Especially over the [past] five years, but really the last decade, this industry has been frothy. It has taken its eye off of the fiduciary at the center of the transaction — helping consumers have a better experience and make smarter decisions,” he said. “All kinds have different models have been tested, but really, at the end of the day, I go back to a quote from the last class I taught in a Keller Williams Market Center: ‘Someone has to sell a damn house.'”
“It’s what we do better than anybody else. It’s core to our training,” he said. “The most important thing for us and our agents to focus on right now is how to help consumers buy and sell real estate.”
As far as the method of selling “a damn house” in the midst of a landscape that’s less like “A Tale of Two Cities” and more like “The Multiverse of Madness,” King said Keller Williams is embracing a bottom-up approach that relies on Market Center leadership to influence its strategy.
“Real estate is hyperlocal. It’s why I believe our model is the best for helping the consumer because we have offices on the ground; we have leaders on the ground,” he said. “We are in a business where people do business with people they like and people they like live near them.”
He added, “We start from a foundation that real estate’s based on a local real estate agent, their sphere of influence and their local knowledge. No one national company is smarter than a local real estate agent.”
From a speed-based market to a skills-based market
Keller Williams’ enhanced focus on building smarter real estate agents went into high gear in 2021, with the launch of a real estate school and several agent communities, the latter of which enables agents to connect with colleagues with similar backgrounds and leverage those experiences to build better businesses.
“If you look at what we’re doing in terms of inclusivity, creating partnership platforms, and creating opportunities for our agents to monetize their products and services through the size of our ecosystem and our marketplace, we’re the most sharing company I’ve ever been around,” King told Inman in December 2021. “We’re creating lots of opportunities, and our singular focus is to help our agents make the most amount of money they can possibly make in this industry while providing the best service.”
The Austin-based franchisor delivered on those plans in 2022, taking its agent community count from one to 13 in nine months. These communities have proven to be a crown jewel in a year filled with legal drama, leadership switch-ups, multiple layoffs and other industry-wide challenges.
“As we face increasing macroeconomic headwinds, we are preparing for what we expect to be a slower growth period,” COO Sajag Patel said in a previous article of KW Military, KW Sports + Entertainment, KW Wealth, KW Commercial, KW Luxury and its agent community other offerings. “Yet, our value proposition in training and coaching is specifically geared to enable our agents to take more market share during economic shifts.”
“To embrace the market of the moment in the third quarter, we purposely launched four new business communities as agents are wanting a greater sense of connection, empowerment and impact,” he added. “Developed in partnership with agents, communities are one more way we’re enabling entrepreneurs to thrive in this fast-shifting market.”
Collabra Technology President and CEO Russ Cofano said Keller Williams’ focus on agent communities, an all-digital real estate school and other training initiatives signals the franchisor’s return to its roots after a hard and short-lived tech company identity shift.
“That was in vogue with where companies were trying to sort of identify themselves, and in dealing with eXp in specific,” Cofano said of Gary Keller’s 2018 tech announcement. “I think today, every brokerage company has to leverage technology. If you’re not, you’re not going to be successful, but referencing yourself as a tech company, is no longer something that agents care about.”
“Agents don’t want to go work for a tech company, they want to go work for a real estate brokerage company that leverages tech to help them be more successful,” he added. “I think, quite frankly, Keller Williams got away from its roots, but it’s going to be more successful going back to helping agents from a training professional development standpoint, and leveraging technology as a foundational element of that, as opposed to trying to create an identity around technology.”
While the transition back to its roots presents a significant opportunity for existing agents, Cofano said it also presents a rushing headwind as slowing sales and weak inventory push less-experienced agents out of the industry and discourage aspiring agents from joining, which could severely disrupt Keller Williams’ high-volume recruiting model.
“That model depends upon a large funnel. They’ve been really good at it over the years, and the market has facilitated that because since the Great Recession, there were a million Realtors in the United States,” he said. “There are more real estate licensees than that if you count non-realtors. But let’s focus on the Realtor number.”
“Today there are over 1.6 million Realtors. That’s a 60 percent increase in the total population in a 10-year period. That’s going to stop. We don’t have the transaction to support it,” he added. “People looking at real estate as a career are going to understand that it is a very challenging time to get into the business.”
The beginning of that disruption showed up in the franchisor’s latest earnings, which saw net agent count growth slow by nearly 45 percent from quarter to quarter. In Q3, Keller Williams added 1,711 net agents for a total of 177,377 agents across the U.S. and Canada — a slowdown from the previous quarter’s 3,098 net agent growth (-44.7 percent).
From Jan. 1 to Sept. 30, Keller Williams agents in the region closed 12.6 percent fewer transactions (884,500), listed 7.7 percent fewer homes (536,700) and logged 13.9 percent fewer written contracts — a trend that started the previous year.
“The biggest headwind that Keller is going to have is how they sort of manage the inherent limitations of and get their fair share when the overall funnel size is going to be reduced,” Cofano said. “And it’s going to be a real challenge for them.”
However, like its competitors who are also bracing for a tumultuous 2023, Keller Williams seems to be prioritizing agent retention over agent recruitment in the coming year.
“I think as long as we run our play, we help as many people as we can help… Does that mean that we’re going to have every age in the industry? No, of course not. We’re not a fit for everyone,” King told Inman. “I wake up in the morning and say, ‘How can we be the best version of ourselves?’ because that formula leads to amazing things. But as you’ve already seen, several companies [have] come out and announced they’re changing tactics around agent recruitment, etc. So at the end of the day, this is more of a co-op-etition than a competition.”
“We need our competitors and our agents to help give the best possible experience to the clients based on market exposure, their local MLS, advertising and those sorts of things,” he added. “The more amount of buyers we can expose our sellers to, the better market conditions we create for our clients.”
Who’s entering the ring with Keller Williams?
Although King struck a positive tone about cooperation over competition, it’s difficult to ignore the simmering — and sometimes explosive — battle between Keller Williams and eXp Realty that drove many headlines during the first quarter of 2021.
On Feb. 2, former KW dynamo and eXp World Holdings CEO Glenn Sanford sent an ambiguous tweet alluding to a brewing legal battle over recruitment. “It’s fun to have a competitor who diminished you in the past try to use the legal system to try to keep former team members from joining the team,” he said to a cadre of commenters who quickly surmised the tweet was about KW.
Over the following week, the context behind Sanford’s tweet became clearer with eXp President of Operations Stacey Onnen’s move back to Keller Williams, and eXp World Holdings’ 11-page motion asking Travis County courts to dissolve Keller Williams’ temporary restraining order against former CEO Mark Willis, who was in the midst of making a move to eXp.
“I am a strong proponent for agent and leadership mobility in the real estate industry,” Sanford said in the motion. “We are interested in engaging with Mark Willis because of his management experience and demonstrated leadership in the industry. EXp Realty has intervened in the lawsuit to protect its right to hire qualified real estate professionals and has no interest in any competitor’s confidential information.”
Keller Williams defended its actions, saying Willis signed a noncompete clause and still had lingering interests in the franchise. “Due to his current ownership interests, Mr. Willis has non-competition obligations in place with Keller Williams in which he agreed not to compete with his partners and Keller Williams while simultaneously profiting off them,” a KW spokesperson said in February. “As a result, the company filed this lawsuit to enforce the agreements and protect the interests of his franchise partners and Keller Williams.”
The case has since stalled, with the judge upholding the temporary restraining order until the brokerages can complete the discovery process.
King declined to comment specifically on the status of the case or eXp, instead focusing on his team’s commitment to working alongside other brands. “I think I have a great relationship with all of our competitors’ leadership teams,” he said. “We’re all respectful of one another. And we all want the same thing, which is to grow our amazing company and have it lead the way.”
Currently, Keller Williams is indeed leading the way among franchisors. In T3 Sixty’s latest Real Estate Almanac, KW dominated the franchise list with a 2021 annual sales volume of $500.1 billion — roughly $200 billion ahead of its nearest competitors RE/MAX ($341.1 billion) and Coldwell Banker ($335 billion). Its franchise performance also secured kwx’s spot on T3 Sixty’s largest holding companies’ list, only being overshadowed by Anywhere who pulled in $737.8 billion.
T3 Sixty founder Stefan Swanepoel and independent real estate analyst Mike DelPrete said the ability to stay at the top will become more challenging as the industry consolidates and brokerages enter “dogfights” to maintain their positions.
“I think [the winners are] companies that are not putting blinders on and just looking at their business, but they’re looking at the whole chessboard and they understand they’re not alone,” DelPrete said in August of the industry’s biggest players, including KW. “They’re not operating in a black box. Everybody’s making moves. Everybody’s making investments. Everybody’s doing new things and cutting out things that aren’t working.”
Although the rivals seem to have put their legal battle on the back burner, Cofano said both companies will likely continue to be competitive with each other to varying degrees, with Keller Williams even having the opportunity to more aggressively recruit agents from eXp and other companies — a move it usually doesn’t take.
“Keller’s model has always been recruiting new agents and bringing them in. They haven’t really been a company that has focused a lot on trying to recruit other agents from other companies,” he said. “I would assume that they’re talking about internally, which is do they move to more of a recruiting from other brands model as opposed to the new-agent model?”
Cofano said there is a golden opportunity to recruit agents from brokerages, such as eXp and Compass. Although both outfits have plenty of agents who’ve found tremendous success within those systems, he said there’s another group of agents who have grown disillusioned with the bells and whistles of a tech-first company and simply want a more traditional experience.
“I would think companies of that ilk are going to be more fertile ground for trying to get agents back to Keller Williams, especially maybe if agents that went to those companies and didn’t see the grass was as greener as they thought it was going to be and want to come back to the familiar environment,” he said. “But, I don’t see them being super successful [with that] unless they fundamentally change a lot of their brand’s recognition, and the fact they’re trying to build these [agent] communities might be an indication of them looking to attract agents in some of those other brands that are affiliated with sports and entertainment, luxury, etc.”
“But, you know, it’s really the agents that are sort of in that Keller, eXp, REAL, and Fathom [Realty] type of environments and smaller independents are gonna be more fertile ground for Keller Williams, I think going forward,” he added.
The challenge of an iconic leader
Keller Williams’ C-suite has undergone several transformations over the past four years, with Gary Keller moving in and out of the CEO seat, Marc King replacing Josh Team as president and former automotive industry leader Carl Liebert being brought in to head the franchisor’s newly-minted holding company, kwx.
The company also began stacking its kwx leadership team with Chief People Officer Mark Foley, Chief Financial Officer Stacie Shirley and Head of Business Development and Relationships Travis Peace. It made another round of appointments at KW Commercial, KW Luxury and several other KW segments later that year to support its agent education and training initiatives.
“The labor market around Austin, our remote work strategy, and other external factors have played a role in our hiring this year,” King said of the franchisor’s bullish 2021 hiring strategy in a previous Inman article. “All of that has created a ton of excitement, a ton of opportunity and plays into our strategy moving forward.”
Just as macro-economic tailwinds boosted Keller Williams’ hiring spree in 2021, macro-economic headwinds pushed the franchisor to make a series of four layoffs throughout the year. The layoffs impacted several departments, including Connect Live, Keller Williams University and KWRI’s marketing team. However, Keller Mortgage took the brunt with hundreds of new hires being laid-off as rising mortgage rates tanked demand and origination rates.
“It’s a supply and demand conversation,” King said. “If you have 1,000 people to process loans and loans slow down because the Fed raised rates four times, and in six months, those things affect and impact your ability to do loans. Keller Williams kind of gets lumped in with all of our business units, but most of the layoffs have happened on that side.”
“But one thing I’m very proud of is [that] we brought a subsidized real estate school option to all of those people because we want to keep them in the family even though the need for the role may change,” he added. “I think the thing that’s often missed, and I can just speak to Keller Williams, we have more employees today than we had pre-pandemic.”
Despite things leveling out on junior levels, there are still lingering questions about the sudden departures of former kwx CEO Carl Liebert and former CMO Tony Rogers, the latter of who left after only three months at the company. Liebert’s departure drew greater suspicions, with some industry leaders questioning Keller Williams’ direction.
“The COO role comes with the mandate of getting us closer to our roots as a training and coaching company,” former Zillow exec Jay Thompson said after the Liebert announcement. “Wait. I thought Keller had proclaimed KW is a technology company. Now they’re getting closer to their roots as a training and coaching company? What’s wrong with being a real estate company? So confusing.”
King declined to share specific details about the end of Keller Williams’ relationship with Liebert and Rogers, but the franchisor’s hiring (and firing) strategy comes down to creating alignment among all of the subsidiaries under kwx.
“We had a lot of different businesses, and it was about aligning all of them under one umbrella,” King said of the formation of kwx. “So we brought in the super talented people that you mentioned, [Carl and Tony], who were great leaders for that world. [But] the market has changed and decisions have changed.”
He added, “If you’re the most amazing kicker on the football team and then you pivot and turn into a basketball team, you have different challenges. All great people, all great leaders, and just different business needs.”
Although it’s easy to jump to the conclusion of “where there’s smoke, there’s fire,” Cofano said Keller Williams’ leadership decisions are parred for the course as it’s difficult for some leaders to mesh with an icon like Keller.
“If you look at the history of Keller Williams, these kinds of changes are nothing new. I think it’s inherent in the organization because you have an iconic leader like Gary Keller,” he said. “It’s very difficult for anybody to come in and be effective over the long term. It’s very hard for an individual to come in and really implement the vision they want to implement, and I think they’re going to continue to struggle with that.”
Cofano said the thorn of “iconic leadership” has shown up with Keller Williams’ peers, including eXp Realty, which has gone through a constant stream of leadership changes. “The success of the company is because of the icon. Without the icon, it wouldn’t have had the growth,” he said. “But then how do you manage the continued evolution of a company from an operation standpoint, and make it interesting to do that for people that are really talented?”
He added, “It’s the double-edged sword. Without the icon, you wouldn’t have the massive success of the company. Certainly not without Gary Keller. But inherent in that is the challenge of keeping good people in their seats, who want to get their own opinions and perspectives on how to grow the company.”
What about that IPO?
Besides the challenges that come with an iconic leader, Liebert and Rogers’ departure also reignited rumors about a failed IPO attempt. With no accessible paper trail, such as Securities and Exchange Commission (SEC) filings, it’s difficult to determine how far Keller Williams got in their alleged foray into the public markets.
As in years past, King was coy about exactly what did or didn’t happen, instead opting to say all options are up for grabs. “Obviously, there are reasons why we can’t make any definitive statements about any directions that we go,” he said. “But you know, everything is always on the table. But it doesn’t mean we’re actively pursuing any of it.”
If the rumors are true, it wouldn’t be surprising that Keller Williams’ leaders pulled away from Wall Street.
A number of real estate’s largest companies’ stock values have taken a nearly two-year-long beating as analysts got bearish about real estate and tech-focused companies — a trend that analysts say started with March 2021’s Archegos Capital Management scandal that hit Goldman Sachs and Morgan Stanley, two of the industry’s most popular IPO underwriters.
Rising mortgage rates, inflation, slowing home sales and recession fears compounded the impact of the Archegos on real estate stocks, which, for some, have fallen by the double-digits. According to Inman’s year-end market review, Redfin’s stock dropped by more than 85 percent in 2022, with Compass (-70 percent) and eXp (-60 percent) experiencing similar declines. Anywhere has fared the best out of its public peers with stock declines of 55 percent.
“I do see how Wall Street impacts big business — the good and the bad,” King said.
Cofano said Keller Williams doesn’t need an IPO; however, he said it could help them navigate a quickly consolidating market where fewer players are looking to claim their share of talented agents and sales.
“When you look at the eXp model, in terms of alternate revenue streams, it is more advantageous to the individual agent than the Keller model from an economic standpoint,” he said. “Now, one could argue whether that is worthwhile because, you know, eXp stock went up, and then it went way down. And what’s the real value of that [is] questionable, but the bottom line is they don’t have an answer to it today.”
“Real estate isn’t going to be appropriate for a public offering, at least for two years, and in that time period, it’s probably more likely they’re going to roll out with some sort of an agent ownership opportunity that would make going public now or ever, really, not necessary,” he added.
King acknowledged an IPO has been a powerful recruiting tool for Keller Williams’ peers and could be for them as well. But going into 2023, he said being the industry’s largest franchisor (KWRI) and second-largest holding company (kwx) is good enough.
“We’ll make the best decision for the agent, regardless of the personal outcome.”