As the brokerage prepares for a slower market, agent recruitment, finding a permanent RE/MAX Holdings CEO and franchise consolidation are among the issues RE/MAX will face in 2023.

This is the eighth in a series of nine reports on the challenges the country’s largest brokerages, portals and iBuyers face in 2023. Check back next week as Inman dives into the biggest obstacles of the new year for Zillow. And look back at the challenges they faced in 2022 here.

As RE/MAX approaches its 50th year as a company — the real estate franchise was founded in 1973 — there’s not much to criticize.

The industry stalwart has seen just about every kind of market there is and succeeded through it unphased. As a result, the brand is consistently named one of the most recognizable in the industry among consumers.

RE/MAX’s stability and longevity will continue to be a huge asset to the company this year as the real estate market continues to struggle through murky waters. But that doesn’t necessarily mean the company has an easy road ahead going into 2023 either.

Moving into a much slower market than those of the previous few years, RE/MAX will want to take a critical look at items, such as its agent population; finding the right leader for RE/MAX Holdings, the holding company of RE/MAX and Motto Mortgage which went public in 2013, in the wake of former CEO Adam Contos’ departure; and how to best structure franchise offices for success, industry experts told Inman.

What follows are a few challenges the brand may want to consider in 2023.

Facing the slowing market

Like every real estate company, RE/MAX will also face the reality of a slowing housing market and the threat of a potential recession. As Americans continue to step back from the market because of still-high housing prices, higher mortgage rates and a fragile economic landscape, RE/MAX will need to be ready to see less revenue in the coming year.

Sean Moudry

Sean Moudry, a real estate coach and Keller Williams broker who also at one point worked with RE/MAX for about eight years, said that a modest estimate is that contract activity may drop for brokerages by about 30 percent in the coming year. That means that they’ll need to be ready for a roughly 30 percent drop in revenue.

As transaction volume continues to decline overall, many agents will drop out of the industry and some will decide to move to companies that tout lower fees.

“I think for our industry this could be a really, really challenging time,” Moudry said.

In its most recent earnings report, RE/MAX acknowledged it would not meet previous goals for franchise sales in 2023. The company just barely squeezed out a profit of $100,000 during the third quarter of 2022.

Agent recruitment

A related challenge RE/MAX will face in the coming year is recruiting more agents. Some less experienced agents will decide to leave the industry now as the going gets tough, but more seasoned agents may also decide to let the sun set on their careers now that the market has taken a turn.

Moudry said for RE/MAX, which tends to have an agent population that skews a bit older, they’ll likely have to deal with the latter case more than the former. RE/MAX told Inman that the median age of a RE/MAX agent, as of the end of September, was 47. Out of the brand’s roughly 140,000 agents, the vast majority are split between age brackets of 30 to 44 and 45 to 59, at about 47,500 agents and 51,000 agents, respectively, in each of those brackets.

Agent ages aside, the company will likely need to increase their sales power in this market.

“That’s the double-edged sword I see for RE/MAX,” Moudry said. “The good side is, a lot of their agents are more seasoned or experienced, more entrepreneurial because that’s what’s attracted to their brand and their business model. But also that demographic — I think we’re going to see a large percentage of those agents just retire and not necessarily never do another sale, but they’re not going to spend $10,000 to $15,000 on marketing moving forward.”

As home price growth slows and buyers are less active, RE/MAX will need more agents to make up for the fewer transactions per agent.

“Recruiting is the only way because you’re not going to increase production,” Moudry added. “[RE/MAX is] already the highest producing [company] per agent.”

New agents just starting their careers or individuals who have newly transitioned into real estate will be RE/MAX’s best prospects, Moudry said, because they may be more willing to put the hard work into succeeding, not having known the hot market of the last couple years first-hand.

The question is, will the brand need to adjust its marketing and services at all to attract that agent demographic? Moudry said, perhaps, noting other brands that are already doing so in a more clear way — Compass with its sleek, modern branding, Keller Williams with its stellar training programs and eXp Realty with its top-notch technology.

“I don’t know what RE/MAX is doing to attract that demographic, and that would be a concern for me,” he said. “Now, they might have something that they’re doing that I’m not aware of — but I haven’t seen it.”

Establishing a new permanent RE/MAX Holdings CEO

At the beginning of 2022, RE/MAX 19-year veteran Adam Contos announced his imminent departure from the company. RE/MAX board member Stephen Joyce took over Contos’ role and has been serving as RE/MAX Holdings interim CEO, while RE/MAX President Nick Bailey and Motto Mortgage President Ward Morrison adopted CEO roles at their respective companies alongside their presidential appointments in the wake of Contos’ departure.

Joyce is set to serve as interim CEO through the second quarter of 2023 while the company searches for a permanent replacement.

With a company like RE/MAX that has been such a rock in the industry for so long and already has strong leadership in its separate branches, it may not necessarily be a challenge to find someone who can take up Contos’ mantle. But it is something that the brand will want to be thoughtful about, industry experts said.

Victor Lund

When asked if it would be a challenge to find the right person to fill Contos’ shoes, Victor Lund, founding partner of WAV Group, said, “[It’s] very difficult to know. If they hire a rockstar who can make a difference … I don’t know who that would be. Like I said, Nick [Bailey] is doing a fine job. He has developed the trust of the franchisees.”

“I think the next CEO is going to have to be somebody who’s going to attract that younger group [of agents],” Moudry said. “Maybe [with] some sort of rebranding.”

Jeff Lobb of Sparktank Media said it could be a challenge for the brand to cut through “the fluff,” so to speak, and find a strong leader who can guide the company through a difficult market. Someone with a long track record of success through ups and downs and hopefully a woman.

“I think they need to get strong female leaders back in the pipeline, which comes from more of an empathy-driven mindset,” Lobb said. “I think there is a big drive in general for more female leadership in those roles, and I’m sure there are some great candidates out there. The question is, will they be open-minded to them?”

Sue Yannaccone of Anywhere Brands is one of the latest women to take up a major leadership role at one of the industry’s biggest companies. She became CEO of Anywhere Brands (previously Realogy Franchise Group) in 2020 and just recently replaced M. Ryan Gorman, former CEO of Coldwell Banker.

Motto Mortgage

All mortgage companies are in for a challenging time now with interest rates higher than they’ve been for years and most consumers experiencing sticker shock as a result.

Motto Mortgage, RE/MAX’s mortgage arm, has experienced steady growth over the last few quarters. As of October 31, 2022, the company increased its Motto franchises by 21.9 percent, giving it a total of about 217 offices in 39 states.

The company behind Motto Mortgage, Motto Franchising LLC, does not generate loans, but it a technology, compliance, training and marketing solution for mortgage brokers. The company provides its “mortgage brokerage-in-a-box” to RE/MAX affiliates or any real estate broker or entrepreneur. RE/MAX also provides mortgage loan processing services to mortgage brokers through another subsidiary, wemlo.

Jeff Lobb | Sparktank Media

“Now that the market’s retracted on both mortgage side and real estate side, what [is facing] Motto now is going to be less transactions and a higher interest rate product, which is going to make people shop [around] anyway,” Lobb told Inman. “My gut tells me that revenue stream is going to suffer for whatever they thought they were going to do to save some revenue in most markets.”

Many mortgage lenders have been downsizing as rising rates put an end to a refinancing boom spurred by record low rates during the pandemic. But since Motto Mortgage franchisees are mortgage brokers who work with multiple lenders, they can help homebuyers shop around for the best deal. That, and their local connections to real estate agents and homebuyers, could actually help Motto Mortgage franchisees weather the storm as the mortgage industry continues to pivot from refinancing existing loans to financing purchases.

Franchise Business Review has named Motto a Top 200 Franchise four years consecutively and also named the company a Top Recession-Proof Franchise this year.

The mortgage company also recently signed on SOCi Inc. as an online reputation management partner, which is apt timing as consumers are more likely to shop around for better interest rates in today’s mortgage landscape with rates hovering around 6.4 percent.

Structuring for success

In thinking about a year ahead of fewer transactions overall and trying to find more ways to make a company’s dollar go further, more than one expert mentioned RE/MAX potentially tapping into more mergers and acquisitions.

“I’d like to see more M&A activity among the RE/MAX owners,” Lund said. “You get economy of scale when you have a brokerage of size, so if there’s any limitation to the RE/MAX model, I would say it’s probably driven by the lack of M&A activity in network, inside of it.”

“In a lot of markets, [RE/MAX] may have seven or eight or 10 competing RE/MAXs in the same market,” Lund continued. “Because they all report independently, rather than collectively, it looks like they’re all small. But collectively, they’re probably No.1 or 2 or 3 in the market.”

In the secondary markets in which it operates, RE/MAX might have a number of smaller offices made up of about 25 agents each, Lobb said. As more agents drop out of the industry, those smaller offices will feel that loss more deeply and will struggle much more to stay alive. And one forward-thinking solution to that now may be more franchise consolidation, Lobb explained.

“I think we’re going to see, and I have already started to see, some smaller RE/MAX acquisitions, them rolling up under a few other RE/MAXs,” Lobb said. “Or if you’re a bigger RE/MAX, there’s opportunity to roll in some other franchises. Maybe it’s franchise consolidation. The reason being is, when you lose agent count, typically, the overhead doesn’t change much. So when they do get acquired or rolled in, no one wants the overhead that goes with it … It’s smart for the business anyway to contract, because overhead in the real estate business, and a big expense, is the death of most brokerages.”

Email Lillian Dickerson

New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here

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