In light of the recent decision in the Sitzer/Barnett Commission case, RE/MAX Executives expressed great satisfaction with the decision to settle the case, as well as the Merle and Nosarek cases, for $55 million before going to trial.
Steve Joyce, CEO of RE/MAX, said: “While this has come at significant financial cost, we believe that all of our stakeholders, affiliates, employees, shareholders, debt “We believe this was the best decision for everyone,” he told investors and analysts. On Friday morning, companies will hold financial results briefings for the third quarter of 2023 with investors.
Approval of the RE/MAX settlement proposal, real estate anywherecould be jeopardized by Judge Stephen Baugh’s yet-to-be-announced injunction and final ruling on the case (and possible Justice Department action), RE/MAX executives said on a conference call. He told analysts he was confident the lawsuit would be approved.
Executives also expressed confidence that the terms of the settlement agreement will not have a material impact on the company’s future profits or financial viability.
“In the settlement, we agreed to certain business practice changes, many of which we have already implemented,” said Nick Bailey, president of RE/MAX. “In addition to the settlement payment, [of $55 million]We do not expect the terms of the proposed settlement to have a material impact on our results of operations or cash flows. ”
Bailey said franchisees and brokers he spoke to were satisfied with the settlement.
“Most brokers work hard to help their agents focus on their business,” Bailey says. “There are still people out there buying and selling, but as things progress, they will make changes if there are additional changes that impact the way they do business.”
Regardless of these changes, Joyce told investors that the strength of the RE/MAX brand will help it weather any unforeseen challenges that may arise.
“We have some of the most productive agents, and our model is very different from anything out there, so if you’re a productive agent, you’re going to love our model, regardless of where your commissions go. They’ll continue to like being with us,’ because we can sell the most homes of any brand out there,” Joyce said.
What will be the commission rate? Buyer’s agent?
Despite management’s confidence and reassurance, analysts have given Mr. Bailey and Mr. Joyce mixed reviews about what the fallout from the Sitzer/Barnett and Mehr, Nosarek, and Gibson cases will be. I asked them to explain the scenario. One of the biggest concerns expressed was what the impact would be on commission rates.
“History shows that commission rates follow supply and demand,” Bailey said. “Commission rates fell in the mid-2000s, rose again during the Great Recession, and have since fallen to less than 5%,” Bailey said. “I think we’ll see something similar going forward. It’s going to be more driven by supply and demand.”
Mr Bailey was also asked to consider the viability of buyer’s agents and buyer’s intermediaries in the event of co-operation coverage being removed.
“In some countries where we operate, there is no buyer agency, which can be a difficult situation for both buyers and consumers as a whole. Some of it is just a ‘be careful’ mentality,” Bailey said.
Because of this, Bailey said he believes RE/MAX has strong support for buyer agents and “serves consumers very well.”
“More than a decade ago, when technology really started to play a central role, not just in home searches, but in all the data that was now available to potential buyers, consumers started using agents. And the data showed that.’Today it’s increasing at a higher rate than ever before,” Bailey added.
3rd quarter financial results
RE/MAX’s third-quarter 2023 earnings report was dominated by myriad questions raised by the Commission lawsuit and Sitzer/Barnett decision, but executives scrutinized the company’s financial results for those who asked questions. I also took time to do it.
During the third quarter of 2023, RE/MAX reported an 8.7% decline in annual revenue to $81.2 million. Additionally, the company reported a net loss of $59.5 million for the quarter (compared to a net income of $140 a year ago).
RE/MAX’s U.S. agent count has declined over the past year as the housing market has slowed. Compared to a year ago, the company’s number of U.S. agents decreased by 6.0% to 56,494. Despite this decline, RE/MAX’s overall agent count remained strong thanks to strong increases in international agents (up 7.4% annually to 63,527) and Canadian agents (up 1.1% annually to 25,288). The number of people increased by 0.7% from the previous year to 145,309. .
RE/MAX executives said they will continue to focus on efforts to increase the number of agents in the U.S., including expanding a pilot program to attract teams of six or more agents to the company.
“As we see the number of agents across the industry decline, I think we can’t help but be affected by that,” Bailey said. “What we are working on is looking at other growth initiatives, including our team, M&A and some recruitment, to regain positive momentum and counter attrition at all levels across the industry. ”