The Real Deal New York

Keller Williams’ franchisee profit dips as brokerage keeps adding agents

Franchisee owner profit slid 4.3% in the third quarter
By Meenal Vamburkar | November 13, 2018 12:50PM

John Davis (Credit: Keller Williams, iStock, and Pixabay)

UPDATED, Nov. 13, 1:54 p.m.: Even as Keller Williams sticks to its growth plan, profit has fallen.

In the third quarter, franchisee owner profit was $54.2 million, down 4.3 percent from a year earlier, the brokerage said. At the same time, Keller Williams’ sales volume has grown — with $93.5 billion in closed deals in the U.S. and Canada. That’s up 4.2 percent from a year earlier, the Austin, Texas-based company said in a statement. (The company does not report net income.)

Profit share distributions in the U.S. and Canada were $47.3 million, down 4.6 percent from the third quarter last year. The decline follows other brokerages that have reported more sluggish earnings and warned about the housing market. Realogy’s revenues stagnated in the third quarter — while Redfin’s profit’s tumbled 67 percent.

Rising interest rates have created “some short-term sticker shock,” said Darryl Frost, a spokesperson for Keller Williams. But home price gains are moderating and the broader economy — including the unemployment rate — is strong, he said.

The slowdown comes as Keller Williams continues a growth initiative program which launched in 2011. Since the end of 2011, the company’s agent count in the U.S. and Canada has skyrocketed 128 percent to 159,631 at the end of last year. Over the same period, sales volume has grown to $315 billion from $97 billion.

“This level of growth contributes to our culture of sharing and plays a big role in fueling our technology investment,” John Davis, president and CEO, said in the statement.

Keller Williams, which claims it’s the largest franchise brokerage by agent count, has also been expanding its artificial intelligence-based assistant, Kelle. Through the service, agents can access listings, market reports, referrals and contacts. A recent addition to the tool was “Market Snaps,” which allows agents to pull hyperlocal market reports through the Kelle mobile app. In the third quarter, 9,712 live referrals were sent via Kelle. That represented $2.3 billion in sales volume.

Keller Williams will have more tech announcements in the first quarter of next year, Frost said.

Outside the U.S. and Canada, Keller Williams agents closed $1.1 billion in sales volume, which was a 31 percent increase. Meanwhile, listings taken volume totaled $5.6 billion in the third quarter — up 12.5 percent from a year earlier.

In the midst of its tech push, Keller Williams acquired Smarter Agent, a platform that connects more than 650 multiple listing services and allows brokers and agents to create branded real estate search apps. The deal, announced in September, makes the brokerage the platform’s largest client — and helps Keller Williams compete against Zillow and Redfin.

Previously, Keller Williams also said it will join eXp Realty and Real in launching virtual brokerages in every U.S. state to connect brokers looking to expand outside of their own markets. The brokerage is also joining Realogy and Zillow in the iBuyer space.