The Real Brokerage is instituting new fees on agents as it seeks to become profitable.
The brokerage, which has no offices and has automated the vast majority of employee positions, is raising the fee it charges incoming agents to $249 from $149 and increasing the annual fee it charges all agents to $750 from $500.
The Real Brokerage will also start charging those who participate in its revenue sharing program, to the tune of a $175 annual fee plus 1.2 percent of revenue share payments.
The brokerage, which lost more than $20 million last year, has an unusual business model: Besides being office-less, it offers agents a generous 85/15 percent commission split and caps their commission payments at $12,000. After that, agents pay a transaction fee per deal, but otherwise keep all of their commissions.
Those fees, however, are also being jacked up: The firm is raising the fee for agents who have hit their cap by $60 per transaction, to $285, except for those in the top 1 percent by sales volume, who will now pay $129 instead of $100. The brokerage is also introducing a $30 fee on all transactions, which it says covers errors and omissions insurance, processing costs and other expenses.
Real says it can cap commission payments because it saves money on head count — it has just one employee per 98 agents — thanks to a tech platform that automated nearly all back-end operations.
The hikes took effect Feb. 1 for incoming agents and will go into effect April 1 for tenured ones.
The firm said increasing fees allows it to preserve its 85-15 percent commission split and annual commission cap.
“We didn’t want to touch the commission split and we didn’t want to touch the cap,” said CEO Tamir Poleg. “We also never want to touch them in the future.”
The brokerage figures that even with the added charges, it still makes a compelling argument to agents: They keep all of their commissions after they hit the commission cap, participate in revenue sharing if they bring in recruits, and receive equity incentives.
The pitch has been effective. Real grew its head count 113 percent last year and now has more than 9,000 agents, up from 1,000 in 2020.
The fees were workshopped with a focus group of agents which Poleg said helped sell the changes to the greater agent population.
“Impact on agent attraction? Not really,” Poleg said. “We didn’t really see any impact on churn. There might be a small, maybe negligible impact.”
Charging agents to join is almost the opposite of that of big brokerages like Compass, which for years brought on big-name agents by offering them massive sign-on bonuses and equity incentives.
But the strategy is not unique, and Real isn’t the only brokerage to raise fees: @properties recently added a 1 percent services fee on gross commission income to compensate for lower revenues during the market downturn. But Poleg said Real wasn’t reacting to the slowdown in home sales.
“We would have made the changes despite the change in market conditions,” he said. “If anything, it had to do with inflation and increase in cost of running a business due to higher employment costs.”
The new fees will make the firm profitable on an adjusted-EBITDA basis by the third quarter, Poleg said, by adding $5 million to the company’s bottom line.
Despite its low overhead, Real lost $20.6 million last year after losing $11.7 million in 2021. It also paid out roughly 92 percent of its income to agents, much more than other firms, which Poleg attributed to the commission cap.
He said his brokerage, which acquired a title company and a mortgage firm last year, has been focused on growth over profitability.
“Overall, we were in line with our budget,” he said.
Read more
