Stung by losses, Realogy vows to become “recruiting machine”
Corcoran and Sotheby’s sales volume dipped 7 percent in 2016
After hemorrhaging agents in recent years, real estate behemoth Realogy vowed last year to regain its edge by aggressively hiring back top brokers. On Friday, CEO Richard Smith took it up a notch and pledged the company would become a “recruiting machine.”
“Don’t think there’s a start and finish to our recruitment efforts, we’re going to continue,” Smith said during an earnings call. “We’re turning this company into a recruiting machine and that’s not going to stop.”
Much of that effort will fall to Peter Sobeck, a former chief operating officer at Citi Habitats who was tapped in September as chief recruiting officer for Realogy’s NRT division, which includes Citi [TRDataCustom], Corcoran, Sotheby’s International Realty and other brands. One tool in his arsenal is commission splits. In 2016, Realogy’s aggregate commission split was 68.9 percent, a number that could reach 70 percent this year, CFO Tony Hull said during the call.
Nonetheless, Smith said New Jersey-based Realogy would not “go head to head with our competition,” which in New York City includes rival firms like Douglas Elliman and, more recently, startup brokerage Compass, which aggressively hired agents from Corcoran and other firms.
“If you’re just throwing dollar at the agents, it’s not sustainable,” Smith said. “We’ll offer compensation that’s in keeping with our goals, but our value proposition is what’s most important.” To that end, Realogy also rolled out an “integrated learning institute” for agents over the past year, he said.
In addition to competition for agents, however, Realogy’s been grappling with a soft high-end market. In its NRT division, properties $2.5 million and up accounted for 17 percent of 2016’s sales.
On Friday, Realogy said sales at Corcoran and Sotheby’s dropped 7 percent in 2016 due to the softer market. Overall, NRT’s sales were flat for the full year. Its revenue was also flat, at $4.34 billion.
Despite NRT’s lackluster year, Realogy generated $5.81 billion in 2016 revenue, up 2 percent year over year, thanks to its franchise offices. And Realogy’s net income rose 16 percent to $213 million.
Hull described light at the end of the tunnel with regard to the sluggish high-end market in cities like New York. “One of the things that was slowing down last year was sellers not realizing it was a buyer’s market,” he said. “They’re finally realizing that and cutting prices to be more realistic about the environment. That’s probably the most positive thing that’s starting to resonate within the high end.”