REMAX deal is ‘best possible scenario’ for Real 

The Real Brokerage's decision to acquire REMAX — a deal combining two very different brokerage models — surprised some in the real estate industry when it was announced last week.

But rumors have been swirling for some time about the possibility of REMAX being acquired, according to Russ Cofano, co-founder and principal of Alloy Advisors.

During a May 5 webinar with T3 Sixty President and CEO Jack Miller and EVP of Media Stephanie Reid-Simons, Cofano explained that REMAX was in a "challenging" position after gaining "a tremendous amount of debt" and losing agents.

"From the REMAX standpoint, this is something that they had to do," Cofano said. If anything, Compass' recent acquisition of Anywhere Real Estate "just accelerated" that need.

The 'best possible scenario': Real is "a less mature eXp," Cofano said, noting that, like Real, the larger cloud-based brokerage experienced a similar pattern of rapid early growth that began tapering off over time.

"The best possible scenario for Real is to acquire a big player like REMAX to make a substantial splash," he said.

At REMAX, recent earnings reports have signaled "active investment in the future of the brand," Reid-Simons noted, though CEO Erik Carlson did hint at "a lot of inbound requests" last fall.

"It didn't feel like a fire sale," Reid-Simons said, but "this is something that's been foreshadowed for a while — and it feels like it's come at a good time for both of them."

What Real gains: With REMAX, Real gets a global footprint and an opportunity to expand its model beyond the U.S. and Canada, as eXp has. The brokerage also gets a boost in revenue and a brand that Reid-Simons noted is recognized by consumers around the world.

But the two companies "couldn't be more different from a cultural operational standpoint," Cofano said, adding that it will be interesting to see how Real "takes on the challenge of navigating both a non-branded company and a branded company under the same roof" — not to mention whether Real continues investing in REMAX's brand identity.

A vote of confidence for growth potential: Though Real didn't have much debt before, the company has now acquired about half a billion, Cofano said. "Debt is not a bad thing — unless you can't show growth," he explained, after which it becomes an "anchor around your foot."

Real's decision to acquire REMAX despite the debt "means that they are firmly buying into the growth model," he said.

Serving two different customers: "Real is the kind of model that feels not just distinct but somewhat in conflict with REMAX," Reid-Simons said. While the broker/owner is REMAX's main customer, Real prioritizes individual agents and team leaders.

As a franchisor, REMAX "has to have its eyes laser-focused on helping the broker have a great economic model, leverage technology, recruit, retain and increase productivity. And Real doesn't do that," Cofano said, adding, "What stops Real agents from starting to now recruit agents who are at a REMAX shop and make it more difficult for that REMAX broker to recruit and retain?"

How the deal could impact agents — and leadership: Miller noted that the average REMAX agent already closes more deals than agents with other brands. The acquisition could give top producers at REMAX an opportunity to leverage Real's tech and become even more efficient, he suggested — and it's possible that REMAX's "culture of production" could boost Real agents and teams.

As for company leadership, executives often leave after M&As as roles are condensed or eliminated, though in this case no departures have been announced. Below the C-suite, Cofano underlined the importance of consultants in franchise systems: "Those people need to stick around," he said.

"Real estate's a relationship business — both on the customer side, but more so even on the brokerage operational side," he added. "That's going to be a big navigational element that [Real CEO Tamir Poleg] and team are going to have to navigate."

What's ahead for franchise owners: How this all shakes out will reveal a lot about the future of the brokerage franchise business. While "REMAX has some of the strongest franchises around," Reid-Simons said, the deal could be "a nail in the coffin of the franchise model."

Cofano believes Real will expand beyond North America and expects "a lessening of the REMAX brand in the U.S. and Canada."

"I think that's what needs to play out for Real to reap the best economics of this transaction," he added.

Miller suggested strong REMAX franchise owners may benefit from Real's tech in a way that "allows them to solve some of the perniciously difficult problems in brokerage" and helps them grow even stronger. Others might find they work better as Real teams.

How the deal compares with Compass-Anywhere: Compass and Real both experienced high growth rates in sales volume over the past two years, Miller said — 60% for Compass and 208% for Real — while Anywhere and REMAX grew at much slower paces (10% and 2%, respectively) despite being larger companies overall.

"In both cases, we have a high-growth company that's still kind of continuing to grow — or at least has been on a growth trajectory for the last couple of years — paired with a company that is flat or maybe slightly declining," Miller said.

Editor's note: Real Estate News is an editorially independent division of T3 Sixty.