How Real’s acquisition stands to impact REMAX brokers 

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The views expressed in this column are solely those of the author.

As the weeks pass and the news of Real's acquisition of REMAX sets in, I continue to be amazed at the execution of the transaction. If the deal goes through, I believe it will make a great business case study on ground-truth realities after an acquisition, and whether both parties can ultimately win.

Early in my career, I was a broker/owner myself. I understand the stresses and risks of running a brokerage, and I've been coaching broker clients — including many REMAX broker/owners — for over 20 years, helping them build their businesses and then sell them to finance their retirements. 

I've also assisted hundreds of brokers in M&As and divestitures, building on my own personal experience. I made my first acquisition of a 300-agent firm in 1992, which at the time was considered a very large, market-changing deal. Needless to say, across my 40 years in real estate, I've pretty much seen it all.

An owner competing against its own franchises

When REMAX brokers went home on Friday, April 24, their owner was a marketing company whose primary customer was the broker/owner. REMAX corporate's success depended on its ability to deliver world-class service to its brokers to help them recruit and retain agents and sell new franchises.

When those brokers came to work the following Monday morning, all of this had dramatically changed: REMAX's new owner was now a competitor. And yes, while Real agents had already been competing with REMAX agents for transactions, the playing field had changed. REMAX CEO Erik Carlson called the acquisition "an accelerator for both of our strategies," but Real is the one in the driver's seat.

Real is a company-owned, cloud-based brokerage composed of 33,000+ agents under one virtual roof. As a single brokerage, Real can leverage its economies of scale to directly compete with the individual REMAX broker/owners under the new "Real REMAX Group" banner. 

Real acquired REMAX, and it will compete directly with REMAX. Let that sink in. 

What REMAX broker/owners could lose  

This competition will manifest itself differently depending on the size of the REMAX franchisee. Small franchises that have paid for and depended on the brand's value proposition are going to be most at risk of losing agents to the new owner, because Real — with no franchise fees — offers a less expensive option. 

That discount may not sway highly productive agents unless they have their own services or operate large teams. But agents who are in the low-production category will almost certainly be attracted to this lower fee.

Large multi-branch franchisees with a solid value proposition are not as likely to lose agents, but there will be some attrition. I would contend, however, that the risk to those firms is far greater when it comes to the business itself. 

Real has been very public about its strategic intent to sell title, mortgage and other related services across the entire network. It's already a key part of its platform. Of course, large franchisees also sell these products and depend on the revenue as an important part of their profitability. Whether you are a large multi-office broker or a small single-office franchise, it seems that your objectives are in direct opposition to those of the new owner.

Real CEO Tamir Poleg may not care which flag an agent flies — either one could generate a similar margin for him. But I can assure you that every REMAX franchisee cares which flag its agents fly. Those agents contribute to fixed costs like rent and staff, not to mention the decades of equity that most brokers have built up in their businesses.

My 4 biggest concerns about this acquisition

1. Real agents recruiting REMAX agents. I've already seen this happening with some of our member brokers since Real's agents have a financial incentive to recruit. Their pitch is, "We are going to be together anyway. You might as well get in with us on the ground floor."

2. Real selling products to REMAX agents and customers. This will impact the biggest brokers first, but it's a risk for all brokers who rely on ancillary revenue streams.

3. The erosion of decades of work and risk that almost every broker has taken to get their business to where it is today. 

4. Losing control of data. Real has made a "friendly" offer to allow REMAX brokers to utilize its AI and tech stack — a key selling feature of the acquisition. But imagine that you're a REMAX broker, and I said you could have free technology if you just gave your data to Compass. Would you be interested? In my view, there is little difference in this offer. Data is the holy grail for the real estate broker and it should be protected at all costs.

I'm celebrating my 41st year in the industry at virtually every level, and I've seen a lot. I am also a voracious consumer of data and information, and I'm known for being a strategic thinker. Those attributes have consistently helped me anticipate the future and guide our clients accordingly. 

But in this case, I hope I'm wrong about what's coming next.

Wayne Einhorn is the president of Inner Circle Broker Coaching and an industry speaker who has been involved at all levels of the real estate business for more than 40 years. His career spans real estate sales, brokerage ownership, executive leadership and consulting.