Company executives predict the U.S. real estate landscape will be disrupted in the coming months due to changes outlined in business practices National Association of Realtors (NAR) Commission Litigation Settlement Agreement, Exp World Holdings Inc. — Parent company of Exp Properties — Focus on improving the company’s agency value proposition.
In the second quarter of 2024, eXp’s global Agent Net Promoter Score (aNPS), a measure of agent satisfaction, was 76, up from 72 a year ago.
“NPS is a leading indicator of our future growth and retention, which ultimately translates into the company’s long-term financial viability,” eXp World Holdings CEO Glenn Sanford said during the company’s second-quarter 2024 earnings call with investors on Wednesday.
Sanford resigned as CEO of eXp Realty several months ago. He now focuses on the international markets in which the company operates and assesses how well the company’s agency value proposition works in each market.
“What we’re doing is really going back to the question about the agent value proposition and going back to each country and reassessing whether we have the right mix of value props for that country,” as each country They’re all different, and some of the tools and technology we initially rolled out, while good for the brokerage business because it helped us streamline the process, weren’t as agent-friendly as we needed to be, which created a problem for growth in some countries. Here comes the challenge.
Back in the U.S., eXp executives believe their understanding of the changes in business practices outlined in the NAR settlement and their actions to prepare for those changes will help the brokerage continue to grow.
“I fully expect that over the next six to 12 months there will be this kind of chaos and people will probably be tired from the breakage and the headaches that come with it,” said Leo Pareja, CEO of eXp Realty. “They’re going to want to Partner with a company that understands this stuff because it might make more sense than people are treating it now. ”
Ahead of the Aug. 17 deadline to implement changes to business practices related to the NAR settlement, Pareja told investors and analysts on an earnings call that the company has been highly focused on providing as much education as possible to its agents and partners .
“Our Buyer Representation Toolkit, which includes the CFA (Consumer Federation of America) was recently considered simpler, clearer, and more consumer-friendly than any other protocol ever created, and it’s something we’ve open sourced so all agents in the industry can access a document that is considered the best in the industry. The transition was as smooth as possible,” Pareja said.
“After August 17, we will likely go through an adjustment period, what I call the ‘chaotic middle,’ as both agents and consumers adjust to the new rules of engagement.”
Pareja believes it is important for agents to choose a brokerage firm that can support them when seeking to comply with the terms of a NAR settlement, as the penalties for non-compliance can be severe.
“It all comes down to enforceability. MLS is the target of enforcing this provision and early indications are that they will do it through punitive penalties,” Pareja said. “As a result, agents can be subject to a $2,500 fine or a $5,000 fine and have their listings removed immediately, and some have raised the fact that they may even suspend the agent.”
While Pareja noted that some buyers may choose not to use an agent, as some buyers occasionally do today, he believes many “will still choose an agent and will continue to need expert guidance throughout the process.”
eXp certainly hopes these efforts in the U.S. and overseas will help increase its agent count, which fell 1% year over year to 87,111 agents worldwide. But the company notes that 75% of agents who leave close between zero and two deals.
When it comes to agent headcount goals, Sanford made it clear he has high hopes for his company.
“Over time, we hope to compete in a market with potentially over 20 million real estate professionals, and that’s our target market where we can reach a similar scale to the U.S., where we will eventually have close to 1 million agents globally. Possibly into the eXp platform,” Sanford said. “We are very excited about this long-term goal.”
Despite a slight decline in agent numbers, eXp Realty reported that U.S. transaction parties grew 1% in the second quarter of 2024 to 120,613 transactions with a total value of $51.9 billion, an annual growth rate of 7%.
The growth prompted eXp World Holdings to report a 5% annual increase in second-quarter revenue to $1.295 billion and a net profit of $11.8 million, slightly higher than the $11.4 million profit reported in the second quarter of 2023.
“Our second quarter results were strong,” said eXp Chief Accounting Officer Kent Cheng. “We continue to improve business efficiencies and reduce costs while actively investing in our agents. We believe this winning formula will deliver superior growth and greater value to our shareholders in the long term.
