After increasing its agent count by 12% to 12,224, the flat-fee brokerage said its new commission plan will pay agents a percentage of the revenue generated by the agents it recruits, positioning it for continued growth Prepare.
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After surging to the 12,000-broker mark in the second quarter, flat-fee brokerage Fathom Realty said it is rolling out a new broker commission plan that will pay brokers a percentage of the revenue generated by other brokers it recruits. People pay a percentage of the fee, thereby setting themselves up for continued growth.
Fathom said in its second-quarter earnings report on Monday that its agent count increased 12% from the same period last year to 12,224, despite an 8% drop in transaction volume due to rising mortgage rates and home prices.
The company said in the report that real estate transaction volume fell to 10,137 in the second quarter “primarily due to continued high mortgage rates” and that it had a net loss of $1.3 million, down from $4.3 million a year ago.
Fathom’s “significant reduction” in net loss was primarily due to gains from the sale of the company’s Dagley Insurance subsidiary to founder Nathan Dagley on May 3 and improved net operating results.
Fathom Realty’s parent company, Cary, N.C.-based Fathom Holdings, derives more than 90% of its revenue from real estate brokerage operations, but it is also a provider of mortgages, title insurance and agent technology.
Total second-quarter revenue fell 11% from the same period last year to $89.2 million as Fathom’s mortgage and title revenue grew 11%, but was not enough to offset a 12% decline in brokerage revenue as Fathom agents participated in sales amount decreases.
Fathom said it plans to address the decline in transaction volume by “continuing strategic hiring efforts supported by the recently announced new revenue share model and service commitments to agents.”
Last week, Fathom announced two new agent commission programs it said are designed to boost profits while helping agent recruitment and retention.
The company said a plan called Fathom Max offers “a highly competitive $465 transaction fee reduction with an annual cap of $9,000.”
Another new program, Fathom Share, features what the company claims is an industry-low 12% commission share with an annual cap of $12,000, “providing twice the revenue share opportunity as the Max program.”
Last year, Fathom increased its agent transaction fee by 10% to $550 for the first 15 completed transactions. After the first 15 transactions, agents now pay $150, up from $99 before the price increase. This year, Fathom added a new high-value property fee to sales of properties worth more than $600,000 and increased Fathom’s annual agent fee by $100 to $700.
While existing agents will be able to continue using what the company calls “Fathom One,” new agents will not be able to use the program.
Fathom CEO Marco Fregenal said all Fathom agents can participate in the revenue sharing program, which pays them a percentage of the revenue generated by other agents they recruit to Fathom, regardless of which program they choose.
Revenue sharing for the Fathom Max plan starts at 10%, while the Fathom Share plan offers 35% at the first level.
Marco Fregnall
“Our Fathom Share plan…offers twice the revenue share potential of the Max plan and higher than any of our peers,” Fregenal said on the company’s earnings call. “Put simply, our agents have the potential to significantly increase the revenue they generate from their own trading while also building passive income through a highly competitive revenue model.”
Last year, Fathom’s shares traded as low as $1.32 and as high as $7.76, but the company’s shares rose 9% to $2.69 in after-hours trading Monday after the earnings release.
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