With company executives predicting that things will get messy in the U.S. real estate landscape over the next several months due to the business practice changes outlined in the National Association of Realtors’ (NAR) commission lawsuit settlement agreement, eXp World Holdings — the parent company of eXp Realty — is focused on improving the firm’s agent value proposition.
In the second quarter of 2024, eXp’s global agent Net Promoter Score (aNPS), which is a measure of agent satisfaction, was 76, up from 72 a year ago.
“NPS is a leading indicator for both our future growth and retention, which ultimately translates to the long-term financial viability of the company,” Glenn Sanford, the CEO of eXp World Holdings, said during the firm’s Q2 2024 earnings call with investors Wednesday evening.
Sanford stepped down a few months ago from his role as the CEO of eXp Realty. He is now primarily focused on the international markets the firm operates in and on evaluating how the firm’s agent value proposition works in each market.
“What we are doing is actually going back to the question about agent value proposition, and going back to each country and reevaluating if we have the right value prop mix for that country,” Sanford said, ”because every country is different, and some of the tools and technologies that we rolled out initially — while good for the brokerage in that it helped us sort of streamline — weren’t as agent friendly as we need them to be and that has created a challenge to grow in some countries.”
Back in the U.S., eXp executives are confident that their understanding of the business practice changes outlined in the NAR settlement — and their initiative in preparing for them — will help the brokerage continue to grow.
“I fully expect to see this messy middle over the next six to 12 months, where folks are probably going to be fatigued from the breakage and the headaches that come with it,“ said Leo Pareja, the CEO of eXp Realty. “And they are going to want to partner with an outfit that understand this stuff because it is probably going to be more meaningful than folks are treating it right now.”
Ahead of the Aug. 17 deadline for implementing the NAR settlement-related business practice changes, Pareja told investors and analysts on the earnings call that the firm has been highly focused on providing as much education as possible to its agents and partners.
“Our buyer representation toolkit, which includes the buyer broker representation agreement that the CFA (Consumer Federation of America) recently recognized as much simpler, clearer and pro-consumer than any other agreement that’s been created, is something we’ve open-sourced, so all agents in the industry have access to what is being considered the best-in-class document in order to make this transition as smooth as possible,” Pareja said.
“After Aug. 17, we will likely experience an adjustment period, which I’ve been calling the ‘messy middle’ as both agents and consumers adjust to the new rules of engagement.”
Pareja believes it will be important for agents to be at a brokerage that supports them as they look to navigate the terms of NAR’s settlement, since the penalties for not complying could be severe.
“It all comes down to enforceability. And the MLSs are the ones targeted to enforce this and the early signs are that they are going to do it through punitive penalties,” Pareja said. “So, agents could be subject to $2,500 fines or $5,000 fines with immediate deletion of their listings, and some have already floated the fact that they may even be suspending agents.”
While Pareja noted that some buyers may choose to go unrepresented, as some occasionally do today, he believes many will “still choose representation and will continue to need expert guidance throughout their process.”
eXp is certainly hoping that these efforts both in the U.S. and abroad help to boost its agent count, which dropped 1% year over year worldwide to 87,111 agents. But the firm noted that 75% of the agents who left had closed between zero and two transaction sides.
When it comes to agent count goals, Sanford made it clear that he has big hopes for his firm.
“When we look at the fact that there’s likely somewhere around 20 million-plus real estate professionals in the markets that we want to compete in over time, that are our target markets where we can get to a similar size that we are in the U.S., that would be almost a million agents worldwide that could eventually be on the eXp platform,” Sanford said. “We are really excited about that long term.”
Despite the slight drop in agent count, eXp Realty reported a 1% uptick in U.S. transaction sides in Q2 2024 to 120,613, with a total value of $51.9 billion that was good for a 7% annual increase.
These increases contributed to eXp World Holdings reporting a 5% yearly increase in Q2 revenue to $1.295 billion, along with a net income of $11.8 million, up slightly from the $11.4 million profit reported in Q2 2023.
“We delivered a solid second quarter,” said Kent Cheng, eXp’s chief accounting officer. “We continue to improve business efficiencies and reduce costs, even while investing aggressively in our agents. We believe this winning formula will drive superior growth and greater value for our shareholders over the long term.”