Why are independent brokerages joining eXp in 2024?

I was on a zoom the other day with eXp Realty CEO Leo Pareja when he said that every day he is talking with at least one independent brokerage about joining eXp ... and the independents are calling him, not the other way around. Pareja said that 6 months ago eXp was not on these brokers' radar.

Some of the biggest shifting in the industry right now is with small & medium-sized independents & many of them are taking a close look at bringing their entire brokerage & brand under the eXp umbrella.

So what has changed?

I am seeing 3 main factors that are forcing many independents to look at things differently.

ONE - Profitability

There are 3 main factors that impact profitability for a brokerage ... homes sold (agent productivity), agent count, & expenses. Let's look at those.

HOMES SOLD - The total number of homes sold in the US in 2023 was historically low, more or less matching the 2008 crash. The US homes-sold volume is predicted to be up slightly in 2024, but high interest rates are impacting buyer enthusiasm, buying power, & readiness. This lower volume impacts brokerages in a number of ways. First, their top agents are still most likely rockin & rollin, dialing up their hustle & keeping the their client pipeline solid (at least the ones who are good business drivers). But most agents struggle with this business fundamental & a down market hurts most agents. So if a brokerage has marginal profitability to begin with, then a downward sales volume can make or break that business profitability in a given month. Brokerages have fixed expenses (space, staff, technology), they are constant whether sales are up or down.

AGENT COUNT - Agent count drives productivity. The math should be more agents = more closings = more profit for the brokerage. Many brokerages have a monthly agent fee, a desk fee, a monthly tech fee ... these fees help the brokerage keep the lights on. Agent count is one of the foundational metrix of a brokerage health & sustainability. Depending on the size of the brokerage, losing one productive agent to another firm can often lead to losing one or two more to that same competitor; losing a top producer can have a more damaging impact. Brokerages (of all sizes) lose low-performing agents in a tough or down market. Brokers are nervous right now, many of them cannot afford to lose agents.

EXPENSES - Most brokerage expenses are fixed, they are the same whether they have a banner month or a low-sales month. Besides space, staff, & tech, most brokerages are also paying E&O policies, marketing, & other expenses to help support their agents & their brand. Again, agent count & production & possibly other income streams help level this out. We are seeing brokers completely eliminate their current expense outlay and bring more services & tools to their agents that choose to come with them. The industry joke is that the base word of the word "broker" is broke; in a down or disruptive market, there are more brokers at risk of being broke. Partnering with eXp, these brokers are significantly reducing their expenses and they earn profit share off of their agent production. The bottom line improves, often drastically.

TWO - NAR settlement

As an industry, we are in our lawsuit era. The NAR lawsuit (& so many copycat lawsuits) & the upcoming settlement & implementation is changing how we are conducting business. As all of this unfolds, brokerages have decisions to make. One of those decisions is how to best lead their agents, and another decision is if they are protected from potential future lawsuits as class-action law firms are going all-in with the entire real estate industry this year. I have heard brokerages expressing vulnerability & exposure. This is what many of those independents talking to Pareja are discussing ... they are discussing protecting their brokerage & their agents by aligning with a large brokerage with ample resources & teams of leaders & attorneys addressing the issues & implementation. While there are advantages to being a small nimble independent brokerage, there are advantages of size & scale & the NAR settlement environment has brought that front & center.

THREE - Risk Mitigation

When independent brokers join eXp, they shift from broker-owner & to broker associate, thus shifting legal liability from their license to the eXp state broker & the eXp E&O policy. That now broker associate can still love on & support their agents like they always have, yet compliance & contract review & customer complaints now fall on the shoulders of the eXp state broker team. The broker associate can now sleep at night knowing they are not on-call all the time & knowing they are no longer one lawsuit away from their license being called into question.

These THREE FACTORS - profitability, lawsuit era, risk mitigation - are leading independents into a discussion & consideration that was not on their radar a year ago. Once they start the process of eXploring eXp as an option, they realize the additional benefits - staffing, resources, technology, stock, revenue share, an exit / retirement strategy - and then the new possibilities are what is keeping them up at night.

It's not that these independents want to change they way they are running their brokerages, the 2024 disruption is causing them to consider all of their options, especially those options that protect their agents, their bottom line, & their ability to sleep at night. Oh, and you can keep your branding (your branding within the eXp branding). If you are considering your options, then let's start the conversation & see what an eXp partnership can do for your agents & your bottom line.