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After surging through the 12,000-agent mark in the second quarter, flat-fee brokerage Fathom Realty says it’s poised for continued growth with the introduction of new agent commission plans that pay agents a percentage of the revenue generated by other agents they recruit.
In reporting Q2 earnings Monday, Fathom said it grew its agent count by 12 percent from a year ago, to 12,224, even as elevated mortgage rates and home prices dragged transaction volume down by 8 percent.
Real estate transactions decreased to 10,137 during Q2, “primarily due to the continuation of high mortgage interest rates,” the company said in reporting a $1.3 million net loss, down from $4.3 million a year ago.
The “significant reduction” in Fathom’s net loss was driven primarily by the gain generated from the May 3 sale of the company’s Dagley Insurance subsidiary back to founder Nathan Dagley, and improved net operating results.
Fathom Realty’s parent company, Cary, North Carolina-based Fathom Holdings, generates more than 90 percent of its revenue through its real estate brokerage business But it’s also a provider of mortgages, title insurance and technology for agents.
Total Q2 revenue was down 11 percent from a year ago to $89.2 million, as an 11 percent increase in revenue from Fathom’s mortgage and title businesses wasn’t enough to offset a 12 percent drop in brokerage revenue as Fathom agents were involved in fewer sales.
Fathom said it plans to address the decline in transactions by “continuing its strategic recruiting efforts, powered by its recently announced new revenue share models and its service commitment to its agents.”
Last week Fathom announced two new agent commission plans it says are aimed at boosting profits while aiding agent recruitment and retention.
One plan, Fathom Max, offers “a highly competitive reduced transaction fee of $465 with a $9,000 annual cap,” the company said.
The other new plan, Fathom Share, features what the company claims is an industry-low 12 percent commission split with a $12,000 annual cap, “providing twice the revenue share opportunity over the Max plan.”
Last year Fathom raised its agent transaction fees by 10 percent, to $550 for the first 15 completed transactions. After the first 15 transactions, agents currently pay $150, up from $99 before the increase. This year Fathom added a new high-value property fee on sales of properties valued at more than $600,000, and raised Fathom’s annual agent fee by $100, to $700.
While existing agents will be able to stay on that plan, which the company calls “Fathom One,” it won’t be available to new agents.
Fathom CEO Marco Fregenal said all Fathom agents can participate in a revenue share program — which pays them a percentage of the revenue generated by other agents that they recruit to Fathom — regardless of which program they choose.
Revenue sharing in the Fathom Max program starts at 10 percent, while the Fathom Share plan offers 35 percent at level one.
Marco Fregenal
“Our Fathom Share plan … offers twice the revenue share potential over the Max plan, and higher first-level percentages than any of our peers,” Fregenal said on the company’s earnings call. “In simpler terms, our agents have the potential to significantly increase their earnings on their own transactions, while also building passive income through a highly competitive revenue model.”
Shares in Fathom, which in the last year have traded for as little as $1.32 and as much as $7.76, were up 9 percent to $2.69 in after hours trading Monday following the release of earnings.
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