If you can’t beat ’em, join ’em.
This thinking has long inspired some independent brokerages to affiliate with traditional brands. And a similar rationale is spurring others to join fast-growing cloud-based brokerages, such as eXp Realty and Real.
Tropical Realty, a Brevard County, Florida brokerage, recently shed its brokerage status to join cloud-based brokerage eXp Realty as an agent team, with the goal of providing “the ability to continue to excel and grow through world class support, programs and the most agent-centric revenue opportunities available today,” said Mitch Ribak, principal broker of Tropical Realty, in a statement.
With 45 agents, Tropical Realty is the largest brokerage team to be absorbed by eXp Realty so far, joining a handful of smaller independent firms that have moved to eXp Realty.
The deal highlights an expansion strategy that cloud-based brokerages are using to accelerate their growth.
Saving on overhead costs, these firms can offer attractive technology and compensation packages to business owners ready to trade their broker-owner credentials for a support structure with room to grow.
“Independent brokerages are moving to eXp to blend the best of world class technology and support with agents that want to grow within a local market and enjoy the benefits of agent ownership,” said eXp Realty CEO Jason Gesing in a statement.
EXp Realty did not buy Tropical Realty, noted Russ Cofano, president of eXp Realty’s parent company, eXp World Holdings Inc. Tropical Realty closed as an independent brokerage and joined eXp Realty as a team.
EXp Realty does not operate physical offices. Enjoying savings from reduced overhead costs, the firm uses a proprietary “cloud office environment” to provide agents with online business tools, training and interaction with coworkers.
The brokerage also offer agents the opportunity to earn company stock, along with a revenue-sharing program that — similar to Keller Williams Realty’s profit-sharing scheme — fuels agent recruitment.
EXp — whose parent company is traded on a stock exchange for early-stage companies — exemplifies a new generation of virtual brokerages that are gaining momentum.
The company has nearly tripled its agent count over the last year to around 3,400, Cofano said.
Another cloud-based brokerage, Real, has also expanded at a break-neck pace, growing its agent count by 350 percent over the last year to more than 1,000 — in part by absorbing some independent brokerages, said Real spokeswoman Lynda Radosevich.
“It’s becoming more and more difficult for independent brokerage companies to compete with large-scale brokerage companies and platforms,” Cofano said.
Many independent brokerage owners see their nimbleness as a competitive edge over franchisors and big-box firms.
But Ribak saw folding his firm into eXp Realty as a way to “maintain his team relationship” and “walk away from the hassle of managing a brokerage company,” while still earning a slice of his agents’ gross commission income, according to Cofano.
EXp Realty would not disclose if Ribak received a signing bonus for bringing his team to the brokerage, saying that “terms of compensation related to this move are confidential.”
But eXp Realty is open to paying compensation to independent brokerages for joining the company.
“We will always look at the short, mid and long term economics of a brokerage moving to eXp and determine whether any additional compensation is appropriate,” the company said in a statement. “That would apply to other independent brokerages like Tropical.”
Rather than collect a commission split as a brokerage owner, Ribak will receive a small slice of commission income earned by his agents under eXp Realty’s revenue-sharing program.
The program pays agents a percentage of the gross commission earned by fellow agents that they have recruited. eXp Realty will compensate Ribak for recruiting all of his agents to the company, paying him an amount equal to 3.5 percent of their gross commission income up to a maximum of $2,800 a year, eXp Realty said.
Editor’s note: This story has been updated to correct that eXp World Holdings Inc. is traded on a stock exchange for early-stage companies. A previous version incorrectly stated that the firm is traded on a Canadian stock exchange.