RE/MAX’s Motto Mortgage Aims For 1,000 Offices Nationwide

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Actual property franchise big RE/MAX’s Motto Mortgage subsidiary has been named to Entrepreneur journal’s 2023 Franchise 500 listing for the fourth yr in a row, placing some wind within the sails of the corporate’s long-term purpose of getting 1,000 places of work up and working nationwide.

For now, 1,000 Motto Mortgage places of work stays a distant purpose. Though Motto Mortgage’s open workplace rely grew 21 % from a yr in the past throughout the first quarter, to 232 as of March 31, quarter-over-quarter development was basically flat.

However the 61 new places of work opened in 2022 was an organization report, Motto Franchising LLC CEO Ward Morrison mentioned in an announcement.

Ward Morrison

“I’m very proud to see how far the Motto Mortgage model has come since launching in 2016,” Morrison mentioned of being singled out by Entrepreneur as soon as once more. Final yr was “a report yr for the model with extra new places of work opened throughout the U.S. than ever earlier than and our franchisees closing practically $2.8 billion in mortgage quantity to assist over 9,700 households fulfill their dream of house possession.”

Entrepreneur ranked Motto Mortgage 403rd on its Franchise 500 listing, down from 306th final yr. Final yr Franchise Enterprise Overview named Motto to a listing of high “recession-proof” franchise alternatives, and the info collected by that publication prompted Black Enterprise to focus on the corporate as a high franchise alternative for Black entrepreneurs.

Supply: RE/MAX investor presentation

Motto Mortgage doesn’t make loans however is a expertise, compliance, coaching and advertising and marketing answer for mortgage brokers who work with a number of lenders. The corporate’s “mortgage brokerage-in-a-box” is offered to RE/MAX associates or any actual property dealer or entrepreneur. RE/MAX additionally offers third-party mortgage processing companies to mortgage brokers by means of one other subsidiary, wemlo.

It usually takes 12 to 14 months for brand new Motto franchisees to stand up and working. After attending coaching and getting licensed, franchisees usually pay $4,500 a month in royalties.

Motto Mortgage open places of work

Supply: RE/MAX regulatory filings

Whereas Motto opened 61 places of work final yr, web development in open places of work totaled 44 after subtracting places of work that closed or left the franchise. Throughout the first quarter (Q1) of 2023, Motto bought a complete of 10 franchises, down from 17 throughout the identical interval a yr in the past.

However that tempo was in keeping with years previous when Motto ended with 60 to 70 franchise gross sales, Morrison mentioned on RE/MAX’s Might 5 earnings name. Rising rates of interest have been a drag on Motto franchise gross sales since Q2 2022, Morrison mentioned, however “we’re inspired by the stable begin to 2023 and the curiosity we see within the market.”

Motto’s development throughout a attempting time for the true property trade has been a vibrant spot for RE/MAX, which posted a $700,000 first-quarter web loss as income and actual property agent rely slipped.

On the corporate’s first-quarter earnings name, RE/MAX CEO Steve Joyce singled out momentum in Motto franchise gross sales and continued development in wemlo’s enterprise with mortgage brokers — as “operational highlights.”

Greater than 70 % of Motto franchise gross sales have been to actual property professionals, and their shut ties to homebuyers have been a key to their success, Morrison mentioned on the decision.

Throughout the first three months of 2023, 93 % of mortgages originated by means of the Motto community had been buy loans, in comparison with 80 % for the trade as a complete.

“We imagine the expansion, success and long-term potential of our mortgage enterprise is as a result of distinctive and compelling worth proposition Motto and Wemlo every supply,” Morrison mentioned. “Ancillary companies like mortgage present actual property entrepreneurs with engaging alternatives to diversify their income and earnings, one thing that is essential throughout altering market circumstances.”

Within the final month, Motto has introduced the opening of 4 new places of work:

Income and adjusted earnings, RE/MAX mortgage phase

Supply: RE/MAX investor presentation

After they’ve been open for at the very least a yr, RE/MAX says every Motto workplace generates about the identical quantity of income as a 20-agent actual property brokerage workplace in a company-owned area.

Whereas RE/MAX’s mortgage phase — Motto and wemlo — are producing regular income development, adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) stay within the pink.

Adjusted earnings had been trending towards optimistic territory, however RE/MAX’s 2020 acquisition of wemlo and the cash it’s invested since within the enterprise have contributed to rising adjusted losses for the mortgage phase in 2021 and 2022.

RE/MAX’s long-term purpose is to generate $100 million in annual income from mortgages, with half of that coming from wemlo.

Wemlo serves not solely mortgage brokers affiliated with the Motto Mortgage community however any mortgage dealer seeking to outsource mortgage processing, offering expertise and a pool of certified processors that lets lenders scale up or down to satisfy demand. This yr wemlo additionally plans to roll out a mortgage brokering system to assist shoppers originate loans.

Morrison mentioned that with mortgage brokers dealing with about 20 % of the 6 million mortgages originated annually, wemlo’s complete addressable market is the 1.2 million dealt with by mortgage brokers. If wemlo can seize simply 5 % of that enterprise, he mentioned — about 60,000 loans a yr — it is going to generate $50 million in annual income. That works out to about $830 per mortgage.

For Motto to hit $50 million a yr in income, it is going to want between 900 and 1,000 franchises to be open and paying the total $4,500 monthly persevering with franchise price, he mentioned.

“We imagine we’re properly on our means towards attaining that purpose and the growth of our gross sales crew ought to assist us get there even sooner,” Morrison mentioned.

Though the Motto gross sales crew has skilled some attrition, “The excellent news is we’re trending in the fitting path, and we count on to be absolutely staffed later this summer season,” Morrison mentioned. “It’s a fair higher story on the Wemlo aspect. Now we have efficiently doubled the scale of Wemlo’s gross sales power and the outcomes have been measurable.”

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