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

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Actual property franchise large RE/MAX’s Motto Mortgage subsidiary has been named to Entrepreneur journal’s 2023 Franchise 500 record for the fourth 12 months in a row, placing some wind within the sails of the corporate’s long-term aim of getting 1,000 places of work up and working nationwide.

For now, 1,000 Motto Mortgage places of work stays a distant aim. Though Motto Mortgage’s open workplace rely grew 21 % from a 12 months in the past in the course of 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 file, Motto Franchising LLC CEO Ward Morrison stated in an announcement.

Ward Morrison

“I’m very proud to see how far the Motto Mortgage model has come since launching in 2016,” Morrison stated of being singled out by Entrepreneur as soon as once more. Final 12 months was “a file 12 months for the model with extra new places of work opened throughout the U.S. than ever earlier than and our franchisees closing almost $2.8 billion in mortgage quantity to assist over 9,700 households fulfill their dream of residence possession.”

Entrepreneur ranked Motto Mortgage 403rd on its Franchise 500 record, down from 306th final 12 months. Final 12 months Franchise Enterprise Assessment named Motto to a listing of prime “recession-proof” franchise alternatives, and the information collected by that publication prompted Black Enterprise to focus on the corporate as a prime franchise alternative for Black entrepreneurs.

Supply: RE/MAX investor presentation

Motto Mortgage doesn’t make loans however is a know-how, compliance, coaching and advertising and marketing resolution for mortgage brokers who work with a number of lenders. The corporate’s “mortgage brokerage-in-a-box” is out there to RE/MAX associates or any actual property dealer or entrepreneur. RE/MAX additionally gives third-party mortgage processing providers to mortgage brokers by way of one other subsidiary, wemlo.

It sometimes takes 12 to 14 months for brand new Motto franchisees to stand up and working. After attending coaching and getting licensed, franchisees sometimes 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 12 months, internet development in open places of work totaled 44 after subtracting places of work that closed or left the franchise. Through the first quarter (Q1) of 2023, Motto offered a complete of 10 franchises, down from 17 throughout the identical interval a 12 months in the past.

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

Motto’s development throughout a making an attempt time for the actual property trade has been a vivid spot for RE/MAX, which posted a $700,000 first-quarter internet 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 stated on the decision.

Through the first three months of 2023, 93 % of mortgages originated by way 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 because of the distinctive and compelling worth proposition Motto and Wemlo every provide,” Morrison stated. “Ancillary providers like mortgage present actual property entrepreneurs with enticing alternatives to diversify their income and earnings, one thing that is essential throughout altering market situations.”

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

Income and adjusted earnings, RE/MAX mortgage section

Supply: RE/MAX investor presentation

After they’ve been open for at the very least a 12 months, 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 section — Motto and wemlo — are producing regular income development, adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) stay within the crimson.

Adjusted earnings had been trending towards constructive 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 section in 2021 and 2022.

RE/MAX’s long-term aim 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 trying to outsource mortgage processing, offering know-how and a pool of certified processors that lets lenders scale up or down to satisfy demand. This 12 months wemlo additionally plans to roll out a mortgage brokering system to assist purchasers originate loans.

Morrison stated that with mortgage brokers dealing with about 20 % of the 6 million mortgages originated every year, 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 stated — about 60,000 loans a 12 months — it should generate $50 million in annual income. That works out to about $830 per mortgage.

For Motto to hit $50 million a 12 months in income, it should want between 900 and 1,000 franchises to be open and paying the complete $4,500 per thirty days persevering with franchise payment, he stated.

“We imagine we’re properly on our approach towards attaining that aim and the enlargement of our gross sales group ought to assist us get there even quicker,” Morrison stated.

Though the Motto gross sales group has skilled some attrition, “The excellent news is we’re trending in the suitable path, and we anticipate to be absolutely staffed later this summer time,” Morrison stated. “It’s an excellent higher story on the Wemlo aspect. We now have efficiently doubled the scale of Wemlo’s gross sales power and the outcomes have been measurable.”

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Electronic mail Matt Carter