Fathom Realty’s New Revenue Sharing Model Set to Boost Agent Recruitment and Growth

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Fathom Realty, a flat-fee brokerage that recently surpassed 12,000 agents, is gearing up for further expansion with the introduction of new agent commission plans designed to enhance recruitment and retention. These plans, which include a revenue-sharing component, are part of Fathom's strategy to navigate a challenging real estate market marked by high mortgage rates and fluctuating home prices.

Growth Despite Market Challenges

In its Q2 earnings report, Fathom Realty announced a 12% increase in its agent count from the previous year, bringing the total to 12,224. However, elevated mortgage rates contributed to an 8% decline in transaction volume, with real estate transactions dropping to 10,137 during the quarter. Despite these challenges, the company managed to reduce its net loss to $1.3 million, down from $4.3 million a year ago. This reduction was largely attributed to the sale of Dagley Insurance, a subsidiary, and improved operating results.

Fathom Holdings, the parent company based in Cary, North Carolina, generates over 90% of its revenue from its real estate brokerage business but also provides mortgages, title insurance, and technology services for agents. Total revenue for Q2 fell by 11% to $89.2 million, with gains in the mortgage and title businesses unable to offset a 12% decline in brokerage revenue.

New Commission Plans to Drive Recruitment

To counter the decline in transactions, Fathom Realty has introduced two new agent commission plans aimed at boosting profitability while attracting and retaining talent. The first plan, Fathom Max, offers a reduced transaction fee of $465 with a $9,000 annual cap, making it an appealing option for agents focused on maximizing their earnings per transaction.

The second plan, Fathom Share, introduces a 12% commission split with a $12,000 annual cap, which the company touts as providing twice the revenue share opportunity compared to the Max plan. This plan is designed to incentivize agents to recruit others to Fathom, as they can earn a percentage of the revenue generated by those they bring into the fold.

Fathom CEO Marco Fregenal emphasized that all agents, regardless of the plan they choose, can participate in the revenue share program. The Fathom Share plan offers a 35% revenue share at the first level, while the Max plan starts at 10%.

“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 noted during the company’s earnings call. “This means 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.”

Market Response and Future Outlook

Fathom’s proactive approach to agent compensation appears to be resonating with the market, as shares in the company rose by 9% to $2.69 in after-hours trading following the earnings release. With these new commission structures in place, Fathom Realty aims to continue its growth trajectory, even in a challenging real estate environment.