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The Real Brokerage hits record revenue growth, but no profit

Real saw a 562% year-over-year increase in revenue during Q1 2022

Despite recording yet another strong quarter of revenue growth, The Real Brokerage did not turn a profit.

During the first quarter of 2022, the brokerage realized $61.6 million in revenue, a 562% increase from the $9.3 million in revenue generated in Q1 2021, but Real recorded a net operating loss of $4.3 million — up slightly from the $3.7 million net loss recorded a year prior.

Executives at Real attributed the firm’s strong revenue growth to a 140% year-over-year increase in agent count, which now surpasses 4,500 agents, as well as the revenue generated per agent reaching nearly $14,000, a 176% increase from a year prior.

According to Michelle Ressler, Real’s CFO, the increase in net loss is due to the brokerage’s “investments related to our growth, including building our team of agents, key management, employee personnel, as well as our technology infrastructure.”

This is reflected in the firm’s operating expenses, which have more than doubled from a year ago to $10.1 million. Those expenses included the acquisition and rebranding of Expetitle (now known as Real Title), as well as increases in its revenue sharing program as it attracts more agents and brings in more support staff to help it better serve those agents.

However, losses as a percentage of revenue came in at 7% during the first quarter of 2022, compared to 41% in Q1 2021.

During the first three months of the year, Real expanded into New Mexico, Arkansas, Maine and Ontario, Canada. Since the end of March, the brokerage has also launched in Mississippi and is now operational in 43 states.

“We are pleased with our expansion efforts and plan to focus on growing deeper within our existing areas in North America,” Tamir Poleg, Real’s CEO, said during the firm’s first-quarter earnings call with investors on Monday.

Real acquired Expetitle, Inc. in January 2022 and rebranded the title insurer as Real Title in April. At the time of acquisition, Real Title was operational in three states, but executives plan to increase its reach and improve the attach rate for transactions completed by Real agents.

“We’re having events with our agents. We’re explaining to them about the benefits of using our title company,” Poleg said on the call. “At the same time, we will likely set up a JV with some of our top-producing agents that will ensure that they use the title company because they will become part owners in that, and they will be also attracting other agents or asking other agents to be funding their transactions into the JV.”

In addition, Poleg said that Real will be integrating Real Title into its consumer-facing app. The brokerage hopes to launch the integration in October of this year.

“Whenever our agents are starting to work with a potential buyer, one of the documents that that buyer will be signing is an authorization to use the Real Title,” he said. “Again, today, most buyers do not really care which title company to work with, so we are going to offer them our own services. And it will be pretty seamless if they choose to use our title company, it will probably result in a smoother and faster closing, more visibility for them.”

As on other brokerage’s earnings calls for this quarter, uncertainty over the future of the housing market due to low inventory, rising interest rates and still rising home prices was a hot topic. While Poleg acknowledged that Real agents are seeing signs of softening markets, especially on the West Coast, he believes that the market is still strong and that his brokerage has what it takes to successfully weather any downturn.

“As I said before, some sort of a downturn in the market is an opportunity for us, an opportunity for a platform like Real to gather more agents and attract more agents and just showing this alternative,” he said. “So, I think we are very well prepared for that.”

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