RE/MAX International's size, scrappiness and success in building the agent-centric franchise business model are only a few reasons the industry loves to wonder about the company. With more focus on broker profitability over agent loyalty, is RE/MAX making big changes?

Concerns about broker profitability is behind a rumor that all RE/MAX franchisees are going to start charging a mandatory five percent "Broker Service Fee" per transaction, effectively ending the reign of the 100 percent commission era. More profits for franchisees to pass on to corporate could be attractive as RE/MAX International prepares for a possible IPO.

Unfortunately, neither statement is true, according to the company, but never say never.

"That has been rumored for 20 years, says Daryl Jesperson, RE/MAX's international CEO. "We like being private."

For more than 10 years, RE/MAX has "allowed" RE/MAX regional owners (franchisors) the option of instituting a "broker service fee" or 'broker fee' in their regions, up to 5 percent on a transaction.

This first happened in the early 80s, says a source, when the Canadians in the Ontario/Atlantic Canada region were told by the licensing authority that brokers had to participate in commissions, so RE/MAX allowed that region's broker/owners to charge a 5 percent fee to agents. Later, when RE/MAX of Florida was re-opened in the late 80s, under new owners, they were granted a 'trial' of the same concept.

It also happened in California, the only state to require brokers to pay worker's compensation to independent contractors, says Jesperson. "It was another way of handling the numbers. That premium had to be paid somehow."

According to Jesperson, the broker fee is a non-issue. About 40 to 50 percent of RE/MAX associates pay some kind of a 'broker fee.'

RE/MAX has been well aware of broker profitability issues, and more than 10 years ago, authorized any region to adopt a 'broker fee,' but only a few had done so until recently.

"More brokers are doing it because the agents prefer paying expenses as their business comes in," suggests Jesperson, "whereas under our 1973 operating guidelines, they got a bill every month whether they did business or not."

In all cases where this fee is initiated, RE/MAX recommends that all agents be "grandfathered" -- at minimum based on their independent contractor agreements with their brokerages.

Company-owned franchises will convert to the 'broker fee' structure within the year, grandfathering current agents according to their contracts with their brokerages, of course. That could cause other broker-owners to capitulate, and start charging the 'broker fee,' too.

What kicked the rumor mill into action was a story published December 31, 2004 by The Denver Post in which the writer tried hard to build a case that RE/MAX was preparing for a possible IPO by suggesting that the company is buying back many of its top franchises, purchasing nine in the last five years.

RE/MAX is also becoming compliant with the federal government's Sarbanes-Oxley financial-disclosure law, which is required for publicly-held companies. The company is hiring compliance officers, an outside auditor committee, and is drafting mock Securities and Exchange Commission reports, according to the Denver Post report.

Again, there is a reasonable explanation. Aging brokers looking for exit visas from RE/MAX may trigger a need for RE/MAX to go public if the company were to buy a number of franchises at one time.

"We have purchased some of those regions with our own cash," explains Jesperson, " but if 20 came on the same time, we don't have that kind of money and banks would say they are tapped out, too, so in those instances, we may have to go to Wall Street. If you are borrowing (bonds), they require you to be Sarbanes Oxley-compliant. It is the banking rules that have driven private businesses to do this."

So, this is also a non-story, say sources. What Liniger did say is that "someday" RE/MAX "probably" will need to go public. One relevant circumstance is if Liniger and his wife and partner Gail Liniger were to pass on, triggering hefty estate taxes, suggests the Post.

"It only makes good business sense (especially now that the Sarbanes-Oxley regulations are available as guidelines) for any company to begin activities to be compliant to those regulations -- and RE/MAX is doing those things," says Jesperson. "Prudent businesses get prepared, and that is what we are doing, but there is no pending date or intention by the company to file an IPO."

Published: January 5, 2005

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.