More real estate brokerages were profitable in the first six months of 2024 than the year prior, according to a newly released study by real estate software company AccountTECH.
The study analyzed 100 randomly selected companies’ earnings before interest, taxes, depreciation, and amortization (EBITDA) margins between January and June of this year, measuring their cash profits for that time period as compared to 2023. Collectively, these 100 companies closed 51,769 sides with 17,749 agents, with 62% of those analyzed achieving a positive net operating profit in the first six months of 2024, compared to 60% for the entirety of 2023.
"While these results show a slight positive trend, they also highlight challenges for the industry in the coming year,” AccountTECH CEO Mark Blagden commented on the findings. “Many brokerages are failing to create adaptive business models that can adjust expenses in response to fluctuating gross profits. Additionally, EBITDA margins of 3% or lower are concerning; such slim margins may not withstand even minor reductions in commission rates.”
This report emerged several days after changes resulting from the National Association of Realtors’ $418 million settlement went into effect, potentially altering compensation for brokers, along with buyers’ and sellers’ agents.
“Faced with the possibility that the NAR settlement may drive commission rates generally lower, brokerages may need to accelerate their efforts to streamline overhead costs to attain or maintain profitability,” Blagden pointed out.
AccountTECH’s study found that profitable brokerages earned an average of $589 per transaction side, $1,767 per agent for the period, or $294 per agent per month. In contrast, unprofitable companies lost $462 per transaction side, at an average loss of $1,284 per agent for the period, equaling a loss of $214 per agent per month.
In terms of EBITDA margins, just 5% of the brokerages studied reported percentages above 9%. This underscores the difficulty companies have maintaining significant profitability in the current low-sales market. While many brokerages are adding revenue through mortgage, title, and insurance services, the findings emphasize that efficient operations and strategic cost management are the main drivers of profitability.
