RE/MAX Reports Motto Mortgage Office Count Is Shrinking
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Real estate franchising giant RE/MAX reports that the number of open Motto Mortgage offices is shrinking for the first time ever as franchise sales slow and some existing franchisees cancel their agreements.
Launched in October 2016, Motto Mortgage doesn’t make loans itself but provides technology, training and marketing tools for mortgage brokers who work with wholesale lenders like UWM, the nation’s biggest mortgage lender.
Elevated mortgage rates have made it a tough time to be in the mortgage business. Motto Franchising LLC sold 27 franchise licenses in 2023, down from 64 in 2021, finishing the year with 246 open offices.
This year the number of open offices is in decline for the first time in the company’s history. Motto Franchising sold only nine franchise licenses in the first half of 2024, down 50 percent from 18 at the same point a year ago.
Motto Mortgage office count peaks
Open Motto Mortgage offices peaked at 246 in Q4 2023 and has declined to 239 as of July 31, 2024. Source: Inman analysis of RE/MAX Holdings Inc. earnings reports.
But the number of open Motto Mortgage offices has been shrinking this year, as some franchisees have terminated their licenses while new licensees require time to get up and running.
The number of open Motto Mortgage offices dropped to 243 at the end of the first quarter, to 241 as of June 30, and to 239 as of July 31, RE/MAX said in reporting second quarter earnings.
Motto Franchising President Ward Morrison said that even as Motto continues to sell new franchise agreements, there has been an increase in terminations, “for many different factors.”
![](https://assets.inman.com/wp-content/uploads/2023/02/Ward-Morrison-150x150.jpg)
Ward Morrison
“Obviously, as the volume of loans decreased within the market due to the macro economy, it’s tougher for offices to get some of those” loans, Morrison said on an Aug. 9 call with investment analysts. “They have to go out there and scrap on a daily basis to try and get refis in the market, try and get purchase in the market.”
A few Motto Mortgage franchisees have lacked the “wherewithal” to stay open in that environment, Morrison said, due to “their financial position, a lack of deals, [or] maybe they are not connected to real estate.”
While Motto has “seen some of those terminations increase during this past year, we feel like when the macro economy changes, we’ll be able to start regrowing that open office count and continue on the trend that we had prior to the macro.”
Another headwind for sustaining past growth in office count is that franchisees sign seven-year agreements with Motto Franchising, and 2024 is the first full year Motto has had offices come up for renewal.
In April, Motto Mortgage announced two original Motto franchise owners — Motto Mortgage Prosperity and Motto Mortgage Supreme — had renewed their licenses.
Since then, Motto has announced the opening of Motto Mortgage Royal and Motto Mortage INVICTUS in Florida; Motto Mortgage Sail Home in New Hampshire; and Motto Mortgage Premier Pros in North Dakota.
“While not all Motto franchises succeed, over the first six years of their existence, Motto franchisees have had a higher success rate than the comparable average small business operating in the financial services industry,” RE/MAX disclosed in its most recent annual report to investors.
The average fee revenue each office generates for RE/MAX has climbed steadily over the years, from an average of $3,000 per month in 2019 to $3,700 a month last year. RE/MAX also provides third-party loan processing services to mortgage brokers through another subsidiary, wemlo, which recently processed its 6,000th loan “clear to close,” RE/MAX CEO Erik Carlson said.
![](https://assets.inman.com/wp-content/uploads/2024/05/Screen-Shot-2024-05-02-at-3.15.06-PM-150x150.png)
Erik Carlson
“Reaching this milestone is exciting for the wemlo brand because growth like this validates the benefits to mortgage brokers (of) providing our third-party processing services,” Carlson said.
New offices pay no monthly fees to Motto Franchising for six months after purchasing a franchise license. After that, fees are ramped up through escalating tiers that top out at $4,650 a month after 13 months. More than 9 in 10 offices (91 percent) were in the highest monthly fee tier at the end of last year, RE/MAX reported.
RE/MAX grows mortgage revenue and losses
![](https://assets.inman.com/wp-content/uploads/2024/08/Motto-rev-earnings-2018-23.png)
Source: Inman analysis of RE/MAX Holdings Inc. earnings reports.
RE/MAX’s Motto Franchising and wemlo businesses generated more than five times as much revenue last year ($14 million) as they did in 2018 ($2.5 million). But after inching toward profitability since launching in 2016, the mortgage segment’s adjusted EBITDA loss has been growing larger for the last three years, growing to $6.9 million in 2023.
At $3.68 million, Q2 2024 revenue from the mortgage segment was up 2 percent from the same quarter a year ago. But RE/MAX’s mortgage segment posted a $1.68 million adjusted EBITDA loss (earnings before interest, taxes, depreciation and amortization) for Q2, up 15 percent from the same quarter a year ago.
For the first six months of the year, mortgage revenue was up 7 percent to $7.3 million, and the $2.8 million adjusted EBITDA loss for H1 2024 was 30 percent less than the $4 million adjusted loss at the same point in 2023.
Morrison said Motto does “pick up some money” when franchisees terminate their licenses, “so that does sort of have a put and take.”
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Email Matt Carter