eXp Realty Faces Scrutiny Over Business Model and Legal Allegations

eXp Realty, once a rapidly expanding force in the real estate sector, is currently facing a dual crisis that threatens its long-term viability. The brokerage, which built its reputation on a revenue-sharing model that incentivized agents to recruit others, is now experiencing its first sustained decline in headcount. With agent numbers dropping by 5% in 2024, questions are mounting regarding whether the company’s growth-dependent structure can survive a cooling recruitment pipeline.

Beyond the operational challenges, the company is embroiled in serious legal controversy. Two lawsuits allege that founder Glenn Sanford was aware of sexual misconduct and assault involving agents within the organization but failed to take adequate action, allegedly to protect the revenue streams generated by those individuals. These suits characterize eXp’s internal structure as a multi-level marketing (MLM) scheme, a classification supported by several academic experts who argue that the company’s compensation model prioritizes recruitment over traditional real estate brokerage activities.

For investors and industry observers, these developments represent a significant inflection point. The company maintains that its model is an innovative approach to rewarding brokers and denies all allegations of misconduct and MLM-like operations. However, the combination of a shrinking agent base—the primary engine of its revenue—and the reputational damage from high-profile litigation creates a precarious environment. If the recruitment-based model fails to attract new talent, the financial sustainability of the entire enterprise remains in question.