eXp World Holdings, Inc.

Current report

The Company faces significant risk to its brand and revenue if it fails to maintain compliance with the law and regulations of federal, state, county and foreign governmental authorities, or private associations and governing boards.

Current report

The Company operates in a heavily regulated industry subject to complex, federal, state, provincial and local laws and regulations within the markets in which the Company operates and third-party organizations’ regulations, policies and bylaws governing the real estate business.

Current report

In general, the laws, rules and regulations that apply to the Company’s business practices include, without limitation, RESPA, the federal Fair Housing Act of 1968, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the Exchange Act and federal advertising and other laws, as well as comparable state statutes; rules of trade organizations such as NAR, local MLSs and state and local Association of Realtors; licensing requirements

Current report

and related obligations that could arise from the Company’s business practices relating to the provision of services other than real estate brokerage services, including without limitation, its mortgage lending services; privacy regulations relating to the Company’s use of personal information collected from the registered users of its websites; laws relating to the use and publication of information through the internet; and state real estate brokerage and mortgage lending licensing requirements, as well as statutory due diligence, disclosure, record keeping and standard-of-care obligations relating to these licenses. Recent regulatory scrutiny regarding the classification of real estate agents as independent contractors, particularly at the state level, could lead to increased compliance costs, potential reclassification, or penalties, which could materially impact the Company’s owned brokerage operations.

Current report

Moreover, under U.S. franchise law, we are subject to federal regulations enforced by the FTC governing franchise offers and sales, as well as various regulations in states in which we operate, which may impose additional registration and disclosure requirements. Furthermore, our ability to terminate or refuse renewal/transfer of franchise agreements may be restricted by state-specific “franchise relationship” or “business opportunity” laws.

Current report

Entering into new business arrangements, joint ventures, or business lines may expose the Company to additional regulatory and compliance risks that could materially and adversely affect the Company’s business and financial condition.

Current report

The Company’s strategy includes pursuing new business initiatives, entering into joint ventures, and expanding into complementary business lines. These efforts often require the Company to navigate complex and evolving regulatory environments that may differ significantly from those governing the Company’s core operations. If the Company is unable to timely and effectively address these regulatory and compliance requirements, or if risks arise beyond the Company’s reasonable ability to mitigate, its business and financial condition may be materially and adversely affected.

Current report

For example, SUCCESS® Lending, the Company’s joint venture mortgage business launched in 2021, operates in the highly regulated mortgage lending industry, which involves stringent licensing requirements, state and federal oversight, and compliance with consumer protection laws. The mortgage lending business faces inherent risks, including but not limited to, operational challenges, legal and regulatory scrutiny, and unforeseen compliance costs.

Current report

These new business lines also require significant investments in infrastructure, personnel, and systems to ensure compliance. Failure to meet these obligations could result in legal or regulatory penalties, reputational damage, or the inability to scale these operations as planned. Moreover, the financial success of these ventures is uncertain given their limited operating histories, making it difficult to predict their long-term contribution to the Company’s overall financial performance.

Current report

Similarly, the Company’s franchise business, while currently immaterial to its overall operations, introduces a distinct regulatory layer. Under U.S. federal law, the Company is subject to regulations enforced by the Federal Trade Commission governing the offer and sale of franchises, including mandatory pre-sale disclosure obligations. Additionally, various states in which the Company operates impose their own registration and disclosure requirements that must be satisfied before franchise offers or sales may be made in those jurisdictions. Furthermore, certain states have enacted “franchise relationship” or “business opportunity” laws that may restrict the Company’s ability to terminate, refuse to renew, or withhold consent to the transfer of franchise agreements, regardless of the terms negotiated in those agreements. Failure to comply with applicable federal and state franchise laws could expose the Company to regulatory penalties, rescission claims by franchisees, or reputational harm, any of which could adversely affect the Company’s business and financial condition.

Current report

While the Company aims to mitigate these risks through robust compliance frameworks and strategic partnerships, no mitigation effort can fully eliminate all risk. Unanticipated challenges in these or other future ventures could materially and adversely affect the Company’s operations, reputation, and financial condition.

Current report

The Company is, and may in the future be, blocked from or limited in providing its agent and franchise compensation plans in certain jurisdictions and may be required to modify its business model in those jurisdictions as a result.

Current report

The Company’s agent compensation plans represent a key lever in its strategy to attract and retain independent agents and brokers and are subject to various international, federal, state, territorial and local laws, rules and regulations which differ in each of the Company’s existing and future markets. As a result, the Company is, and may in the future be, blocked from or limited in providing each of its agent compensation plans in certain markets. In addition, these laws, rules and regulations are subject to judicial and agency interpretation, and it might be determined that the Company’s agent compensation plans are not permitted to be offered to independent contractors. In response to such limitations, the Company has, and may in the future be, required to modify its agent compensation practices in such markets.

Current report

Separately, to the extent the Company operates franchise businesses, state-specific “franchise relationship” or “business opportunity” laws introduce analogous constraints on operational flexibility at the jurisdictional level. These laws may restrict the Company’s ability to terminate, refuse to renew, or withhold consent to the transfer of franchise agreements in certain states, regardless of the terms set forth in those agreements or the Company’s broader business objectives in a given market. While the Company’s franchise operations are currently immaterial, the patchwork of state franchise relationship laws, which vary significantly in scope, applicability, and enforcement, creates compliance complexity that mirrors the jurisdictional variability the Company already navigates with respect to its agent compensation plans. As the Company’s franchise operations grow or extend into additional jurisdictions, this complexity may increase and could further constrain the Company’s ability to manage and exit franchise relationships on its preferred terms.

Current report

Failure to comply with applicable law, rules and regulations or failure to subsequently modify the Company’s business model in certain jurisdictions to effectively attract and retain agents and brokers could negatively affect the Company’s business, results of operations or financial condition. The costs attributable to developing compliant agent and franchise compensation plans can be significant and could adversely affect the Company’s financial condition.

Current report

The Company may be unable to attract, retain, and incentivize qualified real estate professionals.

Current report

The Company’s success depends significantly on its ability to attract, retain, and engage qualified real estate agents and brokers, who are the foundation of the Company’s revenue-generating activities. Competition for skilled agents and brokers is intense, as the Company faces pressure from other brokerages offering alternative compensation models, technology tools, or support services, as well as from technology companies seeking experienced professionals in software development and cloud-based solutions. If the Company fails to recruit and retain a strong network of agents and brokers, the Company’s competitive position, market share, and overall business performance could be adversely affected. Likewise, our franchisees could experience similar issues, which could result in a decrease in royalty fees received by us, negatively affect franchisees’ perception of our value proposition, limit our ability to expand our franchise network, or require us to offer more advantageous financial arrangements to attract and retain franchisees.

Current report

Industry and regulatory changes, including recent revisions to National Association of Realtors (“NAR”) policies and standards, buyer-broker compensation practices, and the recent settlement resolving nationwide antitrust litigation against NAR and major brokerages, may increase compliance burdens for agents, raise operating costs, and impact the perceived value of the profession. These developments could lead to higher attrition rates across the industry and at the Company, particularly among part-time agents or those with lower transaction volumes. Broader shifts in compensation structures, licensing requirements, or competitive dynamics could further complicate the Company’s ability to recruit and retain agents, and if a significant number of agents leave the profession or fail to maintain active licenses, the Company’s agent base and market presence could be materially diminished.

Current report

Further, the Company’s value proposition for agents and brokers, which includes allowing them to participate in the revenue of the Company, is not typical in the real estate industry. If agents and brokers do not understand or appreciate this unique model, including the Company’s revenue share program, equity incentives, and cloud-based platform, the Company may not be able to attract, retain, and incentivize agents effectively. In addition, volatility in the value of the Company’s stock or changes to the perceived value of its programs could negatively impact recruitment and retention.

Current report

If the Company is unable to attract, retain qualified agents and brokers, or to maintain their engagement with its model and programs, the Company’s business, financial condition, results of operations, and growth prospects could be materially and adversely affected.

Current report

Material decreases in the average brokerage commission rate, due to conditions beyond the Company’s control, could materially adversely affect its financial results.

Current report

There are many factors that contribute to average broker commission rates that are beyond the Company’s control. Factors that can contribute to a material decrease in brokerage commissions include changes in regulation, litigation (including pending litigation and industry practice changes described elsewhere in this Annual Report), the rise of certain competitive brokerage or non-traditional competitor models, an increase in the popularity of discount brokers and agents, increased adoption of flat fees, commission models with more competitive rates, rebates or lower commission rates on transactions, as well as other competitive factors. For example, the Company competes with other brokerages that may have reduced operating margins and access to capital resources permitting them to prioritize market share over profits, as well as the growing popularity of non-traditional platforms such as listing aggregators, which may put additional pressure on the Company’s commissions and related costs. The average broker commission rate for a real estate transaction is a key determinant of the Company’s profitability, and a material decrease in brokerage commission rates could have a material adverse effect on the Company’s business and profitability.

Current report

These risks extend to the Company’s franchise operations. Because royalties received from the Company’s franchisees are calculated as a percentage of the franchisee’s gross sales commissions, the Company’s royalty revenues are directly exposed to the same commission rate pressures that affect its own brokerage operations. Any decline in franchisees’ gross commission income, or in the percentage of commissions they are able to collect, would generally result in a corresponding decline in the Company’s royalty revenues. While the Company’s franchise operations are currently immaterial, such declines could nevertheless negatively affect current or prospective franchisees’ perception of the franchise’s value proposition, which in turn could limit the Company’s ability to expand its franchisee network or require it to offer more advantageous financial arrangements to attract and retain franchisees. To the extent the franchise business grows, this exposure could become more significant.

Current report

The Company's franchise business, while currently immaterial, exposes it to risks tied to franchisee performance and the terms of its franchise arrangements that could adversely affect its financial results.

Current report

Prior to May 6, 2026, the Company has no prior material history operating a franchise business, and its franchise operations are currently immaterial to its overall financial results. However, to the extent the franchise business grows, the Company's financial results will become increasingly influenced by the operational and financial performance of its franchisees. Because certain franchise royalties may be calculated as a percentage of franchisees' gross sales commissions, the Company's royalty revenues are directly exposed to the same commission rate pressures, regulatory changes, and broader economic conditions that affect its own brokerage operations. If industry trends weaken, or if one or more franchisees becomes less competitive, experiences financial distress, or elects to leave the franchise system, royalty revenues could decline, which could adversely affect the Company's revenues and profitability.

Current report

The franchise model also exposes the Company to risks related to franchisee liquidity, terminations, and non-renewals. The Company may from time to time need to increase bad debt reserves, record impairment charges related to any funding provided to franchisees, or contend with franchisees that fail to meet their payment obligations. Any of these developments could adversely affect the Company's franchise brand and financial results.

Current report

Actions of independent real estate professionals affiliated with the Company could materially and adversely affect the Company’s reputation and subject it to liability.

Current report

Actions of independent real estate professionals affiliated with the Company could materially and adversely affect the Company's reputation and subject it to liability.

Current report

The Company's operations rely on the performance of a large and geographically dispersed network of independent real estate professionals, including brokers, franchisees, and agents, over whom the Company has limited direct oversight and control. The conduct of these professionals, whether arising from the quality of services provided to customers, failures to comply with applicable laws and regulations, violations of industry standards or ethical obligations, unauthorized or improper representations to clients, fair housing violations, data privacy breaches, conflicts of interest, or other acts or omissions in the course of their professional activities, could expose the Company to reputational harm, regulatory scrutiny, and legal liability. These risks are heightened by the scale of the Company's network, the difficulty of monitoring conduct across a large independent contractor base, and the varying regulatory environments in which these professionals operate.

Current report

The Company has previously been subject to, and could continue to be subject to, public scrutiny as well as litigation and regulatory claims arising out of such professionals' performance of brokerage services or other conduct. Adverse determinations in any such matters could result in substantial financial penalties, damage awards, injunctive relief, or harm to the Company's brand and reputation. Furthermore, high-profile misconduct by any affiliated professional, even where the Company is not found directly liable, could negatively affect public perception of the Company and its ability to attract and retain agents, brokers, franchisees, and customers.

Previous report

Risks Related to Our Industries

Previous report

Our profitability is tied to the strength of the residential real estate market, which is subject to a number of general business and macroeconomic conditions beyond our control.

Previous report

Our profitability is closely related to the strength of the residential real estate market, which is cyclical in nature and typically is affected by changes in national, state and local economic conditions, which are beyond our control. Macroeconomic conditions that could adversely impact the growth of the real estate market and have a material adverse effect on our business include, but are not limited to, economic slowdown or recession, increased unemployment, increased energy costs, reductions in the availability of credit or higher interest rates, increased costs of obtaining mortgages, an increase in foreclosure activity, inflation, disruptions in capital markets, significant volatility in U.S. and international equity markets, deterioration in global financial conditions, declines in the stock market, adverse tax policies or changes in other regulations, lower consumer confidence, lower wage and salary levels, war, terrorist attacks or other geopolitical and security issues, including Russia’s ongoing war with Ukraine, the conflict between Israel and Palestine and rising tensions between China and Taiwan as well as between China and the U.S., changes in trade policy including the imposition of new tariffs, and responses to such tariffs, that may indirectly affect the cost of homebuilding materials, consumer goods, or broader economic sentiment, natural disasters or adverse weather events, or the public perception that any of these events may occur.

Previous report

In 2024 and 2025, the U.S. residential real estate market has been adversely affected by a combination of high interest rates, elevated mortgage costs, and declining affordability, which have led to a slowdown in buyer demand and caused homes to remain on the market longer. More recently, housing inventory has begun to accumulate in many regions, reflecting a mismatch between listing activity and qualified buyer interest. These conditions—combined with tighter monetary policy and consumer hesitation—have contributed to reduced transaction volumes, softer market liquidity, and lower agent productivity. In addition, evolving federal policy under the current administration, including “Buy American” and protectionist trade or immigration measures, could affect global supply chains, the cost of goods and labor, or foreign investment in real estate, each of which may influence housing demand or affordability.

Previous report

Unfavorable general economic conditions, such as a recession or economic slowdown, in the U.S., Canada, or other markets we enter and operate within, could negatively affect the affordability of and consumer demand for, our services, which could have a material adverse effect on our business and profitability. In addition, international, federal and state governments, agencies and government-sponsored entities such as Fannie Mae, Freddie Mac and Ginnie Mae could take actions that result in unforeseen consequences to the real estate market or that otherwise could negatively impact our business. Moreover, continued global financial uncertainty and monetary tightening policies may weigh on consumer spending and homebuying activity, both of which are key drivers of agent productivity and company performance.

Previous report

Risks Related to Our Real Estate Business

Previous report

The real estate market may be severely impacted by industry changes as the result of certain class action lawsuits, settlements, or government investigations.

Previous report

The real estate industry faces significant pressure from private lawsuits and investigations by the U.S. Department of Justice (the “DOJ”) into antitrust issues.

Previous report

In April 2019, the NAR and certain brokerages and franchisors (including Realogy Holdings Corp., HomeServices of America, Inc. RE/MAX, and Keller Williams Realty, Inc.) were named as defendants in a class action complaint alleging a conspiracy to violate federal antitrust laws by, among other things, requiring residential property sellers in Missouri to pay inflated commission fees to buyer brokers (the “NAR Class Action”). On October 31, 2023, a jury found NAR and various of its co-defendants liable and awarded plaintiffs nearly $1.8 billion in damages (all defendants have since settled, which remain subject to ongoing appeals processes). Class action suits raising similar claims are already pending in this and other jurisdictions and the outcome of the NAR Class Action may result in additional such actions being filed. The Company was named as one of several defendants in similar class action suits but entered into a settlement agreement on December 9, 2024 to resolve all U.S. nationwide claims. SeeNote 11 – Commitments and Contingenciesto the unaudited condensed consolidated financial statements.

Previous report

Defending against class action litigation is costly, may divert time and money away from our operations, and imposes a significant burden on management and employees. Also, the results of any such litigation or investigation cannot be predicted with certainty, and any negative outcome could result in payments of substantial monetary damages or fines, and/or undesirable changes to our operations or business practices, and accordingly, our business, financial condition, or results of operations could be materially and adversely affected.

Previous report

On March 15, 2024, NAR entered a settlement agreement to resolve on a class wide basis the claims against NAR in the NAR Class Action. In addition to a monetary payment of $418 million, NAR agreed to change certain business practices, including changes to cooperative compensation and buyer agreements. The NAR settlement agreement: (1) prohibits NAR and REALTOR® MLSs from requiring that listing brokers or sellers make offers of compensation to buyer brokers or other buyer representatives; (2) prohibits NAR, REALTOR® MLSs and MLS participants from making an offer of compensation on the MLS; and (3) requires all REALTOR® MLS participants to enter into a written buyer agreement specifying compensation before taking a buyer on tour. The NAR settlement received preliminary court approval on April 23, 2024.

Previous report

These revised NAR rules and practices have caused and may require additional changes to our business model, including changes to agent and broker compensation and how we meet home buyers. Without mandated commission sharing, for example, we may see the introduction of hourly or a la carte services. Or, if buyers now compensate brokers, they may be more likely to contact listing agents directly, which could drive down dual agent broker commissions. Home lending rules and norms do not currently allow buyers to include buyer’s agent compensation in the balance of a home loan, which may impair the ability of homebuyers to pay their agent fees when purchasing a home. The amended rules and regulations also require us to get a buyer agreement signed before we take a home buyer on a first tour. This requirement may dissuade buyers from hiring the Company, thereby reducing the fees we receive from our agents. These and other shifts in the model for agent and broker compensation could significantly change the brokerage landscape overall and may adversely affect our financial condition and results of operations.

Previous report

In addition to the NAR Class Action and various similar private actions already pending, beginning in 2018, the DOJ began investigating NAR for violations of the federal antitrust laws. The DOJ and NAR appeared to reach a resolution in November 2020, resulting in the filing of a Complaint and Proposed Consent Judgment pursuant to which NAR agreed to adopt certain rule changes, such as increased disclosure of commission offers. The DOJ has since sought to continue its investigation of NAR, and on April 5, 2024, a federal appeals court decided that the DOJ could reopen its investigation. It is uncertain what effect, if any, the resumption of the DOJ’s investigation could have on the larger real estate industry, including any further settlement that may result therefrom.

Previous report

More recently, litigation between other real estate industry participants has highlighted the risk of private litigation under the auspices of antitrust laws. For example, in July 2025, Compass, Inc. filed a lawsuit against Zillow Group, Inc. claiming that Zillow had engaged in anti-competitive conduct. The lawsuit included allegations that other industry participants, including the Company, had conspired with such anti-competitive conduct. Although the Company is not named as a defendant in that action, these types of lawsuits reflect the risk of both private litigation and regulatory action to challenge business

Previous report

practices in the residential real estate sector. Even when not directly targeted, we may face reputational, operational, or financial consequences as a result of broader industry litigation. We may be required to further adjust our business practices, increase legal spend, or defend against claims, any of which could materially and adversely affect our business, financial condition, or results of operations.

Previous report

Risks Related to Legal and Regulatory Matters

Previous report

Adverse outcomes in litigation and regulatory actions against other companies and agents in our industry could adversely impact our financial results.

Previous report

Adverse outcomes in legal and regulatory actions against other companies, brokers, and agents in the residential and commercial real estate industry may adversely impact the financial condition of the Company and our real estate brokers and agents when

Previous report

those matters relate to business practices shared by the Company, our real estate brokers and agents, or our industry at large. Such matters may include, without limitation, RESPA, TCPA and state consumer protection law, antitrust and anticompetition, and worker classification claims. Additionally, if plaintiffs or regulatory bodies are successful in such actions, this may increase the likelihood that similar claims are made against the Company and/or our real estate brokers and agents which claims could result in significant liability and be adverse to our financial results if we or our brokers and agents are unable to distinguish or defend our business practices.

Previous report

As an example, in the matter ofBurnett v. National Association of Realtors (U.S. District Court for the Western District of Missouri), a federal jury found NAR and certain other brokerage defendants liable for $1.8 billion in damages; all defendants have since settled, subject to ongoing appeals processes, which include both monetary and non-monetary settlement terms. During 2024, the Company, along with other brokerage and non-brokerage defendants, have been named as defendants in putative class action lawsuits alleging similar fact patterns and antitrust violations. On December 9, 2024, the Company and certain of its subsidiaries entered into a Settlement Agreement (the “Settlement”) with plaintiffs in the U.S. antitrust lawsuit1925 Hooper LLC, et al. v. The National Association of Realtors et. al., Case No. 1:23-cv-05392- SEG (United States District Court for the Northern District of Georgia, Atlanta Division), which was filed on November 22, 2023 against the Company and other US brokerage defendants (the “Hooper Action”). The Settlement resolves all claims set forth in the Hooper Action, as well as all similar claims on a nationwide basis against the Company (collectively, the “Claims”) and releases the Company, its subsidiaries and affiliates, and their independent contractor real estate agents in the United States from the Claims. By the terms of the Settlement, the Company agreed to make certain changes to its business practices and to pay a total settlement amount of $34.0 million. The Settlement received preliminary approval on May 23, 2025, but remains subject to final court approval and will become effective following an appeals process, if applicable. Both the NAR and the Company’s settlement terms may materially impact business practices within the industry which could adversely impact the Company’s business, results of operations, and financial condition.

Previous report

Risks Related to Our Stock

Previous report

Glenn Sanford, our Chairman and Chief Executive Officer, together with Penny Sanford, a significant stockholder, own a significant percentage of our stock. As a result, the trading price for our shares may be depressed and they can significantly influence actions that may be adverse to the interests of our other stockholders.

Previous report

On March 4, 2025, each of Glenn Sanford and Penny Sanford filed a Schedule 13D with the Securities and Exchange Commission, which disclosed that they beneficially owned approximately 27.19% and 17.35% of our outstanding common stock as of January 31, 2025, respectively. This significant concentration of share ownership may adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in a company with two stockholders holding a significant number of our shares. Each of Mr. Sanford and Ms. Sanford can significantly influence all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. In addition, due to his significant ownership stake and his service as our Chief Executive Officer and Chairman of our Board of Directors, Mr. Sanford significantly influences the management of our business and affairs. This concentration of ownership and influence could have the effect of delaying, deferring, or preventing a change in control, or impeding a merger or consolidation, takeover or other business combination that could be favorable to our other stockholders.

Previous report

The stock price of our common stock has been and likely will continue to be volatile and may decline in value regardless of our performance.

Previous report

The market price for our common stock could fluctuate significantly for various reasons, many of which are outside our control, including those described above and the following:

Previous report

Recent instability in global capital markets and the volatility of U.S. and international stock exchanges—driven by inflationary pressures, geopolitical conflict, central bank policy shifts, and investor uncertainty—may contribute to elevated fluctuations in the price of our common stock.

Previous report

In addition, the stock markets have experienced periods of high price and volume fluctuations that have affected and continue to affect the market prices of the equity securities of many companies, including technology companies and real estate brokerages. Such price fluctuations can be unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business.