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A46/100FDD 2025

HomeSmart — Litigation & Risk

Real Estate · FDD Items 3, 4 & 5

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Elevated Risk

6 cases disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
6
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
46 / 100
FranchiseVerdict composite
Rating
STRONG
STRONG / MODERATE / CAUTION / AVOID

7(a) FOIA data · FY2020–present

SBA Loan Performance

Aggregated from public SBA 7(a) loan disclosures. Default rate is the share of loans that were charged off or settled for less than the full balance.

Total 7(a) loans
14
Government-backed loans issued
Default rate
0.0%
vs <3% typical · system-wide
5-yr default rate
0.0%
Defaults
0 loans
Loans charged off or defaulted
Total loan volume
$8.1M
Avg loan size
$579K
Participating lenders
8

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Required
Disputes resolved outside court — limits your legal options
Jury trial waiver
Waived
You give up the right to a jury trial
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
Arizona
State whose law governs disputes — relevant if you're not based there

What drove the 46/100 rating

Risk Score Breakdown

  1. 01HIGHSignificant litigation portfolio including tortious interference, class action MLS disputes, TCPA violations, and no-poaching Assurance of Discontinuance—indicating operational and compliance risks
  2. 02MINORNo Item 19 financial disclosure (Avg Revenue and Net Income not provided)—impossible to assess actual franchisee profitability against $65.5K–$205K investment range
  3. 03MINORComplex royalty structure with $12/agent/month minimum plus $120/side plus $500/month floor creates unpredictable profit scenarios and potential margin compression
  4. 04HIGHGoing concern notation suggests parent company financial stress despite 14.5% unit growth, raising sustainability questions
  5. 05HIGHModest unit growth (262 units, 14.5% YoY) in mature real estate franchise segment; growth rate does not offset litigation and disclosure gaps

Severity inferred from FDD text — not a regulatory or legal classification

Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice — consult a franchise attorney before signing any franchise agreement.