Revenue Recognition (Policies)

12 Months Ended

Dec. 31, 2020

Revenue is recognized upon the transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services in accordance with the revenue standard. The Company's revenue is disaggregated by major revenue categories on our Consolidated Statements of Operations and further disaggregated by business segment as follows:


	Years Ended December 31, 2020 vs December 31, 2019
	Realogy Franchise Group				Realogy Brokerage Group				Realogy Title Group				Corporate and Other				Total Company
	2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
Gross commission income (a)	$	—	$	—	$	4,669	$	4,330	$	—	$	—	$	—	$	—	$	4,669	$	4,330
Service revenue (b)	243		351		26		11		714		579		—		—		983		941
Franchise fees (c)	725		668		—		—		—		—		(306)		(282)		419		386
Other (d)	91		139		47		68		22		17		(10)		(11)		150		213
Net revenues	$	1,059	$	1,158	$	4,742	$	4,409	$	736	$	596	$	(316)	$	(293)	$	6,221	$	5,870


	Years Ended December 31, 2019 vs December 31, 2018
	Realogy Franchise Group				Realogy Brokerage Group				Realogy Title Group				Corporate and Other				Total Company
	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
Gross commission income (a)	$	—	$	—	$	4,330	$	4,533	$	—	$	—	$	—	$	—	$	4,330	$	4,533
Service revenue (b)	351		374		11		9		579		564		—		—		941		947
Franchise fees (c)	668		688		—		—		—		—		(282)		(295)		386		393
Other (d)	139		136		68		65		17		16		(11)		(11)		213		206
Net revenues	$	1,158	$	1,198	$	4,409	$	4,607	$	596	$	580	$	(293)	$	(306)	$	5,870	$	6,079

_______________

(a)Gross commission income at Realogy Brokerage Group is recognized at a point in time at the closing of a homesale transaction.

(b)Service revenue primarily consist of title and escrow fees at Realogy Title Group and are recognized at a point in time at the closing of a homesale transaction. Service revenue at Realogy Franchise Group includes relocation fees, which are recognized as revenue when or as the related performance obligation is satisfied dependent on the type of service performed, and fees related to leads and related services, which are recognized at a point in time at the closing of a homesale transaction or at the completion of the related service.

(c)Franchise fees at Realogy Franchise Group primarily include domestic royalties which are recognized at a point in time when the underlying franchisee revenue is earned (upon close of the homesale transaction).

(d)Other revenue includes brand marketing funds received at Realogy Franchise Group from franchisees, third-party listing fees in 2019 and 2018, and other miscellaneous revenues across all of the business segments.

The Company's revenue streams are discussed further below by business segment:

Realogy Franchise Group

Domestic Franchisees

The Company franchises its real estate brands to real estate brokerage businesses that are independently owned and operated. Franchise revenue principally consists of royalty and marketing fees from the Company’s franchisees. The royalty received is primarily based on a gross percentage (generally 6%) of the franchisee’s gross commission income. Royalty fees are recorded as the underlying franchisee revenue is earned (upon close of the homesale transaction). Annual volume incentives given to certain franchisees on royalty fees are recorded as a reduction to revenue and are accrued for in relative proportion to the recognition of the underlying gross franchise revenue. Other sales incentives are generally recorded as a reduction to revenue ratably over the related performance period or from the date of issuance through the remaining life of the related franchise agreement. Franchise revenue also includes domestic initial franchise fees which are generally non-refundable and recognized by the Company as revenue upon the execution or opening of a new franchisee office to cover the upfront costs associated with opening the franchisee for business under one of Realogy’s brands.

The Company also earns marketing fees from its franchisees and utilizes such fees to fund marketing campaigns on behalf of its franchisees. As such, brand marketing fund fees are recorded as deferred revenue when received and recognized into revenue as earned when these funds are spent on marketing activities. The balance for deferred brand marketing fund fees increased from $13 million at January 1, 2020 to $14 million at December 31, 2020 primarily due to additional fees received from franchisees, offset by amounts recognized into revenue matching expenses for marketing activities during the year ended December 31, 2020.

International Franchisees

The Company generally employs a master franchise model outside of the U.S., whereby it contracts with a qualified third party to build a franchise network in the country or region in which franchising rights have been granted, and enters into long-term franchise agreements (generally 25 years in duration) to receive an initial area development fee ("ADF") and ongoing royalties. Ongoing royalties are generally a percentage of the royalties received by the master franchisor from its franchisees with which it contracts and are recorded once the funds are received by the master franchisor. The ADFs that the Company collects are recorded as deferred revenue when received and are classified as current or non-current liabilities in the Consolidated Balance Sheets based on the expected timing of revenue recognition. ADFs are recognized into franchise revenue over the average 25 year life of the related franchise agreement as consideration for the right to access and benefit from Realogy’s brands. In the event an ADF agreement is terminated prior to the end of its term, the unamortized deferred revenue balance will be recognized into revenue immediately upon termination. The balance for deferred ADFs

decreased from $48 million at January 1, 2020 to $43 million at December 31, 2020 due to $7 million of revenues recognized during the year ended December 31, 2020 that were included in the deferred revenue balance at the beginning of the period, partially offset by $2 million of additional area development fees received during the year ended December 31, 2020.

In addition, the Company recognizes a deferred asset for commissions paid to Realogy franchise sales employees upon the sale of a new franchise as these are considered costs of obtaining a contract with a customer that are expected to provide benefits to the Company for longer than one year. The Company classifies prepaid commissions as current or non-current assets in the Consolidated Balance Sheets based on the expected timing of expense recognition. The amount of commissions is calculated as a percentage of the anticipated gross commission income of the new franchisee or ADF and is amortized over 30 years for domestic franchise agreements or the agreement term for international franchise agreements (generally 25 years). The amount of prepaid commissions was $25 million and $24 million at December 31, 2020 and 2019, respectively.

Lead Generation Programs

Through Realogy Leads Group, a part of Realogy Franchise Group, the Company provides leads through real estate benefit programs that provide home-buying and selling assistance to members of organizations such as credit unions and interest groups that have established members who are buying or selling a home as well as to consumers and corporations who have expressed interest in a certain brand, product or service (such as relocation services), including those offered by Realogy. Realogy Leads Group also directs the Company's broker-to-broker business, which generates leads by brokers affiliated with one of its customized agent and brokerage networks, including the Realogy Advantage Brokerage Network. The networks consist of real estate brokers, including company owned brokerage operations, select franchisees and independent real estate brokers who have been approved to become members. Member brokers of the networks receive leads from the Company's real estate benefit programs (including via Cartus Relocation Services) and each other in exchange for a fee paid to Realogy Leads Group. Network fees are billed in advance and recognized into revenue on a straight-line basis each month during the membership period. The balance for deferred network fees decreased from $3 million at January 1, 2020 to zero at December 31, 2020 due to $7 million of revenues recognized during the year that were included in the deferred revenue balance at the beginning of the period, partially offset by a $4 million increase related to new network fees.

Cartus Relocation Services

Through Cartus Relocation Services, a part of Realogy Franchise Group, the Company offers a broad range of employee relocation services to clients designed to manage all aspects of transferring their employees ("transferees"). These services include, but are not limited to, homesale assistance, relocation policy counseling and group move management services, expense processing and relocation-related accounting, and visa and immigration support. The Company also arranges household goods moving services and provides support for all aspects of moving a transferee's household goods. There are a number of different revenue streams associated with relocation services including fees earned from real estate brokers and household goods moving companies that provide services to the transferee which are recognized at a point in time at the completion of services. The Company earns revenues from outsourcing management fees charged to clients that may cover several of the relocation services listed above, according to the clients' specific needs. Outsourcing management fees are recorded as deferred revenue when billed (usually at the start of the relocation) and are recognized as revenue over the average time period required to complete the transferee's move, or a phase of the move that the fee covers, which is typically 3 to 6 months depending on the move type. The balance for deferred outsourcing management fees decreased from $4 million on January 1, 2020 to $3 million on December 31, 2020 due to $41 million of revenues recognized during the year as performance obligations were satisfied, mostly offset by a $40 million increase primarily related to additions for management fees billed on new relocation files in advance of the Company satisfying its performance obligation. Furthermore, Cartus Relocation Services continues to provide value through the generation of leads to real estate agent and brokerage participants in the networks maintained by Realogy Leads Group, which drives downstream revenue for our businesses. The Company also earns net interest income which represents interest earned from clients on the funds it advances on behalf of the transferring employee net of costs associated with the securitization obligations used to finance these payments, which is recorded within other revenue in the accompanying Consolidated Statements of Operations.

Realogy Brokerage Group

As an owner-operator of real estate brokerages, the Company assists home buyers and sellers in listing, marketing, selling and finding homes. Real estate commissions earned by the Company’s real estate brokerage business are recorded as revenue at a point in time which is upon the closing of a real estate transaction (i.e., purchase or sale of a home). These

revenues are referred to as gross commission income. The commissions the Company pays to real estate agents are recognized concurrently with associated revenues and presented as the commission and other agent-related costs line item on the accompanying Consolidated Statements of Operations.

The Company has relationships with developers, primarily in major cities, to provide marketing and brokerage services in new developments. New development closings generally have a development period of between 18 and 24 months from contracted date to closing. In some cases, the Company receives advanced commissions which are recorded as deferred revenue when received and recognized as revenue when units within the new development close. The balance of advanced commissions related to developments remained flat at $9 million at January 1, 2020 and December 31, 2020 due to a $2 million increase related to additional commissions received for new developments, offset by a $2 million decrease as a result of revenues recognized on units closed.

Realogy Title Group

The Company provides title and closing services, which include title search procedures for title insurance policies, homesale escrow and other closing services. Title revenues and title and closing service fees are recorded at a point in time which occurs at the time a homesale transaction or refinancing closes. The Company also serves as an underwriter of title insurance policies in connection with residential and commercial real estate transactions under its title insurance business, insuring clear title and ownership for the lender and buyer in homesale transactions. The Company's clients include unaffiliated title agencies as well as title agencies that are a part of Realogy Title Group. For unaffiliated agents, policy premium revenue is recognized on a gross basis (before deduction of agent commission) upon notice of policy issuance from the agent. For affiliated title agents, the incremental policy premium revenue is recognized upon the effective date of the title policy as the agent commission revenue is already recognized by the affiliated title agent.

Contract Balances (Deferred Revenue)

The following table shows the change in the Company's contract liabilities related to revenue contracts by reportable segment for the period:


	Year Ended December 31, 2020
	Beginning Balance at January 1, 2020		Additions during the period		Recognized as Revenue during the period		Ending Balance at December 31, 2020
Realogy Franchise Group (a)	$	80	$	147	$	(157)	$	70
Realogy Brokerage Group	13		3		(4)		12
Total	$	93	$	150	$	(161)	$	82

_______________

(a)Revenues recognized include intercompany marketing fees paid by Realogy Brokerage Group.

The majority of the Company's contracts are transactional in nature or have a duration of one-year or less. Accordingly, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.