What specific liabilities of Remax are measured at fair value on a recurring basis as Level 3 liabilities?

According to Remax's 2025 Franchise Disclosure Document, Level 3 liabilities that are measured at fair value on a recurring basis consist of the company's contingent consideration related to the acquisition of Motto. This means that Remax uses unobservable inputs, where there is little to no market data, to develop its own assumptions for valuing the liabilities associated with the Motto acquisition. These valuations are performed regularly.

Fair value measurements are categorized into a three-tier hierarchy. Level 3 measurements rely on unobservable inputs, which require Remax to develop its own assumptions due to the lack of available market data. This contrasts with Level 1 measurements, which use quoted prices for identical instruments in active markets, and Level 2 measurements, which use quoted prices for similar instruments or model-derived valuations with observable inputs.

For a prospective Remax franchisee, this information provides insight into how Remax values certain liabilities on its financial statements. The use of Level 3 inputs suggests that the valuation of the contingent consideration for the Motto acquisition involves a degree of subjectivity and estimation by Remax, as it is based on internal assumptions rather than readily available market data. Understanding these accounting practices can help franchisees assess the financial health and reporting transparency of Remax.