DONNA BROOKS
Profits not surprising

A healthy real estate market has delivered good news for most Bay State real estate firms, with 66 percent of local companies reporting an increase in profits last year, according to the National Association of Realtors’ 2004 Profile of Real Estate Firms.

Nearly a quarter of the firms that responded to the recent NAR survey saw profits decrease in 2003. However, the majority of firms surveyed, or 64 percent, expect profits to climb this year, with 28 percent anticipating profits to remain the same as 2003.

Profits have been on the rise in real estate firms across the country during the recent real estate boom that set home sales records for three years in a row, according to NAR. Six out of 10 real estate firms nationwide reported higher profits in 2003. More than half of the firms expect even greater profits this year, with another 32 percent believing their profits in 2004 will be equal to last year.

The NAR profile was based on a 61-question survey that sought information from firms on their organization and structure, firm practices and services, technology use and their relationship with affinity groups and relocation networks. The national survey was mailed to 33,180 real estate firms in February of this year, including the country’s 500 largest firms, and generated 2,808 usable responses.

NAR produced a local sampling for the Massachusetts Association of Realtors, with responses from just over 200 real estate firms. Twenty-two percent of all firms surveyed in Massachusetts saw profits jump by more than 25 percent last year. A larger percentage of firms in the commonwealth anticipate greater profitability this year compared to companies nationally (64 percent vs. 54 percent).

Agents a Factor

Donna Brooks, broker-owner of Boss Realty in Leominster, said she is not surprised that most companies are experiencing greater profitability. At her own company, Brooks estimates profits were up by about 20 percent in 2003. But Brooks said she also has seen expenses jump, including advertising costs.

Brooks acknowledged that she has done more advertising to promote her company and home listings. But even if advertising had remained at the same level as the prior year, Brooks estimates advertising costs for her company would still be 10 percent to 12 percent higher.

One factor that has helped companies achieve stronger profits is the addition of real estate agents, according to Brooks. With heavy job losses in recent years, many people are turning to real estate as a career, said Brooks, providing companies with more commissioned agents to generate business.

“The more [agents] make, the more you’re going to make,” she said.

According to NAR, many firms are supporting their staffs by investing in technology and offering training and group affiliations – all of which have helped boost profits.

In Massachusetts specifically, real estate firms appear to rely more heavily on technology in their day-to-day business. Some 95 percent of firms use e-mail to communicate with clients, and nearly 83 percent of firms have a Web site – significantly more than the 52 percent of firms nationwide that reported having a Web site. Over a quarter of Massachusetts firms reported that the Web site generated 6 percent to 10 percent of leads, and 17 percent said that more than a quarter of their leads came from the Web site.

Rhonda Sprague, broker-owner of Harvard Realty, which serves Harvard, Littleton, Lancaster and other communities west of Boston, said she has spent a lot of money upgrading technology at her company. The company launched a new Web site two weeks ago, and already has seen an increase in visits to the new site.

“We feel our presence on the Web is very important,” said Sprague.

The national survey indicates more technology use among real estate firms across the country as well. Some 88 percent reported using e-mail to communicate with clients. In a separate survey done in 2000, only 56 percent of residential real estate firms used e-mail.

Twelve percent reported that they generated more than 25 percent of their leads from the Internet in 2003.

As for staffing, half of the real estate firms in Massachusetts gained additional sales staffers in 2003, compared to 21 percent nationwide that reported adding staff. One-third of the Bay State firms that added agents gained between one and three sales agents.

Brooks’ and Sprague’s companies were among the firms that expanded their sales force. Brooks’ Leominster company added three new agents, bringing the sales staff’s total number to 10, while Sprague hired two new agents.

New agents in the Bay State are undergoing more training compared to their counterparts in other parts of the country. According to the survey, the median number of required training hours for new agents is 16.3, compared to 11.3 nationally. Twenty-five percent of the firms in Massachusetts require new sales agents to complete more than 30 hours of training and 29 percent require 11 to 30 hours of training.

On the other hand, the median number of training hours required for experienced sales associates is 4.9 in Massachusetts and 5.6 nationally. Thirty-five percent of Bay State firms in the survey require experienced sales agents to complete one to 10 hours of training while 25 percent require 11 to 30 hours of training.

Bay State companies were more likely to provide some type of in-house training for agents than the typical firms nationwide. Half of the firms in Massachusetts reported providing in-house training, vs. 39 percent nationally.

Sprague said she offers some individual training, but most of the training for her agents is provided by The Realty Guild, a group that represents independent and locally owned real estate companies from Maine to Massachusetts.

Among secondary activities in which real estate firms are involved, escrow services are more frequently offered by Massachusetts companies than real estate firms across the United States (19 percent vs. 12 percent).

In addition, there are more single-office operations nationally than in Massachusetts (93 percent vs. 79 percent).

Aglaia Pikounis may be reached at apikounis@thewarrengroup.com.