Recent news that Itzkan and Marchiel Real Estate, one of the Boston area’s larger high-end residential real estate agencies, had been acquired by Coldwell Banker Hunneman showed that larger companies are continuing the trend of scooping up prestigious firms to add to their local presence. But despite increased efforts by larger companies, independent luxury brokers say they see it more as a challenge than an opportunity to hop on the acquisition bandwagon.

“In Brookline, I think I’m the only independent left,” said Chobee Hoy of Chobee Hoy Associates Real Estate in Brookline, which frequently lists several multimillion-dollar homes in the area. “But frankly, I feel pretty good about it. I think the competition that’s out there is very real, and I have to stay on my toes.”

Like other independent brokers, Hoy says larger companies looking to acquire her business constantly approach her. While she may decline those offers, the regional and national companies are managing to score acquisitions on a regular basis. Just a few months before the Itzkan and Marchiel announcement, the principals at Hammond Residential Real Estate – which also specializes in the luxury home market – announced that they had reached an agreement to be acquired by GMAC Real Estate. Meanwhile, when speaking about the Itzkan & Marchiel deal in an interview two weeks ago, Hunneman CEO William Kiley said his company had a number of other mergers in the works.

“There aren’t too many high-end brokers left,” said Paul J. Harrington, president of The DeWolfe Co. “They’re still out there, but in the higher market, they’re more scarce and far between. [Mergers] are happening everywhere, but more so in the high-end market.”

Harrington, whose company last week added Yankee Realty of North Haven, Conn., to its list of acquired agencies, said offices that market expensive properties are in particular demand. DeWolfe has been relatively quiet in terms of acquisitions this year compared to its aggressive acquisition plan carried out in 1999. Harrington said DeWolfe has shifted its focus more toward new technologies and marketing, though he added, “We’re still looking at opportunities.”

As for higher-end real estate offices, “Those are the companies that are most attractive for companies like ours,” he said. “They’re more profitable. They generate more revenue with fewer transactions, although they command more of a premium on acquisition costs.”

Still Hoy, who is president of the independent broker-based Realty Guild, said the high-end independent broker is not in danger of becoming extinct anytime soon.

“I’m courted all the time” by larger companies, Hoy said. “Sometimes I get so tired of them that I’m borderline rude. I don’t mean to be, but how many times can you say ‘Please, I’m not interested’?”

In her observations, Hoy said most independent high-end brokers that end up entering into merger talks were most likely not looking to stay in the business long anyway.

“There might be some out there that are seeing it as a smart exit strategy,” she said, “and I can think of a number of cases where the owner was ready to retire and it made sense to sell the business.”

“The only reason a lot of these companies get acquired is because there isn’t someone like another family member to step in and take over the business for the broker,” said Phyllis K. Sagan of Sagan Agency Realtors in Swampscott. “Their sons or daughters have gone off to become doctors or lawyers instead. But mostly, there’s no other reason for them to be gobbled up.”

Sagan added that she, too, “gets calls all the time” from companies looking to acquire her agency. “I don’t want to be acquired,” she said.

Despite the national name recognition and services some of the national companies offer, those agents interviewed said they maintain an advantage over the Coldwell Banker and GMAC offices in the area.

“My company is owned by a local resident who has a vested interest in the community,” Sagan said. “No one has to call long distance to get in touch with the owner of this office.

“I can spend a lot on advertising, and I can change my marketing plan for a house at a moment’s notice,” she continued. “High-end people want that flexibility, and I have that flexibility that big corporation people don’t have.”

“When you remain independent, as long as you can survive, I think you have so much more flexibility. The dollar isn’t the bottom line,” Hoy said. “I probably do more advertising, and I’m sure I give more to the community than they do.”

Hoy said national companies may tout the fact that they have their own mortgage companies or relocation services as advantages to using their affiliates, but she maintained that most quality independent agencies can provide those same services.

“A company like DeWolfe has their own mortgage division and they want you to lock in with their mortgages, but I think it’s better to have a relationship with several mortgage brokers or banks and provide you with different options,” she said.

“There’s nothing [the independents] don’t have,” Sagan added. “We all have our own Web pages, we’re members of relocation services. We don’t have an in-house mortgage company, but I can give you 10 people’s names.”

Staying Focused
Robert R. Borden II, president of LandVest in Boston, said the availability of associated services like relocation packages and mortgages from one company may actually deter some luxury home owners or homebuyers from working with them.

“I think these mergers are terrific,” Borden said. “It helps to clarify the focus on the niche market that we have. “We don’t have a mortgage business. We put all of our focus on the customers’ needs. The mortgage business doesn’t lend itself to us. It’s not where we’re at.”

Borden said companies that work with luxury real estate need to keep a strong emphasis on that market, something that can prove difficult when working in a larger company.

“Companies like GMAC and Coldwell Banker work in all levels of the real estate market, so high-end companies that join them tend to get diluted. You can’t have companies like those focused only on high-end properties. That’s just the way things are.

“Itzkan was a darn good firm, and they’ll continue to be a good firm, but their focus is going to get diluted.”

“It’s a fine line to walk when you manage a large organization,” Harrington said. “You try to provide support to thousands of sales associates and provide a level of local autonomy. We’ve worked hard to maintain the local flavor of the company. We decentralize as much as we can to leave the autonomy there, and centralize where we can to be more efficient.”

Sagan said high-end buyers, like most buyers, demand personal service, and they will continue to receive that type of service at independent agencies.

“There’s nothing like the personal touch of an owner of a company greeting you when you come through the door. I know where the people are coming from, and I know where they’re going. It’s like how you feel when you walk into a restaurant and they know your name. You feel special,” she said.

Endangered Species: High-End Independents

by Banker & Tradesman time to read: 5 min
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