In the third year since the real estate crash began in earnest, many fine brokerages are struggling, conditions some believe could provide happy hunting for some of the real estate environment’s larger predators – if only the prey would cooperate.
Already this year, the RE/MAX-flagged Leading Edge group has acquired or otherwise persuaded brokerages in Newton, Waltham and Watertown to come under the RE/MAX banner. Coldwell Banker has been on the hunt in Connecticut, swallowing up the Alaimo & Corrado chain in May.
Last month, RE/MAX added two new executives, Bob Leighton and Roz Anton. Their orders are to aid in acquisitions in the New England region – one with an eye toward brokerages with more than 20 agents, the second targeting smaller real estate teams.
“As the pie continues to shrink, it’s the strongest companies who will be able to continue to take a piece of that pie,” said Jay Hummer, executive vice president of RE/MAX New England.
Opportunity Costs
But some are beginning to question whether the traditional big-brokerage value model makes sense. Going it alone has traditionally meant shouldering all the costs of marketing, advertising, office space and other essentials. In the offline world, it took a big ad budget and a big brand name to afford fancy newspaper ads and other branding materials, a selling point long-espoused by large chains looking to persuade smaller brokers to fly their flag.
But as the Internet has overtaken the real estate industry, it’s driven down many of those costs. Canny search engine optimization, and the rise of third party real estate sites, can often deliver eyeballs just as well to a smaller brokerage’s listing as to a large one. And off-the-shelf, web-based solutions are available for customer relationship management and other needs that can fit even a small brokerage budget.
Those changes are making some independents question whether there’s much a big broker can deliver that’s worth the 8 percent to 10 percent franchise fees culled off the top by large franchisors.
After over twenty years at a big broker, Diane Higgins left in 2006 to found the Higgins Group in Lexington. Since then, she’s built it into one of the top 100 offices in volume in Massachusetts, according to data from MLS-PIN, the commonwealth’s largest multiple listing service. Over the past year, her firm has done $178 million in sales volume on 279 sides.
“I’ve had so many offers [to become a franchisee or get bought] it’s unbelievable. I make it a point to meet with anyone that’s interested,” Higgins said. But she loves the flexibility she has as an independent. “In December of 2006 I was like, ‘what the heck did I do?’ But it was the best move I ever made.”
She’s not without company. A look at sales figures for this year from MLS-PIN reveals a top 100 brokerage list dominated by big-brand, national names – but with more than a sprinkling of strong independents making a go of it. In addition to regional powerhouses like Hammond and Conway, these include smaller companies such as Campion & Co. Fine Homes Real Estate in Boston, Rutledge Properties in Wellesley, Louise Condon Realty in Needham and the Sagan Agency in Swampscott.
‘Roll-Ins’
And many of them say they plan to stay independent for a long time to come.
“I have had several offers, and have never considered it for more than a few minutes,” said Roberta Swenson, owner of Rutledge Properties in Wellesley. “I think if an independent can prosper anywhere, it’s in a town like Wellesley.”
Indeed, some independents see franchise offices as targets themselves. Blaise Coco, broker/owner of Methuen-based Coco, Early & Assoc., founded his firm in 1997 after 13 years at Century 21. But he’s expanded rapidly, acquiring five different companies in the last twelve months.
“We had 65 agents last year, and we’re about 170 today,” Coco said. “We’ve grown quickly, and we’ve done it by taking advantage of the down market, targeting the franchises. It’s hard to make five to eight percent today in your bottom line, and they’re paying 8 to 10 percent in their franchise fees. And we figure they’d be prime targets for acquisition or mergers.”
Still, that doesn’t mean there are no opportunities for the larger brokerages to make some acquisitions. Carol Bulman, CEO of Jack Conway & Co. Realtor, said that in uncertain economic times it can sometimes be tougher to recruit stellar agents on their own, since they’re more anxious about how a move will affect their business. But when an agent is a broker/owner at their own shop with their own overhead worries, it can be a different story.
“There are a number of smaller shops that would offer great opportunities for us to strengthen ourselves in certain areas of our footprint,” she said. “The right acquisition is a win-win for all.”
That fits in with national trends, with many brokerages anxious to acquire talent and market share, but reluctant to take on new overhead themselves.
“The overwhelming majority of deals happening now are ‘roll-ins,’ where the acquired office is closed and the agents and staff relocated into the nearest acquiring company’s office,” said Nicolai Kolding, partner at Colorado-based REAL Trends, an analysis firm specializing in the brokerage industry.
Kolding said he expects mergers and acquisitions will pick up over the fall and winter as brokerages seek to boost revenue.
