Real Estate Brokerages More Diverse and Competitive

The nation’s real estate brokerages vary widely in size and specialty, fueling competition that benefits consumers, according to new research by the NATIONAL ASSOCIATION OF REALTORS®.

NAR President Thomas M. Stevens says the diversity of real estate companies in today’s marketplace, as seen in the association’s just-released Profile of Real Estate Firms: An Industry Overview, is a natural outgrowth of real estate professionals’ entrepreneurial spirit.

“There is a definite creativity and striving for success that breeds the wide variety of business models and services we see today,” says Stevens, senior vice president of NRT Inc.

Today’s consumers can choose from a range of business models, from full-service to flat fee, fee-for-service, and even hourly rates. “What’s sometimes overlooked is that the lion’s share of the real estate agents and brokers at those firms are REALTORS®,” Stevens says. “Although most consumers opt for full-service brokerage, the other types of firms and services are an important part of the marketplace as well as NAR membership.”

Here's a collection of key findings from the 2006 NAR Profile of Real Estate Firms:

Tech spending on the upswing. More than six in 10 firms increased technology spending in 2005, and 41 percent planned on additional technology spending in 2006 while another 56 percent anticipated they would maintain the same level of spending.

Ancillary services more common. More than three-quarters of brokerages offer one or more ancillary services, up from half of firms in 2004. “Most buyers and sellers rely on the expertise of real estate professionals to help them with all aspects of the transaction process, from shopping or listing to negotiation and closing,” says David Lereah, NAR’s chief economist. Secondary services include property management, 41 percent; land and development, 22 percent; residential brokerage (for firms with other primary activities), 22 percent; relocation, 20 percent; appraisal, 13 percent; counseling, 10 percent; auction, 4 percent; and international, 3 percent.

Web sites are the rule. Almost eight out of 10 real estate firms have a Web site that’s been online for a median of five years. While the vast majority of firm Web sites feature real estate listings, three out of five include mortgage or financial calculators; over half have community information.

Single-office brokerages predominant. More than half of real estate firms have been in business for 15 years or more, and 80 percent of firms operate out of only one office with a median of five licensees. Only 10 percent of firms have three or more offices.

Training is key to success. Seventy percent of all firms provide training for both staff and sales agents. Eight of out 10 firms said their training programs contributed to their ability to acquire listings. Two-thirds of real estate firms report higher profits in 2005, including 66 percent of residential brokerages and 72 percent of commercial firms. “Real estate firms understand the importance of training and education programs that keep their staff on top of the latest trends,” Stevens says. “These programs allow agents and staff to learn from others’ experience in this fast-changing marketplace.”

Few offer health coverage, most offer E&O. Only 27 percent of firms offer health insurance to their independent contractors, although the licensee typically pays the full cost. Nearly eight in 10 firms provide errors and omissions insurance for independent contractors.

Franchise firms are bigger. Twenty-three percent of all firms are affiliated with a franchise, which has remained relatively constant since 1999. However, franchise firms are larger and account for 55 percent of the total sales force. The typical franchised firm has had their affiliation for 11 years.

Profits higher in ’05. Two-thirds of real estate firms report higher profits in 2005, including 66 percent of residential brokerages and 72 percent of commercial firms.

Residential is most popular focus. Eighty-one percent of firms offer residential brokerage, and 36 percent provide commercial brokerage as a secondary activity; 55 percent of large residential firms have a relocation department. In terms of primary real estate activity, 81 percent focus on residential brokerage, 6 percent commercial, 5 percent property management and 3 percent appraisal; 6 percent focus on other areas.

Local emphasis. Given the localized nature of many real estate services, three out of five firms specialize in a particular geographic area. That ranges from 65 percent of residential firms to 38 percent of commercial firms.