Real Estate

Why leading independent brokers are demonstrating long-term prowess
Independently Healthy

Why leading independent brokers are demonstrating long-term prowess

By Maria Patterson

In a market where so many real estate firms are choosing the path of affiliating with a national brand, leading independent brokers remain confident in their financial strength, positioning and longevity in their respective marketplaces. Why? The numbers say it all. Collectively last year, independent brokerages affiliated with Leading Real Estate Companies of the World, for example, reported a total sales volume in excess of $400 billion. Their secrets to success? Flexibility, responsiveness and teams who have a vested interest in the welfare of the company. And that’s just the beginning.

According to Leading Real Estate Companies of the World? (LeadingRE) President and CEO, Pam O?Connor, the line between ?independent? and ?franchise? has blurred considerably over the years.

??Independents? are generally defined as locally branded companies with local ownership, but there are entities like HomeServices that own locally branded companies as well as franchisees, and large independents are increasingly employing franchising themselves as a growth strategy,? O?Connor explains. Meanwhile, most franchisees are ?independently owned,? so the issue these days isn?t so much about independents versus franchises as it is about the strength of local and regional brands versus national ones.

LeadingRE represents the top companies in the local/regional brand category commonly referred to as ?independents. According to O?Connor…and supported by results in RISMedia’s 18th Annual Power Broker Report & Survey?in 2005, LeadingRE brokerage firms produced more sales (over 1 million transaction sides) among the top 500 companies in the country than any individual national franchise brand. This represented about 35 percent of the total units of the top 500, with just 20 percent of the companies,? she remarks. Our network-wide sales volume exceeded $400 billion and is estimated to be nearly $100 billion more than its closest national franchise brand competitor.

Why are LeadingRE companies so consistently successful? Because real estate, says O?Connor, was, is and will continue to be a local business.

Independent vs. National Brand:

The Current Landscape

?Franchises have grown steadily since their inception in the mid-?70s, but in recent years, the growth of the largest franchises has been mostly through acquisition rather than through organic expansion,’ says O?Connor, noting exceptions such as RE/MAX Intl. and Keller Williams.

At the same time, as more firms sign on with national brands, more and more continue to leave those franchises in favor of returning to a local independent. In the past few years, LeadingRE has seen a number of sizable franchisees leave large national networks to return to a local brand, preferring the freedom of being able to deploy their revenues as they choose in their local markets, while still enjoying the national connections provided by LeadingRE.?

?Just about every major market has a strong independent player,’ says Stephen Baird, president & CEO of Chicago-based Baird & Warner. From my point of view, it’s the best place to be. The strong independent is the owner/manager and he or she is making the decisions about things on the ground locally. Since it’s a local business, his or her motivation is much stronger. They have their money on the line. Typically, the national brand affiliates just don’t have the same chits in the game.?

Financially, O?Connor asserts that LeadingRE affiliates perform as strong and often stronger than their national brand counterparts. In terms of growth, LeadingRE?s affiliates in the top 500 increased unit sales by 9% in 2005, while the two top national franchises were down in units by 2-3% in what was the best real estate year of all time,? she explains.

According to O?Connor, however, ?there is no magic to franchising versus independent; good management is the determining factor, and neither franchises nor independents have a corner on that.

Challenges for Independents

Whether supported by a national brand or operated at the local level, most of today’s real estate brokerages are facing very similar challenges, such as recruiting and retaining productive agents, and keeping up with the demands of an evolving consumer base, not to mention a shifting marketplace.

?I’m not sure the challenges facing independent firms are any different than those facing other firms,’ says Arthur Sterbcow, president of New Orleans-based Latter & Blum. We’re all dealing with competition from what some people call ?interlopers? and the lead generation companies. The national franchises, however, are also out there competing against their fellow franchises. The national brands are trying to sell a franchise on every corner.

Baird points to the ability of independent firms to quickly react to challenges that the market demands.

?The independents are in the best position because they can adjust to their local marketplace,’ says Baird. I’m excited about the fact that the market is changing. I think we’ll have great opportunities as more big brands close their offices. We?ll be here to provide a better alternative for those sales associates. I think you’ll see the independents grow even more.

Similarly, leading independent firms, for the most part, are not overly concerned with specifically competing against the national brands.

One area where some local independents can fall short against a national competitor is branding. Some independents have to consider if their brand is as strong as the national brand in their market,? explains Baird. We’re in a brand-conscious environment and in a lot of marketplaces the local brand is as good as or better than the national brand. Our brand in Chicago is as good as or better than the national brand here?we have a local connection plus a national reputation. People in Chicago know that Baird & Warner is a Chicago company.?

Resources, More or Less

Many independent brokerages cite increased resources as a reason for affiliating with a national brand. Many local independents say just the opposite is true, however.

?When a big company joins a franchise, rarely does that franchise deliver anything that they didn?t already have,’ says Sterbcow.

?We have way more marketing, way more products, way more marketing material and a better Web site than the national brands,? asserts Baird. They often develop a product that is one-size-fits-all, whereas we can customize our products specifically for our market.?

?In some respects, independents have an advantage in that they can target their dollars very surgically to benefit their own firms exclusively, while franchisee fees go into a national pool that may not always translate to a direct local benefit,’ says O?Connor.

?Independent doesn’t necessarily mean small,’ says O?Connor. Many of our LeadingRE independents are multimillion-dollar firms with tremendous resources, representing half of the top 10 companies in the country?firms of formidable size and resources. [Most] franchisees are not owned by a large company with deep pockets, so simply being a franchisee doesn’t deliver those benefits.

How Consumers Choose

Most agree that consumers ultimately aren?t choosing a real estate company based on its brand?or lack thereof. Their experience with the firm they choose, however, will determine their brand loyalty moving forward.

?For the most part, I don’t think consumers pick a real estate company based on brand,’ says Baird. I wish they did! Most consumers make their decisions based on the individual person. They do look at the company, however, to make sure they’re legitimate and well known.?

?Most consumers are loyal to a firm because of the quality of agents at that firm,’ says Sterbcow. We’ve been around since 1916 and consumers know our name and know what we stand for. Consumers come to us because they love the agents and the agents come to us because they love the firm.?

History in the community can, however, play in the favor of a local independent when it comes to consumers. Most independents have longevity in their communities. This generates tremendous name recognition and credibility among consumers,? O?Connor believes. While franchisees benefit from the good service of their namesakes, they also suffer when a consumer has a bad experience with a firm or associate with the same name. But at the end of the day, companies in both categories have to perform in order to earn and retain business.

The LeadingRE Advantage

For local brands, the connection achieved through the larger network provided by LeadingRE is essential.

For Baird, LeadingRE serves as an important referral network, but the greater benefit received from being part of LeadingRE, says Baird, is the information sharing.

?You go to their conventions and meet all these people and everyone shares information,? he says. I call these guys on the phone all the time and ask them, ?What do you think about this?? or ?How are you handling this?? There’s a lot of sharing of information that helps you build your business. That doesn’t happen in bigger companies where everything is dictated by the corporation.?

Sterbcow learned the value of the LeadingRE Network after dealing with the effects of Hurricane Katrina. LeadingRE jumped all over themselves to provide us housing, computers, anything we needed,? he says. Being independent is great, but you still need that support network.?

O?Connor cites the following as advantages enjoyed by LeadingRE firms:

High-conversion buyer/seller business: 60,000 broker referrals, growing corporate relocation leads from sister company RELO Direct, Inc., and Internet buyer traffic and exposure for listings through RELOHomeSearch.com.

Multi-dimensional business resources to support member success, such as access to the growing luxury program, LuxuryPortfolio.com. Preferred vendor ?vetting? and pricing/product advantages for real estate products and services, a variety of educational and marketing resources, and international connections with affiliates in over 25 other countries.

Networking with the best of the best brokerage firms in the country, with strong loyalty to one another and mutual commitment to maintaining high standards.

Looking ahead, O?Connor sees a bright future for leading independent brokers. Progressive brokers understand that ultimately, they must rely on themselves rather than others for their success, and increasingly, they value the freedom they have as independents to shape their businesses. In a softening market, franchisors will have a tougher time justifying their value proposition and the related cost of high franchise fees. Also, good brokers want to be with good brokers, and as long as we can maintain that collection of fine brokers, we will continue to attract others of the same caliber. RE

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