BrokerPulse

RealTrends Q32021 BrokerPulse sees brokers still optimistic about the market, wary of competition and wondering when inventory will rise.

2021 RealTrends Brokerage Compensation Report

For the study, RealTrends surveyed all the firms on the 2021 RealTrends 500 and Nation’s Best rankings, asking for annual compensation data for the 2020 calendar year.

@properties leaders poised for strategic growth

Mike Golden and Thad Wong, co-founders of @properties talk growth through franchising.

Newsletter

The RealTrends BrokerSource and HousingWire OpenHouse newsletters deliver twice weekly information on trends, strategies, analysis, people, and news shaping the real estate industry.

Mergers and Acquisitions Activity Booms

Mergers and Acquisitions Soaring

Scott Wright, REAL Trends director of mergers and acquisitions, recently wrote about the boom in valuation activity and how the variety of valuations were well above any levels in prior years. This is true for all brands, business models and regions of the United States and Canada. Not all are about selling a brokerage firm. In fact, those getting a valuation for the potential sale of a firm are in the minority of the work we do.

Age of Ownership and More

It’s also true that mergers and acquisitions activity is robust. Why? Indeed, some of it is due to the age of the ownership of many leading brokerage firms.  Some of it is due to the lack of succession planning within the community of brokerage firms. Other segments of mergers and acquisitions are due to the purchase or sale of minority interests in brokerage firms.

Market Uncertainty

Some are also due to market uncertainty. The number of new models entering the business and the levels of their capital backing has affected the confidence of some realty firm’s leaders in their future view of the profitability of a brokerage business. With an apparent race to the bottom by an increasing number of firms regarding agent splits and the price of the retention of high-producing agents, many brokerage firms are left wondering how to continue to grow their firms and profits when they’re getting challenged at both ends of the spectrum. Further, some firms are offering new ways to lower the cost of a transaction to the consumer through direct purchases or lower commission rate offerings.

Each of these factors is playing into owner decisions about whether or not now is the time to consider the sale or all or a part of their brokerage firms. Further accelerating such choices are the number and variety of buyers that are out seeking investments in the brokerage industry. In addition to such well-known firms as HomeServices and Howard Hanna, Realogy/NRT continues to consider small- to medium-sized brokerage firms where they can be combined with their existing operations.   

Private Equity Enters the Picture

The private equity industry has also now expressed a keen interest in our business. We are aware of no less than four such companies who are taking a long, hard look at residential brokerage as vehicles for investment. Compass, which has purchased some small- to medium-sized brokerage firm as a means of entering new markets, has also acquired some larger firms as a means of either entering a market or rapidly growing their market share in areas where they already have a presence.

Prices and Terms

Market multiples have remained relatively steady over the past few years, and terms for the purchase of brokerage firms stay at relatively high levels. The private equity firms have yet to make their presence felt, but we believe they will remain active in the near term once a few transactions have been completed.

After seven years of recovery in housing sales, and as outlined in Pending Home Sales Down—Again, we may see a softening in the prices and terms being offered by any number of acquirers of residential brokerage firms. While we have no firm evidence that this will be the case, our experience tells that when the market either flattens out or drops, purchasers become more cautious about which firms they will seek to acquire and, generally, tend to soften the prices and terms of what they are willing to pay.

Most Popular Articles

Real estate leaders: Keep close eye on proposed legislation

In this edition of RealTrending, Steve Murray, senior advisor to RealTrends, talks about private property rights and how a case in Berlin, Germany, tells a story of what could happen here in the U.S.

Sep 20, 2021 By

Latest Articles

August housing starts better than expected

U.S. homebuilders started construction on 1.615 million homes in August, up 3.9% from July 2021 and 17.4% higher than a year ago, according to the August housing starts report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Sep 22, 2021 By