Small Real Estate Firms Try to Find a Foot Hold

As large agencies attempt to dominate the market, independent real estate agents and discount brokerage firms are offering package deals, cut-rate pricing and niche services to try and remain competitive.

Over the last two decades, buyouts of mid-sized regional firms by nationwide companies has become common. This was the case when NRT Inc. purchased locally owned Gundaker Realtors in 2001, creating Coldwell Banker Gundaker in St. Louis.

“We’re seeing . . . a business climate where you need to be either very big and carry the market or stay small and create your own exclusive niche to be able to compete,” said Mike Travaglini, president of the St. Louis Association of Realtors.

Market share held by top firms is shrinking, with smaller agencies and some franchises acquiring more listings and increasingly larger pieces of the real estate pie, according to a 12-market study of regional real estate competition that included St. Louis. The study was published by Pennsylvania State University.

Results of the study

Coldwell Banker Gundaker, with about 3,600 agents and 39 branches, is the market leader on the Missouri side of the metro area with 33% of house sales. While still the dominant regional leader, its market share has dropped in recent years, from about 36% in 2004 and nearly 40% in 2003, according to Mid America Regional Information Systems, which operates the Multiple Listing Service database.

Steve Sawyer, an associate professor at Pennsylvania State University and co-author of the real estate market study says that intense competition and double-digit growth have forced brokers and companies to come up with more innovative ways to do business and jockey for market share. This heightened competition has spawned a new type of real estate company.

“There’s a lot of ‘help-yourself’ kinds of alternative business models that are slowly gaining speed,” Sawyer said, “and they’re figuring out how to do business in a hot market and do it better, cheaper and faster.”

Discount firms, such as Assist-2-Sell, offer a flat fee of $29.95 to list, market and sell houses for clients. Its a la carte menu of services lets customers choose, for example, whether to list their houses through the MLS system, a standard service with many traditional firms.

Another firm trying to stay ahead is Seller’s Agent Inc., a family-owned firm in St. Louis County. Consumers can choose from three different listing packages with varying commission levels to sell their houses.

“We try to help our customers understand the likelihood of obtaining a higher price at a higher commission, versus costing them in selling price what they could save in commission,” said Garey Keathley, who runs the firm with his wife and daughter.

Changes in the market

But these days, his agents are more likely, for example, to use the Internet for quick prospecting of houses for buyers, rather than pounding the pavement looking for for-sale-by-owner signs.

Brown-Kortkamp Realty in St. Louis, with 18 agents, handles traditional real estate but also has a focus on foreclosures and HUD-owned properties in the metropolitan area.

Foreclosures in the St. Louis region made up 8% of sales during the first six months of 2005, according to First American Real Estate Solutions, a research firm that tracks such properties.

Gail Brown-Rozelle, president of Brown-Kortkamp, is trying to tap into that market. The company is rehabbing six foreclosed properties. But it’s also branching out into new residential development.

“It’s a boom-and-bust industry, and it’s important for firms of any size to be able to weather the highs and the lows of the market,” she said. “But if you’re going to be one of the smaller entities, you have to work hard to have a niche and be able to distinguish yourself with services that the major conglomerates don’t offer.”

The Florida home loan market is filled with companies, big and small. You shouldn’t base your decision on which to be affiliated with on size, but rather on efficiency. Look for firms with years of experience and guarantees of personal attention, regardless of the number of agents they employ.