HousingWireHousingWire
In this week’s episode of the RealTrending podcast, host Tracey Velt sits down with RealTrends founder Steve Murray. The duo explore the current state of mergers and acquisitions, team-based brokerage models, commission compression, and growth opportunities for agents and brokers.
This interview has been edited for length and clarity. To start the conversation, Velt and Murray dive into the current state of mergers and acquisitions in the real estate industry.
Murray: When the market turned down two and a half years ago, most of the national companies that had been very active (in M&A) departed. People like Berkshire Hathaway HomeServices, Anywhere, United Real Estate and many leaders are on the sidelines. The two who are left are Compass, who have been still very aggressive, and Howard Hanna. What we’ve seen mainly is the activity is now at the local level between local brokerage companies.
Velt: Valuations, I assume, have come down because of the market and the lack of demand?
Murray: Almost every brokerage in the country has seen a decline in their profit. That would bring valuations down. Then you take away the price pressure from competition among many of the national companies. Now the competition is among local brokers, and while they don’t pay the same multiples of EBITDA that some of the national guys did, it hasn’t slipped that far because there are only so many good brokerage companies worth acquiring left in our industry these days.
Velt: Do you see any new models out there?
Murray: Over the last five years, the thing we’ve noticed is that the number and size of teams have grown. It turns out, the most valuable thing a brokerage can do if you watch teams is to provide a flow of customer opportunities to your agents. Then you can grow and you can be profitable — period.
Velt: I know brokers who have tried lead generation and can’t make it work. What is the secret to that? Why can teams make it work so much better than a brokerage?
Murray: Any medium-large brokerage companies that do that are now accused by their own agents of competing with those very same agents. The second thing is it requires a mindset shift, where you are basically telling your agents they’ll be on the lower end of the commission split, since you’re supplying them with leads and resources.
A team-oriented brokerage can be scaled up. It’s far more profitable than a brokerage company even in the best days of our industry.
To close the conversation, Murray and Velt explore the biggest opportunities and challenges for agents and brokers in the new market.
Murray: Buyers are very savvy. I think that’s a great opportunity for the best agents, teams and brokerage companies. But it means they have to be very proactive in furthering their skills and energy levels. I think there’s a huge opportunity with artificial intelligence too, to create efficiencies and cut costs in your brokerage or even as an agent.
​
