Real Estate Companies Show Optimism

Study of Real Estate Firms Shows both Optimism and Challenges

WASHINGTON (September 10, 2013) – Most real estate firms are
small, independent businesses that specialize in residential brokerage, with 69
percent of all firms expecting profitability to increase over the next year,
according to the 2013 National Association of Realtors® Profile of Real Estate

Paul Bishop, NAR vice president of Research, said the industry
sees greater competition in tandem with the housing market recovery. “Two
out of three real estate firms expect competition in the marketplace to
increase, both among firms and nontraditional market participants,” he
said. “Because real estate is an entrepreneurial field, some
experimentation in business models is likely when the market is in a recovery

Eighty-four percent of real estate firms are independent,
non-franchised companies, while 13 percent are independent franchises; the rest
are subsidiaries of a national or regional corporation. Independent firms
generally have fewer agents and lower sales volumes.

Eight out of 10 firms specialize in residential brokerage, with
commercial brokerage and residential property management the most common
secondary functions, each offered by nearly four in 10 residential brokerages.

Other primary business specialties at real estate firms include
residential property management, 6 percent; and commercial brokerage and
residential appraisal, 5 percent each. Smaller shares of real estate firms
focus on land development, commercial property management, commercial
appraisal, relocation, counseling, international and auction.

The typical real estate firm has been in business for 13 years; 80
percent of firms operate out of a single office and have a median of two
licensees. Only 8 percent of firms have four or more offices, but have a median
of 100 licensees. Larger firms were more likely to have increased staffing;
firms with four or more offices added a median of 10 licensees during 2012.

NAR President Gary Thomas,
broker-owner of Evergreen Realty in Villa Park, Calif., said a sizeable number
of firms are expanding. “Although conditions vary around the country, 45
percent of real estate firms are actively recruiting agents, largely due to
growth in their primary business,” he said. “As for challenges over
the next two years, six in 10 firms cite profitability, 44 percent identified
local or regional economic conditions, and 42 percent are concerned about both
maintaining sufficient inventory and keeping up with technology.”

The typical residential real estate firm handled a median of 25
transaction sides in 2012, representing a dollar volume of $4.4 million. Ten percent
of a firm’s median sales volume was generated by a website, but less than 1
percent came from social media; however, firms with three or more offices
obtained 5 percent of their business through social media. The vast majority of
sales were from prior relationships with clients and from referrals.

Many related business activities or services are offered by
franchised real estate firms in-house, through outsourcing or a business
relationship with another firm. Among in-house offerings, 27 percent of firms
provide business brokerage (the buying and selling of businesses such as retail
stores), 15 percent provide relocation services and 5 percent offer mortgage
lending. Smaller categories include home improvement, title or escrow services,
home warranty, homeowners insurance, settlement services, other insurance, home
inspection, moving services and securities brokerage.

Only 22 percent of firms offer health insurance to their
independent contractors and licensees, although the licensee typically pays the
full cost. Nearly eight in 10 firms provide errors and omissions insurance, but
licensees generally must pay for at least some of the coverage.

Real estate firms report that 72 percent of their staff have an
academic degree. More than eight in 10 have licensees with professional
certifications or designations, and more than six out of 10 firms provide
training and education programs for their staff or sales agents. The typical
firm requires new agents to receive a median of 21 hours of training and continuing
education annually, while experienced agents acquire 12 hours.

The 2013 National Association of Realtors® Profile of Real Estate
Firms was based on a questionnaire mailed to a national sample of 121,931
executives at real estate firms in August of this year, generating 6,671 usable
responses. The response rate was 5.5 percent.

Source: NAR


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