While court records and news reports hint at the extent of the carnage, these facts on the ground may both overstate and understate the true situation with respect to brokerage closures.
On the one hand, companies falter for a myriad of reasons during both market upswings and downturns. That means not all of the current crop of closures can be attributed to weak home sales or soft home prices, though those trends — and their impact on commission income — are surely an important part of the paradigm.
On the other hand, some companies escape the public disclosure of their burdensome debts by merging with a competitor who agrees to take over the troubled company. One example would be GMAC Home Services, which was acquired by Brookfield Residential Property Services, which operates several real estate chains in Canada.
"It’s a tough marketplace in Michigan, but we are not seeing a lot of brokerages collapse," says Martin. "We are seeing a lot more mergers."
‘Is Your Broker Going Out of Business?’
Of course, one company’s misfortune can be another company’s opportunity — or at least that’s how Max Kim, broker/owner of SoCal Avalar Real Estate in Irvine, Calif., might describe the current situation. Kim says he wants to open four new Avalar Real Estate offices in Orange County in the next five years and he plans to recruit more than 400 real estate salespeople to do it. To get their attention he created an ad with the headline: "Is Your Broker Going Out of Business???" The ad attracted agents who were "at the verge of wanting to give up on the industry," Kim says, and that has given him a chance to try to keep them in the business.
Editor’s note: This article was updated with information about the status of Prudential Americana in Las Vegas, which reportedly emerged from bankruptcy in May 2008.
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