In this column, Anthony Askowitz explores a hypothetical real estate situation from both sides of the broker/agent dynamic.
A veteran agent is surprised to learn that her broker has acquired a competing real estate office, in the middle of a historically challenging market and economy brought on by the COVID-19 pandemic. Her broker, while acknowledging the enormous personal and business adversities being faced at the moment, sees an opportunity to secure top producers, ease their financial concerns and grow his company’s footprint. Is this the right time for real estate companies to expand through acquisitions?
My broker is certainly “zigging” when everyone else is “zagging!” As the economy plummets, our local real estate market craters, and agents and staffers at other firms lose their jobs, our broker goes out and acquires a respected competitor — taking on additional agents when no one is selling anything!
I appreciate his confidence and enterprise, but I just don’t see the logic behind this decision, and I certainly don’t love having to compete with more top producers right here in my office. While there may be long-term potential benefits, how does adding agents help us over the next month, quarter or year as we struggle to make ends meet?
Obviously, this is a very difficult time for everyone, regardless of where we live, what we do, who we love, or what we look like. The human toll in terms of death and illness is extraordinary, as is the loss of security and income as a result of distancing measures, mandatory closures and company closures.
At this point, we probably all know of someone who has passed away or lost a relative to the virus, and many others who have been furloughed, downsized or laid off due to the economy. It’s a tragedy that is still unfolding day by day.
With all that said and understood, we also realize that the crisis will end at some point. Especially in the real estate business, where closed transactions are always a result of steps taken in prior months, it’s critical to our business survival that we continue to look to the future and plan for it.
We should make decisions now to put ourselves in a position of strength when the crisis does end. Making these acquisitions at this point in time will help us reap enormous benefits when the market and economy come back to full strength, making us a bigger, better and stronger firm.
I would add that we are fortunate to be able to make these decisions due to a long run of profitable quarters and years, at a time when our office has the resources to acquire these competitors.
It’s true that our existing agents may not see the benefits in the short term. The next few months will most likely be challenging for them, with or without this acquisition. Eventually, they will come to see that the increase in business from the additional agents will only benefit them. Rather than creating more competition, added business creates more exposure, confidence in the brand, and more opportunities for them individually.
This is a win-win situation for both companies. The agents from the acquired offices will gain the security and increased services of the larger, established company. And in many cases, the brokers from the acquired offices will enjoy the freedom to refocus their energies on serving their clients and building their teams without worrying about overhead, logistics or administrative issues — not to mention the financial security that comes with the sale of the business.
How to resolve
There’s a simple solution to this dispute, in which both sides make persuasive arguments. The agent is correct to point out the challenges of growth at this moment, while the broker is also accurate about the opportunities to be had.
A sensible compromise is for the broker to target strategic acquisitions of small efficient, boutique-style firms with low overhead, whose agents add to the prestige of the larger office (possibly extending its service area), without straining its finances or putting undo competitive pressure on the existing agents.
Anthony is the broker-owner of RE/MAX Advance Realty in South Miami and Kendall, where he leads the activities of 155 agents. He is also a working agent who has consistently sold more than 100 homes a year for over a decade. For two consecutive years (2018 and 2019), Anthony has been honored as the “Managing Broker of the Year” by Miami Agent Magazine’s Agents’ Choice Awards. NOTE: Anthony is not an attorney and does not give legal advice. Please consult a licensed attorney regarding matters discussed in this column.
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