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Independent brokerages are made of a unique cut, and in many ways, are the backbone of the industry, despite other big box names sometimes garnering the most attention.
At Connect Now on Tuesday, Inman editor at large Clelia Peters and @properties co-founder Thad Wong discussed just what makes indies special, and some of the advantages and challenges of owning an independent brokerage.
Peters wondered if a big identifying factor for indies was maintaining a small size, or if it was simply not being owned by another major player in the industry. For instance, could Keller Williams be considered an independent?
“I think once you get to the point of that scale, it’s hard to be independent,” Wong replied.
“The challenge these days [for indies] in competing … is value proposition, whether it revolves around technology, potentially marketing, etc.,” he added.
Even if indies don’t always have the same name recognition or market footprint as big brands, Wong argued that it’s wrong to discount them because they embody the industry’s “entrepreneurial spirit.”
Peters noted that indies have the advantage of having their pulse on their local market, but as a result of that strong point, it’s often difficult for them to scale.
Wong said that his own growth mentality as an entrepreneur drove him to scale @properties in the time since the company’s inception in 2000.
“I live by the motto, ‘If you’re not growing, you’re dying.’ Whereas there are other great people who have said, ‘I’ve got the No. 1 market share in this region, this is fantastic,’ my personality was to always to push myself to accelerate and grow,” he said.
Personal relationships are really what defines an indie, Wong added. But he said with the size of many indies compared to larger brokerages today it’s “virtually impossible” for them to be competitive.
“Cards get stacked against indies,” Wong explained.
He elaborated that, for indies, there’s always the tension of remaining independent versus gaining brand recognition, credibility or technology solutions by joining up with a larger company. With tech, he explained, indies may be able to easily find a company to help provide them with solutions, but those solutions are often one-size-fits-all — which limits their full potential as a company. Wong added that this is one solution @properties tries to provide independents.
Another major disadvantage, in Wong’s opinion, of the companies indies might partner with to find tech solutions, is that those companies don’t actually have real estate experts working with them to power their solutions.
“I think it’s really important that these solutions have to be owned and operated by people who have experience selling real estate,” he said. “I think Redfin, for instance, would have been successful much faster had they involved those in the industry to come up with solutions to help them generate profitability and scale.”
The real estate industry’s relatively low barrier for entry, Wong and Peters agreed, is one likely reason that other companies that work to provide solutions to people in the industry dismiss real estate professionals’ input.
“I think the knowledge of the broker is what’s missing in some of these rollups and in some of the technology that the industry’s putting out there,” Wong said. “The people outside the industry don’t respect the minds inside the industry.”
Wong added that companies like Side and Place are providing a “true technology solution” on the backend for indies, but the drawback with those companies is that they don’t necessarily offer significant market share or positioning, in his opinion.
Peters and Wong also wondered about how to draw the line between indies and teams, which Peters said, “are becoming the new indies,” in a way.
Teams are typically able to distinguish themselves from indies because of their leverage, Wong argued. He then made a case for what he called “the Compass effect.”
“[Compass execs] take $1 billion to come into a market, buy companies, buy teams, build share, show a trajectory of growth, go public, [and] worry about profit later,” Wong said. “And they were very successful at accomplishing that.”
As an independent broker, Peters wondered if Wong had ever regretted not teaming up with a bigger brand. But Wong was confident in his decision.
“I never believed anyone had the resources that we needed,” Wong said. “We had Sotheby’s come to our door and offer us a tremendous package. And I think it’s a great brand … that was tempting. Big check, big options, they say ‘look, we see what you’re doing, we’ll give you great territory,’ etc. If I had done that, I would have taken a much different route of growth, but I wouldn’t have built what we have today, which is our technology.”
“I like where we’re at today, because it’s more complicated and we can offer greater solutions, and I can actually have an effect on brokerages’ futures, so that’s fun,” Wong concluded.
“Impact and people and relationships … at the end of the day, that is part of the core of what makes a difference in being an indie,” Peters added.