Agents Told Lean Times Ahead

March 23, 1995|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff Writer

Dave Liniger built a residential real estate empire as baby boomers came of age and created a seemingly insatiable demand for homes. Those days, he said emphatically yesterday, are gone.

Over the next decade, agents and brokers will scramble for every deal -- and make less money on each one. Only those who work full-time, embrace new technology and manage to boost their annual sales averages will survive, Mr. Liniger, the chairman of Re/Max International Inc., told several hundred agents yesterday on the Baltimore stop of a 60-city speaking tour.

Mr. Liniger, who was shunned by Realtors 22 years ago when he founded his then-controversial real estate agency in Denver, said home sales, and therefore agents' profits, have peaked.

"We've maxed out the number of transactions, and that number is being fought over with more competition than we have ever seen before," Mr. Liniger said during a seminar at the Stouffer Renaissance Harborplace Hotel. "It is a serious crisis for most brokers. This is a long-term problem that means good benefits for customers."

National home sales are expected to remain around 3.9 million per year because of changing demographics. The baby boom generation is aging and increases in general population growth have slowed.

In the Baltimore region, home sales have dropped for the eighth straight month despite an easing in interest rates. Rates had edged up about 2 percentage points last year, with each increase disqualifying more potential buyers.

Business closings and layoffs haven't helped, Mr. Liniger said. For one thing, the once-brisk relocation business has fallen by the wayside in many regions of the United States.

That means fewer sales on average for the nation's more than 1 million agents. Tens of thousands of agents have left the industry in the past 3 1/2 years, especially part-timers and those doing marginal business -- seven or eight transactions a year. Brokers and agents getting into the business often are enterprising college graduates or white-collar professionals with extensive computer backgrounds, Mr. Liniger said.

"We will have better-quality competition, so it will be tougher for us to survive," he said.

Intense competition has prompted agencies to consolidate or close offices. It also will drive agents' commissions down over the next five years, Mr. Liniger predicted, though he could not say by how much. Now, commissions range from 3 percent to 7 percent of a home's sale price.

Since agents will make less money per sale, they will have to increase the number of sales to stay afloat, Mr. Liniger said. Re/Max agents average 25 sales a year, he said.

Mr. Liniger, a 49-year-old Vietnam veteran and licensed pilot who raises horses at his Denver home, co-founded Re/Max with his wife, Gail, in 1973. He started with 21 agents, doubling that number each year for five years.

He recruited top producers from other agencies by allowing them to keep 100 percent of their commission rather than splitting it with the company. In exchange, Re/Max agents contribute to overhead costs.

That policy -- as well as the recruitment of other companies' agents -- earned Mr. Liniger the wrath of the Realtor organization in Denver, where he was removed as a member of the board. His Realtor membership was revoked, and other agencies' brokers refused to show homes he listed for a short period.

Re/Max now has 40,000 agents in 2,444 offices in the United States, Canada, Mexico, the Caribbean, Europe and Southern Africa. In the Central Atlantic region, which includes Maryland, Re/Max has 105 offices. All are independently owned and operated franchises.

No longer the sole agency offering agents the option of keeping all of their commissions, Re/Max now is trying to gain a competitive edge through new technology. The company launched its own satellite television network last year, which it uses to train agents.

Within the next year, the company expects to complete a system of home sale listings that customers could access through video screens in offices or kiosks in public places, Mr. Liniger said. Re/Max plans to test the system in major cities, he said.

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