Are small brokers viable? Question is posed by national giants buying up local firms

Yet little guys do compete

They specialize in geographic area, type of property

July 19, 1998|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

The receptionist still includes "W. H. C. Wilson" as part of her greeting, and the newspaper advertisements carry the name in bold print. But it's only a matter of time before W. H. C. Wilson, the venerable Roland Park real estate firm, passes from the lips of agents, buyers and sellers, replaced only with O'Conor, Piper & Flynn-ERA.

It's been a little more than two weeks since independently owned W. H. C. Wilson & Company Inc. -- started by William H. C. Wilson in 1952 -- was absorbed by OPF-ERA, and some in the industry are wondering if the days of the independent broker are numbered. Yet others say there always will be a place for the smaller company.

"I am a firm believer in the existence, in the companies that are specialized and are centered in a given area," said Arthur Davis, president of Chase Fitzgerald & Company Inc., a Roland Park competitor of W. H. C. Wilson/OPF-ERA. "For companies like ours to succeed and do well, I think there is plenty of opportunity to do that."

OPF was the largest independent broker in Baltimore until it was acquired in February by NRT Inc. of New Jersey and placed under the ERA banner. The goal of NRT Inc. -- which also owns Coldwell Banker and Century 21 -- is to form a dominant national real estate entity by acquiring strong independents in major metropolitan areas. The practice, in turn, allows the acquired independents to purchase smaller brokers and increase market share.

James P. O'Conor, president and chief executive officer of OPF-ERA, said the purchase of Wilson has prompted inquiries from other brokers, and that last week the company held acquisition talks with three firms.

"The beat goes on," O'Conor said. "Very definitely, we are having interest expressed by others who call, and in some cases we are calling them. There is a decided interest to be able to provide the full [real estate] services to everybody."

Timothy M. Rodgers, president of Hill & Company in the Village of Cross Keys -- says firms such as his that carry 30 agents can compete with firms such as OPF-ERA that boast close to 2,000 agents.

Individual attention

"Boutiques [smaller firms] are in demand, they do quite well from a customer standpoint. A lot of our clients want the individual attention. When they call, they want the gal on the switchboard to know who they are and not have 15 or 20 different numbers to call," said Rodgers, who said his firm may command just 1 percent of the market, but handles 25 percent of the properties sold that are listed higher than $500,000.

"[Arthur] Davis and I talked, and to be honest, we were sort of puzzled why they [OPF-ERA] want to buy so many up, unless they want to just eliminate all competition," Rodgers said.

And that may be precisely on the agenda.

"It's best to buy your competition instead of letting your competition grow," said Nancy Hubble, who owned her own firm before selling to Wilson in the early 1990s and then moving to OPF-ERA last year.

"I think it was a smart business move and don't forget I was an owner for 35 years, so I am looking at the deal as a company owner and not as just a Realtor selling houses."

Hubble knows the passions of remaining an independent, but also the benefits of going with a large company.

"I can tell you that all the assets that we have gotten from working with a big company have helped our business in the past year and half. And it is probably going to be harder and harder for the small company. But there are always sellers or buyers who prefer to work with the small companies," she said.

And that's what Rodgers is counting on.

"It is great for us since they [OPF-ERA] have eliminated some competition, so it makes it easier," said Rodgers, who has brushed off offers to sell. "I hope it won't become like the banks when there are only two or three major things out there and the general public has to pay top commissions or whatever."

But the temptation to sell may be stronger than ever, according to Lauri Moore-Moore of Real Trends, an industry newsletter. Now may be the best time for independent brokers to sell, she said.

"There is a window of opportunity for brokers to sell their businesses," Moore-Moore said. "We have a ready real estate market for the first time in decades, and if you have built a large independent company and you don't have someone waiting in the wings in the family to take that firm over, and you want to get your equity out, you've got some alternatives.

"You can try to take it public, and that's only been done a couple of times. Or, you can do some sort of employee SOP [stock option plan]. That's been done a couple of times. But at this point, the most common alternative is to find someone who is willing to buy you."

The sale of independent companies to larger firms is generally done by major stockholders seeking to cash in and are not sales forced by competition, Moore-Moore said.

"Can the independent remain competitive? Absolutely. There is viability there," she said.

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