Dude, what happened to my real estate company?

We’ve recently had a few rounds of consolidation and cut-backs in the local real estate community, with one major bankruptcy and shut down by a national franchise operation. I’m sure that some consumers are confused by all of this because they don’t necessarily understand the business models that most real estate companies operate under. A part of the confusion grows out of the franchise nature of many companies in the business and what that means and doesn’t mean for a local real estate franchise.

There are several recognizable national franchise brands, among them are Century 21, Coldwell Banker, ReMax, Prudential and GMAC Real Estate. These are all umbrella brands that are owned by large companies such as Realogy, which owns the C21 and Coldwell Banker brands. People mistakenly believe that being a part of a big brand somehow also means being a part of a bigger company. It does not.

The local C21 real estate office that you see is usually part of a mom & pop operation, normally a sole proprietorship, which is owned by a broker. Some of those operations are well capitalized and well run and some are not; however, none of them have any real business relationships with the “parent” company other than the franchise license to use the brand name. They pay a good fee for the use of that name and they may gain some benefit from whatever national level marketing and advertising the parent company may do. Some may grow to be big companies, relative to their local market, but most remain small operations. And the fact that you may see 2-3-4 companies in a market area all with the same national brand doesn’t mean anything in terms of leverage or advantage for you as a buyer or seller. They normally don’t cooperate at all, since they compete against one another for business in that market. In our little market we had four C21 franchisees, now we have three.

There is no synergy, no leverage, no advantage that grows out of there being multiple C21 or Coldwell Banker franchises in a state. Contrast that with a brand and company like Real Estate One, which is Michigan’s largest real estate company, but which is not a national brand. Real Estate One is a family owned company, too, which operates only in Michigan. It just happens to be a very successful and very large family owned and run company (in fact it is the 13th largest real estate company in the United States). Real Estate One has 37 Corporate-owned offices in the state and 30 other offices that are franchise operations (yes we do franchises, too), whereas the next largest competitor has 7 locations. The number of Realtors fluctuates up and down, but Real Estate One is normally 3-4 times the size of our closest competitor and our business volume is an order of magnitude greater.

But, size aside, it is the synergy and leverage that Real Estate One is able to generate that provide real advantages for our clients. Any REO agent can go into any REO office and use the facilities and technology that are there to help his/her clients. REO makes such large and consistent media buys that all of the local media give then the best rate, which they pass on to their agents to us on behalf of their clients. REO was an early Internet innovator and still leads in leveraging that resource for its agents and clients. The RealEstateOne.com Web site is the only one locally that aggregates the listings of all of the major realtor boards in the lower peninsula (because we have offices in all of those areas) and makes them available to our agents and our clients. REO continues to innovate on the Web with map-based search options, YouTube video production for our listings and more. You don’t get all of that from the small franchisees, even if they do have a big, impressive brand name on their signs.

So the important take-away here is that those big brand names mean very little. You need to look at the strength of the local company that you are going to deal with to sell your house or to help you find a house to buy. The company with the big brand name could be the next small franchise operation to go belly up in the current real estate environment. Seek, rather, the comfort of the stability and longevity of Michigan’s largest and most successful real estate company, one that has been there for more than 85 years and will be there tomorrow – Real Estate One.