Real estate brokerage not the only one returning to independent roots
They have done it before. They can do it again.
That seems to be the mantra at Hampden Township-based Thompson Wood Real Estate.
Last month, the 34-year-old residential brokerage firm ended its longtime affiliation with Prudential to return to its roots as an independent.
"There couldn't have been a better time. The market is improving," said Steve Thompson, president and broker, who opted to let the franchise expire June 30 because he no longer sees the benefit.
Co-founded in 1979 by his mother, Vi Thompson, the company aligned itself with Prudential Financial Inc. in 1990.
Prudential had deep pockets, and developing a Web presence was very costly back then, he said. Plus, Prudential had a major relocation business, which created a midstate stronghold on home sale leads for Thompson Wood.
Today, being online is a lot cheaper, and Prudential, at the end of 2011, sold its real estate and relocation business to a unit of Brookfield Asset Management, a Toronto-based investment firm.
"We get referrals, but there is no captive relocation company," Thompson said.
He is competing for that relocation business with the likes of Realogy Holdings Corp.'s Cartus Corp. Realogy is the parent company of NRT LLC, which owns ERA Real Estate. Realogy also owns Century 21 Real Estate and Coldwell Banker.
Thompson, who joined the business in 1985, is relying on his company's reputation in Central Pennsylvania to attract talent.
"We're known as a boutique agency. We never wanted to get too big," he said.
Thompson has nearly 30 agents, including seven recent additions. He has set a goal of no more than 50. He also intends to maintain just one office.
"I believe there are a lot of agents who resent paying 6 percent to their franchises," he said.
Thompson said he believes competitive commission splits and lesser fees — for example, he doesn't charge rent for office space — will drive talent not only his way, but also to other independent firms. Top agents can earn 100 percent of their commissions at Thompson Wood.
"You take a risk," he said. "(But), I think you are going to start seeing more independents. There is nothing a franchise can offer that is worth 6 percent that (an agent) can't get on their own."
Like many of his peers, Thompson said he often gets calls from other real estate companies looking to acquire his firm.
Successful individuals in this business are self-motivated and can do well anywhere, Thompson said.
Thompson has installed new signage and updated his Web presence to reflect the departure from Prudential. And he plans to continue investing in technology and online to help drive sales volume. The company also owns two neighboring properties in the 3800 block of Market Street, which gives it the ability to grow.
Shrinking market inventory could be the biggest challenge moving forward, Thompson said.
Thompson Wood has not reported sales or revenue figures since 2008. It sold between 350 and 500 homes annually from 2003 to 2007, with total sales and leasing volume in the $83 million to $94 million range, according to Business Journal records.
Revenue was about $2 million in 2008.
"Like many real estate companies throughout the country, I've been way off due to the economy," Thompson said. "Our company's sales mirror what's going on in the national economy."
The housing market continues to recover. The Greater Harrisburg Association of Realtors reported 2,222 sales in the second quarter, which was 12.3 percent above the second quarter of 2012. Last year was a year of stabilization for the housing market.
"This year, especially this year, the number of sales and leases are significant," Thompson said.
Brief history of Thompson Wood
Thompson Wood Real Estate was founded in 1979. Founder Vi Thompson served as president of the Hampden Township-based brokerage business until her retirement in 2011.
In 1990, the company aligned itself as a Prudential franchise. It was known as Prudential Thompson Wood Real Estate until the end of June, when the franchise agreement expired.
Vi's son, Steve Thompson, owns the independent business today. He has been with the company since 1985.
Getting back their independence
Three years ago, Susquehanna Township-based Joy Daniels Real Estate Group Ltd. left Re/Max Realty Professionals Inc.
“I didn’t have any issues (with Re/Max). They were just not as team-oriented,” said Joy Daniels, broker and CEO, who had been with Re/Max since 1994.
The team concept of selling homes has helped Daniels become one of the leading real estate professionals in the commonwealth.
“There are a lot of things changing in the current real estate market, and I think that teams are going to be a big part of the future in real estate,” she said. “When consumers start to recognize they have a choice between an individual agent and a team, I think they will opt to hire a team for the same amount of money that they would pay for one agent.”
Because not all larger firms promote the concept, Daniels said, she expects there will be more independent companies forming in the future.
However, the pressure is there to join franchises. And mergers and acquisitions are a big part of residential real estate.
“Honestly, we take it as a compliment when franchise-type companies come and talk to us,” Daniels said, citing at least four “serious” calls since 2010.
Daniels said she enjoys the independence and has no desire to sell. The biggest advantage is “not having to answer to anybody,” she added. She could not think of any disadvantages.
Bennett Williams started in 1956 and is a full-service brokerage firm offering commercial and industrial, retail, property management, appraisal and client advisory services in the Mid-Atlantic.
“Because of our extensive retail and commercial work, we really carved out our position in this market,” said Chad Stine, president and CEO.
The firm thought its affiliation with Coldwell Banker would provide a national platform and more market exposure for some of its properties, he said. It also thought the name would help grow Bennett Williams’ industrial business.
“We found that the large percentage of our clients are repeat and a lot of the new clients we pick up are based solely on our market knowledge and industry expertise,” Stine said. “We paid a lot of money and a lot of deals were self-generated.”
The recent departure from Coldwell Banker hasn’t stopped the phone calls. Other large entities regularly call seeking an affiliation, Stine said.
“To water the brand down doesn’t really make sense,” he said.
For smaller independents, the benefits of joining larger companies might be the best route to take, he added: “For someone a few years in that may not have the financial wherewithal to go out and assemble what we have, it may be a benefit to align. I think a lot of franchises, especially in residential, probably help to give some credibility.”