G.M. Filisko is a Chicago area freelance and former editor for REALTOR® Magazine.
Top 100 Companies: The Big Get Bigger
Introducing 2006's top 100 companies list
July 1, 2006
Six years ago the Dow was over 11,000 and NRT headed our “Top 100” list. Both are true today, too. So what’s changed? A lot!
Mother used to say, “The more things change, the more they stay the same.” When REALTOR® Magazine began comparing its first “Top 100 Companies” list from July 2000 with this year’s roster, we saw a lot that looked familiar. The list was headed up by many of the same heavy hitters—Long & Foster Real Estate Inc., Prudential Fox and Roach, Crye-Leike Inc., John L. Scott Real Estate. Quite a few of the names running the industry’s top companies also had a familiar sound—Mary Frances Burleson at Ebby Halliday, REALTORS®; John Foltz at Realty Executives of Phoenix; Bill Watson at Watson Realty Corp.
Like a lot of old sayings, however, this one is only partially true. Look closely at this year’s list, and you’ll see that a surprising 53 percent of the companies on our 2000 list are absent, at least under the name by which they appeared that year. Many brokerages from that first year are still going strong as part of a consolidated entity. Jenny Pruitt & Associates, REALTORS®, and Gundaker, REALTORS®, are now part of HomeServices of America Inc. and NRT Incorporated, respectively. Real Living Inc. of Columbus, Ohio (No. 4), showed up on the list for the first time in 2002. But two of the companies that merged to form Real Living—HER, REALTORS®, and Realty One Inc.—were 29th and 14th respectively in 2000. Other notable mergers and name changes include the combination of Howard Hanna Real Estate of Pittsburgh (No. 23 in 2000) with Smythe, Cramer Co. (No. 20 in 2000) under the Hanna name (No. 7) and the metamorphosis of Richard Smith Co. (No. 22 in 2000) into Coldwell Banker United, REALTORS® (No. 10). (All comparisons in this article are by transaction sides rankings.)
The booming real estate market has upped the ante for companies vying to make the rankings. With existing-home sales increasing by a total of 36.5 percent between the 2000 and 2006 surveys, according to the National Association of REALTORS®, it’s no wonder that companies needed extraordinary growth to stay on top. In 2000 (using 1999 figures), it took only 3,439 closed transactions sides to make the list. By this year, the minimum had jumped 62 percent. Six years ago, No. 100 was Coldwell Banker Hunter Realty of Beachwood, Ohio. The company celebrates its 25th year in business in 2006 but is no longer in the Top 100. This year our 100th place finisher was McColly Real Estate of Schererville, Ind., with 5,598 closed sides in 2005. Another Ohio brokerage, Coldwell Banker Heritage, REALTORS®, in Dayton, tied McColly with 5,598 transaction sides, but the Indiana company had the edge based on sales volume.
What the list doesn’t show
For a perfect example of how change can happen below the surface, consider HomeServices of America Inc. The Minneapolis company owns real estate brokerages throughout the United States, but the companies retain their local identity. Venerable local institutions such as Reece & Nichols of Kansas City and Esslinger-Wooten-Maxwell of South Florida are part of the HomeServices fold. The company, founded only in 1998, sat solidly in the No. 2 position in 2000—and there it has remained for the last six years.
But in that time, the company has more than tripled in size, going from six brokerages to 19. It has also more than doubled its closed residential transaction sides (from 93,593 to 197,588) and quadrupled its sales volume (from nearly $14 billion to more than $62 billion). During the same period, median home prices grew 59 percent.
One of the biggest changes at HomeServices isn’t reflected in the data, says President and CEO Ronald J. Peltier. It’s the company’s increased success at cross-selling nonbrokerage services, such as mortgage and title. Net profit from nonbrokerage services has increased about 500 percent since 2000, Peltier says. The Top 100 Companies charts show only companies’ residential sales business. (That fact, incidentally, explains why another perennial big player, Weichert, REALTORS®, isn’t on this year’s list. The company decided not to report its brokerage volume separately this year.)
If Peltier is pleased with HomeServices’ progress, he also sees room for growth. “Last year, our capture rate in mortgage, title, and casualty insurance services wasn’t anywhere near 100 percent,” he says. At one of the HomeServices brands, for example, The Long Cos. in Tucson, Ariz., associates closed about 15,500 transaction sides in 2005. But the company completed just 3,025 mortgage units and 5,848 title units, says Rosey Koberlein, crb, the company’s CEO.
Peltier says HomeServices expects to increase the capture rate by bundling affiliated services—including closing fees and costs for title work and loan origination—and guaranteeing service costs upfront. “What we’ve been practicing and continue to refine is a way to offer the mortgage and guarantee all the closing costs so that consumers will know exactly what their costs will be. That’s how we win the confidence of our consumers,” he says.
“By providing guarantees, we benefit not only consumers but also sales associates,” says Koberlein. When consumers are confronted with higher fees at closing, the first place they look for relief is their salesperson’s commission, she notes.
Fonville Morisey Realty Inc. of Raleigh, N.C, is another company where a superficial review of the numbers paints a misleading picture. Its ranking of No. 43 in 2000 and No. 41 this year gives no hint of the bumpy ride the company faced after the dot-com bust hit the state’s Research Triangle area in 2000 and 2001. In 2001 the top company saw its position on the list drop to No. 65. (The drop was also due in part to more companies participating in the list in its second year.) “When the rest of the nation was having tremendous run-ups in activity, we were recovering from the loss of thousands of jobs,” recalls President John C. Morisey Jr.
These days, the company is making up for lost time. It posted 10,614 closed sides in 2005. As the company expands, it’s focusing on how to help its sales associates build stronger relationships.
“When people do business with our associates, they say they’ll refer us to other people. The challenge is to make sure associates follow up, says Morisey. “Companies that can help their salespeople build referrals will be the clear winners.”
To that end, Fonville Morisey created a customized, Outlook-based contact-management software that provides salespeople with automatic reminders to contact past customers. Staff field-tested the program with a handful of associates and refined it before rolling it out companywide. “A lot of software is too complicated, and only top associates use it,” says Morisey. “Because this software is effective and really simple, it enables more salespeople to learn how to use it faster.”
Peter McGarry, the company’s vice president of business development, echoes the theme of simplicity. “We’ve completely redone our training program to get back to basics,” he says. “Everything must be organic and integrate readily into the associates’ day-to-day work flow.” For example, says McGarry, most top salespeople have hundreds of contacts on their databases. “Yet, when we dig further by doing a source-of-business analysis, we find that they typically get most of their business from a few influential people who are out there working on their behalf. We’re training salespeople to focus on maintaining closer contact with those influencers.”
Fonville Morisey has also embarked on one-on-one coaching with new sales associates. Managers meet with new associates at least once a week to help them with business planning and marketing. Managers review associates’ recent contacts and the results. “Coaching and personal accountability, combined with the easy-to-use tools to get the job done, are critical components of our future success,” Morisey says.
Big moves, new markets
One company that made a big move from 2000 to 2006 is The Tomlinson Black Group of Companies, based in Coeur d’Alene, Idaho, with offices in Washington and Idaho. The company started out at No. 73 with 4,871 sides in the 2000 Top 100. It now ranks No. 43, with 10,545 sides.
The surge in second-home sales over the last five years has been the single biggest contributor to growth, says CEO Bob Tomlinson, CRB. “As baby boomers buy second homes, they’re looking in the north to get away from the heat. Coeur d’Alene and Spokane, Wash., have lots of lakes and rivers, and homes are also still relatively affordable.”
Tomlinson says the company’s growth has also come from the acquisition of an office in the resort community of Sand Point, Idaho, and expansion into selling new general construction.
“We’re the exclusive broker for many new communities in the very popular price range between $175,000 and $275,000, which is just above starter homes,” says Jim Carollo, GRI, president of Tomlinson Black Affiliate Services, which oversees the company’s technology, marketing, and education functions. “We have a broker who works with developers and builders from the beginning.”
Bob Tomlinson plans to sustain his company’s growth by expanding on the progress he’s already made toward a one-stop approach to home buying. “We have relationships with home builders and developers, ownership in a title company, and a joint venture in the mortgage business,” he says. ”We’re not a one-stop shop yet, but we’re getting closer.”
Ironically, one of the biggest challenges facing the company is a direct result of its recent success. Fueled by outside buyer demand, home prices have risen by 39.5 percent between 2000 and 2005 in Spokane and by 65.4 percent in Coeur d’Alene, according to the local REALTORS® associations. Carollo estimates that prices in the mid-range niche have risen 25 percent in the last two years. When combined with rising interest rates, these soaring prices are putting homes out of the reach of some local residents. “We’ll have to rely more on people coming in from out of the area,” says Tomlinson, “and there’s only so much of that that we can depend on.”
That’s why the company’s expansion isn’t over. “We’re absolutely on the hunt to expand into other markets in the Inland Northwest,” says Tomlinson.
Although Tomlinson Black’s growth is impressive, other companies saw even larger one-year jumps in Top 100 rankings. Coldwell Banker JME Realty in Pensacola, Fla., didn’t make the cut last year coming in at No. 109, with 5,210 closed transactions sides. This year, the company jumped to No. 71 after growing sides to 7,353, a 41 percent one-year increase. Among the Top 100, the company also had the largest one-year jump in sales volume, with a 104.2 percent increase.
Several factors explain the dramatic growth, according to Joseph M. Endry, broker-owner and president. “We’ve continued to have a significant increase in size every year because of acquisitions as well as organic growth,” he says. “In the last three years, we’ve realized the company’s long-term vision of becoming a regional company. We’re now in the Gulf regions of Alabama, Florida, and Mississippi because it allows the company to capture business throughout the Gulf Coast, increase efficiencies of scale, and recruit more easily,” he says. When the company expanded into Alabama in 2004, it added five offices and 103 sales associates; its 2005 expansion to Mississippi added four offices and 53 salespeople. Even though several of the company’s Mississippi offices as well as the one in Gulf Shores, Ala., were damaged by last year’s hurricanes, sales have been up significantly in those areas as residents try to find places to live.
To track its performance, the company has a customer service department that sends a feedback form to consumers after all transactions. “We had about an incredible 40 percent response rate last year,” says Denis McKinnon, director of operations. “Even better, we received a 97 percent satisfaction rating.”
When the company gets a rare negative response, “we contact the client to find out more specifics, and then counsel the manager and sales associate about what they can do better in the future,” says Endry. The company also does “service recovery” by sending a gift to the client. “If you can make those customers happy, they are four times more loyal than an initially satisfied customer because they know we’re serious about creating happy customers,” he says.
Still, with rapid growth comes challenges. “If there were one thing I wish I’d done differently, it would be building up our technology and systems three or four years earlier to accommodate the expansion opportunities coming our way,” says Endry.
“Our moves into Alabama and Mississippi happened so fast, we encountered challenges that we’d have avoided if we’d completed [the technology buildup] sooner,” Endry says. Looking back, he says he’d have hired more personnel at the company’s headquarters after expansion to help train new associates on how to access the company’s and the franchise’s intranets more easily.
Endry believes his market will be fairly well insulated from any slowdown because of its numerous military bases, huge medical community, four-year university, strong retirement market, and new business moving to the area. “But this year’s production will be about the same as last year,” he says, “maybe a little less.”
Productivity for the long haul
Generally, not seeing much of a change in your numbers over six years would be cause for alarm. But when the number is sides per agent and your company was among the most productive six years ago with 20.2 sides per salesperson, staying the same looks pretty good.
That is, unless you’re Bill Saunders and John Collopy, owners of RE/MAX Results in Eden Prairie, Minn. (No. 39 with 11,113 sides). The company increased its sides per associate this year to an average of 23.4, the highest on the list.
Saunders admits that maintaining that level of production is tough. “It becomes a bigger challenge as more new people enter the business,” he says. “In Minneapolis/St. Paul, just a few years ago, we had about 10,000 associates. Now it’s more than 22,000.”
The company meets the challenge by emphasizing the theories of W. Edwards Deming, who stressed total quality management, and the Six Sigma methodology, which advocates error-free work, says Saunders.
“The greater your operational efficiency, meaning the better, quicker, and more accurate you are in your company, the greater your personal productivity will be,” says Saunders. For example, the company cuts between 30,000 and 40,000 checks a year and strives for no errors on any check. “That way, associates aren’t spending two to three days figuring out their commission checks rather than working with customers,” says Saunders. To help achieve the ideal of total quality, the company tracks per-check errors, phone errors, insertion errors on MLS sheets, and other benchmarks.
RE/MAX Results also emphasizes productivity among its administrative staff. “There aren’t a lot of levels of management, and we have a half-dozen people in accounting doing what others would use 20 people to do. We’re like a lean sprinter,” he says.
That lean, error-free approach is also applied to recruiting, says Amy Coletta, director of recruiting. Coletta was a sales associate herself for six years, so she relies on her own real estate sales experience in recruiting. She regularly meets with associates in her market and visits broker open houses to make the necessary face-to-face contacts with potential recruits. In addition, she analyzes quarterly productivity reports from the MLS to determine such things as which companies’ sales associates have shown sharp increases in activity and might be worth approaching.
“I really analyze carefully,” she says. Coletta looks at listing histories for signs of recruits canceling and relisting their inventory, overpricing, or losing listings, or salespeople who aren’t able to convert listings to closed sales, and avoids those associates. “I want to hire the serious lifer,” she says.
Coletta’s six-page transition plan, “plus the efforts of everyone from the brokers to the secretaries,” plays a role in fulfilling transition needs when a new person comes over, she says. “We want the transition to be as smooth as possible so there’s no disruption in business.”
The company’s hiring systems will get a workout this year as Saunders expands his staff to further enhance customer service. “The minute things get a little lean in real estate, companies tend to drop staff. That’s when you need to stay the course or add people, so we look at this possible downturn as an opportunity,” he says.
Like the Dow Jones Industrial Average, the “Top 100 Companies” list is a moving target. It’s impossible to predict exactly where these companies will be a half-dozen years from now. But if their last six years are any indication, they’ll still be aiming for the top.