As the industry has had to adapt to a new real estate landscape, brokerages have had to find new avenues for growth. Once considered taboo, mergers and acquisitions are steadily becoming one of the most strategic ways a broker/owner can invest in their growth and business. Whether your business has been approached for a potential merger or acquisition, or you’re considering ways to deepen your foothold in your market, a merger or acquisition may be an option for your brokerage’s growth.
All eyes on real estate
To say that the housing market has been booming lately may be an understatement. Low interest rates have offered buyers more power, and sellers have leveraged demand to secure multiple offers and record-breaking sales as home values increased. As consumer demand has skyrocketed, so have real estate business values and outside investor interest. This has led to a unique growth opportunity for brokerage owners, opening up new opportunities for capital and the flexibility to scale their business with a little support from the private equity firms and venture capitalists clamoring for their piece of the real estate industry.
Organic growth isn’t the only option
In the case of real estate brokerages, bigger is often better. A recent National Association of REALTORS® (NAR) study found that firms with only one office had a median brokerage sales volume of $4.5 million in 2020, while firms with four or more offices saw a median sales volume of $146.2 million. Brokerages with a larger market share have a wider pool of potential clients and a larger workforce, finding it easier to lock down sales at a higher rate than a smaller boutique firm. While growing your business organically may feel daunting, it isn’t your only option. Merging with a local competitor or acquiring another firm is a surefire way to scale your business, increase brand awareness and support your recruitment efforts.
Don’t discount ancillary services
There are countless services and providers involved in selling a home. These business lines offer an infinite opportunity for brokerage owners to increase their revenue streams and value prop with a smart acquisition or two. As a broker/owner, thinking of the big picture when it comes to ancillary services offers an incredible growth opportunity. An NAR study found that in 2021, only 4% of all real estate firms surveyed offered in-house title and escrow services, with only 5% offering mortgage lending in-house. If you’ve been brainstorming new ways to generate revenue, bringing complimentary home services into the fold may be the way to go.
But that’s not the end of the merger and acquisition story for a broker/owner. In positioning your business successfully, your brokerage may draw the attention of an interested party. If your long game is to one day sign the papers on your own acquisition, it’s critical to invest in your growth now.
Bryan Brooks is senior vice president of franchise sales for HomeSmart and regularly facilitates mergers and acquisitions for brokerages nationwide. For more information about joining HomeSmart as an agent, please visit HomeSmart.com/join, or visit HomeSmart.com/franchising for franchise opportunities.