Boutique Broker Explosion Goes Into Reverse
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
When Debra Kameros in June merged her 12-employee real estate company with one of the city’s biggest firms, Prudential Douglas Elliman, she said she was relieved that the cost and hassle of phone bills, support staff, and photocopy machines were no longer her concern.
“I’m loving my ability to focus on being a broker and not on the running of an office,” Ms. Kameros, who founded her company 25 years ago, said. “I’ve thought about that a lot over the years — the prospect of not having to worry about fixing the copier.”
Ms. Kameros is not the only independent broker who is joining forces with other companies. During the recent New York City real estate boom, the number of small real estate brokerages exploded, brokers said, fed by changes in technology and the booming economy. As the industry braces for rocky times ahead, small and mid-size companies are joining the larger firms in a bid to reduce overhead and focus more on sales.
The coming downturn “will be much more difficult for smaller companies,” a broker who joined The Corcoran Group recently after 15 years of owning her own firm, Susan Sears, said. “There are terrific individual brokers who will do deals, that’s for sure. But it’s harder to do business on one’s own.”
In the past five years, the number of small brokerages — those with 20 or fewer brokers — doubled to roughly 200, the founder of the Barshay Brokerage Real Estate Group, Benjamin Barshay, whose company has three agents, said.
He attributed the change largely to technology — such as industry databases and Web sites including Trulia and Streeteasy — that make it easier for small companies to access other firms’ listings. The Real Estate Board of New York instituted a rule several years ago requiring exclusive listings to be shared electronically with all member firms.
“Five or six years ago, it was more difficult to compete,” Mr. Barshay said, but the changes have “enabled smaller players to be productive where we were not nearly as productive a handful of years ago.”
It helped that the real estate market grew quickly over the past several years, making it easy to do deals and attracting a large number of new brokers to the field.
“There was a time when everybody I knew was becoming a broker, or they knew someone who was a broker,” Ms. Kameros said, adding that that’s already beginning to change. “Very many of them are not doing it now.”
Part of the issue is simply a numbers game: While brokers selling multimillion-dollar apartments only need a few yearly sales to make a tidy profit, smaller firms often rely on high sales volumes of lower-priced apartments. “I would rather have higher activity volume, even if the prices were to drop off more,” Mr. Barshay said. Instead of selling one apartment for $1.4 million, “I’d rather see myself doing four for $800,000 each.”
Moreover, a very small drop in sales volume can have a significant impact on smaller companies. This summer, Mr. Barshay said, his company brokered only two contracts, compared to six last summer.
Overhead costs, such as rent, advertising, and salaries, also play a large role in brokers’ motivation to join larger companies, Ms. Kameros said. “I think it makes a difference if you have an office,” she said, adding that some very small brokers have an advantage if they work from home and don’t have a staff. “I think the smaller and larger companies are probably more comfortable in uncertain times. The mid-sized ones are going to have a little more trouble.”
For Ms. Sears, the compelling reason to switch was that Corcoran has access to a top-notch Web site and other resources that are costly for a small firm to maintain. “My main reason was the technology,” she said. “It takes many full-time people to manage a Web site.”
She added that in the current market, working for a larger company provides “a bit of psychological safety net,” though brokers generate much of their business on their own. “They give you all the tools you need to make deals in this changing marketplace.”
A recent furor at the Real Estate Board of New York highlights some of the obstacles faced by small brokers. Members of REBNY’s Small Firms Committee sent a letter to REBNY’s president, Steven Spinola, voicing concerns about ResidentialNYC, REBNY’s new listings Web site.
The fee for joining the service was too steep for small firms, according to a committee member, Timothy Bascom, while major firms were charged a proportionally smaller fee. “It’s an overly expensive forum for small brokers,” he said, adding that small brokers’ complaints often seem to fall on deaf ears at REBNY. “If it was a situation where it was charged on a per broker basis, it would be fine.”
Mr. Spinola said ResidentialNYC represents “a substantial percentage” of REBNY members, adding that he plans to contact the committee about concerns raised in the letter.
Still, there are advantages to being a small broker. “At a smaller firm, you can give more time and energy to each customer,” Mr. Bascom, the principal of Bascom Real Estate, said, adding that the industry rewards hard work regardless of a company’s size. “The hardworking independent firms will always be around.”