The downside of working with a superstar agent
The housing bust left some real-estate agents with a big market share in their area. If they're the only game in town, you can expect them to play by different rules.
Gardelle Lewis isn't afraid to tout his success. The veteran real-estate broker proudly displays a plaque from a local magazine in Augusta, Ga., proclaiming him "best real estate agent" of 2009, and he's quick to bring up that his client surveys boast a 99% satisfaction rate. He dines at the finest restaurants in town, belongs to five country clubs and serves on 10 local boards, ranging from the University Health Care Foundation to the Augusta Opera.
"People recognize me in the grocery store," he says, beaming, as he downs London broil at one club's downtown dining room, overlooking the Savannah River.
But in real estate, being popular doesn't mean you can't play hardball. Lewis charges more in commission than the average local agent and often arranges deals so he doesn't share that commission with another brokerage. He's also choosy about his clients. On a recent afternoon, he told a reporter about a dingy ranch house that he declined to list, saying he wasn't "the right person for the job." (Bing: What's a typical real-estate agent commission?)
Is he worried about losing business? Hardly.
Lewis works for the biggest agency in town. It has twice the market share of its largest competitor.
"They're much larger than us," says Thomas Blanchard Jr., president of rival broker Blanchard & Calhoun.
"Most of the time," Lewis says about sellers in town, "I'm the one they pick."
Welcome to the age of the kingpin broker, in which select group of powerful real-estate agents has quietly, and perhaps surprisingly, grabbed a firm grip on some local markets. In some cities, these brokers have become almost the only game in town, with a hand in one-third to one-half of all home sales.
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For brokers like these, top-dog status is a credit to their business savvy and to the work they've put in to building a strong clientele. But critics say their dominance also gives these agents a daunting amount of leverage over their customers.
Think commissions are negotiable in a soft economic climate? Not with the biggest agents in town, who can easily have more than 100 listings and can turn down new ones without giving it a second thought. Have a buyer's agent and want to see a home listed by the market leader? Forget it, if that mega-agent won't split commissions; she's likely to shut you and your agent out. And who needs to advertise a property? A top broker might offer the home without even placing it on a multiple-listing service, the Holy Grail of real-estate advertising, because he "knows everyone."
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The ranks of this group have grown steadily, with an assist from the housing crash. Thanks in part to survival-of-the-fittest consolidation, only 55,000 brokerages are operating in the U.S. today, down from 73,000 in 2005. The upshot: A recent study of real-estate markets by professor Jason Beck at Armstrong Atlantic State University in Savannah, Ga., found that 20% of the cities studied had a brokerage with a market share of 30% or more, up from 16% of cities in 2007. In a fragmented, service-oriented business such as real estate, Beck says, "30% is a really dominant firm."
To put that in perspective, the four largest financial brokerages in the U.S. combined control less than 40% of customer assets.
In all, the shift makes the real-estate landscape even trickier for buyers and sellers to navigate. Many big brokerages, for example, have the clout and contacts to be on both sides of the deal — representing the buyer and seller and taking home most of the commission. That's entirely legal, but competing brokers say it can keep clients from getting the best deal.
"A lawyer wouldn't represent both the defendant and the prosecution," says Douglas Miller, a real-estate attorney and executive director of Consumer Advocates in American Real Estate, a nonprofit consumer group based in Navarre, Minn.
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Top brokers say that deals run more smoothly when the buyer's agent and seller's agent aren't strangers at the closing table. What's more, some say, control of a deal is a fair reward for their effort.
Judy Phetteplace, who holds a majority market share in her territory outside Albany, N.Y., says she has earned the right not to share commissions with other brokers: "I don't have to put up with the aggravation." Whatever their business philosophies, big brokers are finding themselves in good shape in a shaky market.
How clout pays off
Sometimes, a broker who says he "knows everyone in town" isn't exaggerating much. In an industry that depends heavily on connections, Lewis has them in spades. He's a fourth-generation member of a prominent local family and is comfortable with Augusta's well-heeled professional class. Just as important, he's one of the ground-floor employees of an agency that seems to have a finger in every neighborhood.
Lewis joined Meybohm Realtors in the 1980s, when its owner, E.G. Meybohm, was building a business around a small team of agents with big networks, the kinds who could be "high producers." The firm partners with local builders that give it the exclusive right to sell properties in their new housing developments. It also has acquired some big competitors, most recently in September 2008, when it merged with a brokerage that dominated nearby Aiken, S.C. Today, Meybohm sales comprise about 33% of greater Augusta's market, more than twice as much as the No. 2 firm.
These brokers' success highlights how local businesses can grow into powerhouses in ways that national firms only dream of. If a company had a 40% or 50% market share nationwide, it might attract scrutiny from regulators as a possible monopoly, says Thomas Brown, an antitrust expert at international law firm O'Melveny and Myers. But generally, concentration in local markets doesn't raise eyebrows.
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Still, it does give brokers some strong cards to play. On one recent afternoon, the affable, soft-spoken Lewis checked in on one of his listings, the $535,000 penthouse of a client whose late husband belonged to the elite Augusta National Golf Club. Then, Lewis took a visitor on an SUV tour of a row of stately manors that he has sold to doctors and dentists.
Who would be stupid enough to list with these "super agents"? No time for buyers or their sellers it seams. They spend all their advertising dollar on themselves, not your listing, have some 19 year old unlicensed assistant doing their work and their attitude is one of smugness all the way.
Better service with a smaller brokerage and agent for sure.
As a real property attorney, my opinion is it is not in the interest of both the buyers and sellers to utilize the same agent for the transaction. This allows, among many things, the agent to know what one will pay, and what the other will accept, and play them against each other in order to receive the maximum commission. It also allows the agent to pick and choose which properties to show, as they want the buyer to spend the maximum to ensure, once again, the agent receives the largest payout.
My experience is that 90% of real estate agents are not honorable, nor are they concerned with protecting their client. Their only concern is making the sale and getting paid, sometimes to the detriment of the client. I have had several agents over the years ask our office to overlook title issues in order to make a sale, and the reasons for doing so clearly exhibit a "me" mentality. When we refuse, they elect to choose other counsel in future transactions as they feel we "lost" the deal for them, rather than that we honored our commitment to our mutual client and, possibly, saved the agent from future litigation.
Unfortunately, the real estate commission does not want to hear the complaints-they want their agents to appear pristine to the public.
bull hockey. GREED!!!!! is what motivates the profiled realtors. fiduciary relationships, people, means working in the best interest of the client. not working with other agents, i.e., not using the MLS, is limiting the number of potential buyers.