Consolidation within the residential real estate brokerage industry remains alive and well in Connecticut with several large firms looking to add to their war chest as the tough economy pushes smaller players to the brink.
Coldwell Banker has acquired four firms in Connecticut over the past year. The deals have all been made under the leadership of Cathleen Smith, who has been president of the company’s residential brokerage businesses in Connecticut and Westchester, N.Y. since August 2010.
Coldwell’s latest deal included the acquisition of Farmington-based Prestige Properties LLC, which has added 34 sales associates to its roster.
“I think everyone has a focus to expand their organization,” Smith said. “Acquisitions are the way we can grow our company.”
Smith said consolidation within the industry has been going on for the past six to eight years, but the pace has accelerated since the financial crisis of 2008, which pummeled the housing market and took a major bite out of the brokerage industry.
Declining and stagnant home sales have meant less business for brokers who depend on commissions for revenue. That has put stress on smaller firms in particular, which have made them think twice about going it alone, Smith said.
The shakeout of the mortgage industry also has been dramatic in Connecticut.
The number of mortgage originators in the state, for example, shrunk from about 13,000 in April 2008 to about 4,620 today, according to the state Department of Banking.
Meanwhile, the number of registered mortgage brokers has fallen to 284.
Jay Hummer, executive vice president of RE/MAX New England, said it can be attractive for owners of small brokerage firms to sell to a larger player so they can shed the management role and go back to strictly doing sales.
It’s that dual role of CEO and real estate broker that can be especially burdensome in a poor economy, Smith added.
At the same time, it can be more attractive for larger brokerages looking to expand their footprint to acquire smaller firms, rather than try to enter a new market from scratch.
Going into a new area cold not only requires finding office space and hiring workers, but it also takes time to learn the market, Smith said.
That’s why Coldwell Banker acquired Century 21 Alaimo & Corrado last year when it was looking to break into the Enfield, Suffield and South Windsor market.
“Through an acquisition you have an immediate presence and some history established in the community,” Smith said. “That is the better way to go.”
Smith said Coldwell Banker was attracted to its most recent acquisition target, Prestige Properties, because it does a lot of real-estate owned transactions for banks and other lending institutions, which is a book of business Coldwell is looking to expand.
Hummer, of RE/MAX New England, said some of their independent franchisees are looking to expand. And it’s the five- to 20-agent companies that have been the most open to being acquired, mainly because they have pushed themselves to the financial limit.
“A lot of agents have left the business because the pie has gotten smaller,” Hummer said.
