weigh the benefits of acquisitions and contractions
It’s no secret that a sharp decline in home sales has triggered a wave of
consolidation that has swept through California’s real estate brokerage
companies. With statewide sales at just 366,720 in April, there simply
isn’t enough demand to keep nearly 175,000 REALTORS® busy.
The closure of realty companies and offices may sound like more bad news
for an industry that’s already under siege, but consolidation isn’t all
bad. Some practitioners have greeted an office closure as an incentive to
reinvent their business.
Chuck Knapp, owner and general manager of Century 21 Desert Rock in
Hesperia, is a case in point. The firm, which has 55 full-time agents,
closed one of its three offices in February. The office was closed because
the outlying locale hadn’t experienced the sales growth Knapp and his wife,
broker/owner Hanna Knapp, had expected three years earlier.
“When business is good and doing well, it’s probably time to look
into expansion, and when the business changes and volume drops, you have to
look at a reduction. I don’t think it’s wise to say it’s good to expand or
not expand or to reduce or not reduce. You just have to do it,” Chuck Knapp
Business Model Doesn’t Depend on Third Office
The bottom line was that the incremental business Century 21 Desert Rock
could attribute to its physical presence in nearby Apple Valley no longer
justified the overhead, Knapp explains.
“In our hearts, we knew we could still service that neighborhood from our
existing main location,” he says. “We’d learned that we had a good sphere
of influence there, and I don’t think we necessarily acquired a lot more
business through that location.”
Seven of the 20 or so sales
associates who were affected by the consolidation had already been on board
when the third had opened; the others were newbies who’d signed on within
the last three years. Yet, all of the associates were absorbed easily into
the main office, Knapp notes.
At 53,000 square feet, the main office is reasonably large, so “it wasn’t
that hard to fit the people back in,” Knapp says. Some office equipment was
moved over as well, which also helped the company accommodate the
additional associates at that location.
The payoff of the office closure was realized immediately.
Expenses eliminated from the budget included:
• Marketing expenses
specific to the Apple Valley location
“All of those costs immediately came back to the company because we no
longer had those expenses,” Knapp notes.
Discount Broker Becomes REO Specialist
Not only fewer closed sales, but also shifts in market opportunities can
result in consolidation and office closures.
When the telephone stopped ringing at New Millennium Discount Realty in
Victorville, broker/owner Brant Ensworth knew it was time to make a change.
He shuttered the once-prosperous discount firm and signed on as a
broker-associate with Keller Williams Victor Valley Market Center, also in
“Our business as a discount REALTOR® had completely dropped off. The market
turned, and the sellers who were listing their properties really focused
more on the name-brand companies,” he recalls.
Rather than push the discount model any further, Ensworth, who has worked
in different aspects of real estate for more than 20 years, turned his
attention to bank-owned homes, or REOs. As part of that transition, he
became concerned that REO asset managers in faraway cities wouldn’t take a
chance on an unknown name or keep faith with an independent broker.
“My concern was if we had an REO that was on the market for a considerable
amount of time, that they [sellers] would assume it was because they’d
listed with the wrong individual and not a name they were aware of or knew
well, and that they’d made a mistake and then they’d go with a larger or
more recognized franchise,” he explains.
He believed an association with a large national firm would offer a better
name recognition and help him gain credibility with REO asset
Ensworth considered his options and Keller Williams won out, Ensworth says,
largely because he wanted to keep his existing separate office, which is on
a major thoroughfare, and display signage. The firm’s agent-centered
culture and an attractive commission structure were also important
At its height, New Millennium Discount had had five licensed salespeople,
including Ensworth, and three unlicensed assistants on board. Today,
Ensworth’s team at Keller Williams is comprised of himself and two
assistants, who show property and process paperwork. REO properties now
make up most of the sales in the local area and Ensworth’s own
The switch paid off in a variety of ways, some of which were expected and
others were surprising even to Ensworth.
These positive outcomes included:
• REO inventory continued to grow
• New connections with
• More networking
• Increased personal
“We’ve made a lot of contacts with very successful agents since we’ve been
with Keller Williams and the training opportunity is there to help veterans
and beginners, so I’ve learned a lot as well,” he says. “There are a lot
more networking opportunities available when you are part of a larger
company than when you are on your own.”
Marcie Geffner is a freelance reporter in Los Angeles.