Working for the biggest broker in Augusta, Ga., means Gardelle Lewis doesn't have to offer discounts to get clients.
Gardelle Lewis isn't afraid to tout his success. The veteran broker proudly displays a plaque from a local magazine in Augusta, Ga. anointing 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.
* Video: SmartMoney, RedesignedEditor in Chief Jonathan Dahl on the latest changes to the content and design of SmartMoney Magazine
More from the February issue:
*10 Things Facebook Won't Say* America's Best Fund Managers* Blind Faith in Socially Responsible Funds* Perfect Portfolio
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 who he works for. On a recent afternoon, he tells a reporter about a dingy ranch house that he declined to list, saying he wasn't "the right person for the job." Is he worried about losing business? Hardly. Lewis works for the biggest agency in town, which has twice the market share of its largest competitor. ("They're much larger than us," laments 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, where a select group of powerful real estate agents has quietly — and surprisingly — grabbed a firm grip on their markets. In some cities, such brokers have become almost the only game in town, with a hand in a third to a half of all home sales. 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 this group 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."
The ranks of this group have been steadily growing — with an assist from the housing crash. Thanks in part to survival-of-the-fittest consolidation, there are only 55,000 brokerages in the U.S. today, down from 73,000 in 2005. The upshot: In a recent study of real estate markets by professor Jason Beck at Armstrong Atlantic State University, 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 like real estate, Beck explains, "30% is a really dominant firm." (To put that in perspective, on a nationwide level, 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 both buyer and seller, and therefore 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 Real Estate.
For their part, top brokers argue that deals run smoother when the buyer's agent and seller's agent aren't strangers at the closing table. What's more, some say, control over 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's earned the right not to share commissions with other brokers: "I don't have to put up with the aggravation." Whatever their business philosophies, from Augusta, Ga, to Cleveland, Ohio, big brokers are finding themselves in good shape in a shaky market.
Trackback URL for this story: http://www.smartmoney.com/tb/Jd.2Bs.2B9E.3D
What is a Trackback?It is a way to tell us that you have published something that references this story.
How do I send a Trackback? If you blog or mention this story on your website, you can use this Trackback URL to notify us about it. Some blogging software programs can help in sending a Trackback to us.
Click here to read more about Trackbacks.
Unlike a simple calculator or worksheet, lifeplan provides step-by-step actions to help you put - and keep - your financial house in order.
This award winning column addresses estate planning, individual retirement accounts, long-term-care insurance and strategies for selecting variable annuities.
Read Full Article »