Listed below is the five classification methodologies used in creating the five sections of the Real Estate Almanac.
Each year we hold a mirror up to the industry and asks: Who are the most powerful and influential executives in residential real estate brokerage?
Power is an elusive concept, defined as “the ability or right to control people, companies or the industry.” But power can also exist even when it is not exercised. But we all agree what power is not. It is not a popularity contest. It is not based only on a single criterion such as head count, office count or revenue. And it is never “pay to play.”
The concept is not easy or straightforward, so you can just imagine the healthy debate involved in creating this list every year. Our team does do a lot of research and analyzes hundreds of bios, annual reports and transactional and sales volume data. We send hundreds of requests for additional information, personally verifying announcements, stats and actions that took place over the past year. Yet it remains as much an art and it is a science.
Some people have entrepreneurial power, some have financial strength, some hold high office, some have personal power, some have positional power, while others have political clout. Some are innovators, some executives, some doers, some dealmakers. It doesn’t matter. We have tried to analyze them all and share with you our findings and thoughts.
Here is our process:
First Round: Organization
We look at leaders, predominantly CEOs, of organizations that meet the following initial criteria:
- Brokerage companies with more than $3.0 billion in annual sales, 10,000 annual transactions or 500 agents.
- Technology companies with at least 1,000 broker clients, 50,000 licensed agent users, $30 million in revenue, 100 employees, $20 million in funding or two or more enterprise client relationships (e.g. national franchise, qualifying association).
- State associations with more than with 100,000 members, local associations with more than 20,000 members, or MLS organizations with more than 40,000 members.
Second Round: Activities
During this round we review each executive/leader and, when available, evaluate the following information:
- The office he or she currently holds and the decision-making power of said office.
- His or her tenure in the industry.
- The size of the individual’s organization (sales volume, offices, agent count, number of clients, etc.).
- The financial resources of the organization.
- The organization’s significance and impact in the residential real estate brokerage industry.
- Activities, acquisitions or other initiatives the individual led or was involved in 2019.
- Other industry-wide activities, such as association board of directors.
- The individual’s personal power and influence outside his or her organization.
Third Round: Future Impact
We consider the individual and company’s initiatives, planned or announced that are realistically expected to occur in the foreseeable future. We try to ascertain the significance of these actions. We also, acknowledge appointments, promotions and retirements announced up to the release of the SP200.
Leaders are placed into one of the following categories according to their primary activities and responsibilities as we understand them to be:
In addition, we identify leaders in the following unique groups. They all are powerful and influential, and have not yet made it to the main SP200 list, but we believe they deserve more than just an honorable mention. These leaders have been included on one of three SP2019 Bonus Lists:
Associations and MLS organizations are tracked and reported based on year-end membership count. These numbers are reviewed and vetted by individual organizations and through research collected on each organization.
Realtor associations come in three varieties, determined by geographic scope: national, state and local. Realtor associations have a federated makeup: members cannot join just one.
When agents join a local association, to gain access to the MLS for example, they automatically join the state and national associations; the memberships are tied together in what is known as the three-way agreement.
- State Associations – tracks the annual membership of the nation’s largest associations operating at the state-level.
- Local Associations – membership in local Realtor associations is clustered among the largest. In the local association category, approximately a fifth of the nation’s 1,086 local residential Realtor associations account for 80 percent of the nation’s total membership.
Multiple Listing Services
The MLS world is quite diverse, but, as with local Realtor associations, the biggest of the big stand in a class of their own and account for a bulk of the nation’s MLS subscriber count and subsequently the largest component of sales volume and transaction count. The nation’s large regional MLSs have huge footprints, sophisticated technology, innovative business practices and well-run management structures. The largest MLSs serve members across a broad geographic area, sometimes statewide or even across multiple states. As such, MLS growth is tracked by annual MLS subscriber count.
T3 Sixty constructed the Tech 500 by developing a rubric through which to evaluate real estate technology by functionality. It identified the different needs real estate brokers and agents have based on how they apply to their sales funnels and other needs in seven broad sections. Each section is then divided into 63 functional categories. This framework is referred to as T3 Sixty’s Real Estate Technology Landscape.
These categories represent the functionalities and services brokerages and agents use or need and provides a useful logic and language for technology companies, investors and real estate brokerages to use in their evaluation and decision-making process going forward.
To deliver the most accurate, meaningful and complete data possible, T3 Sixty starts with the broadest possible set of information, whether it be leaders for the SP 200, brokerages for the Mega 1000, technology providers for the Tech 500 or any of the other sections of the Real Estate Almanac before employing obtaining additional data in a variety of ways, including surveys, franchise reporting, MLS data, public financial statements, interviews, and several other proprietary processes. We strive to verify as far as possible, but, for obvious reasons, cannot guarantee 100 percent accuracy or completeness.
It is important to reaffirm that no technology vendor (or any other company or person for that matter) has ever paid for inclusion in the Tech 500, or the Real Estate Almanac. Inclusion in the Tech 500 was determined specifically by:
The depth, breadth and reliability of the vendor or product
Known or tested client satisfaction or adoption metrics
Innovation and application within their respective category
Provider or product’s market share
Year-over-year growth, specifically related to enterprise entities
Ability to service and support clients, including enterprise entities
Leadership within respective category and overall impact on the industry
As T3 Sixty is committed to serving as the industry’s foremost provider of business intelligence, and we invite anyone who believes they can contribute to any data set in the Real Estate Almanac to contact our R&D team at firstname.lastname@example.org. We thank you in advance for any input you can provide to make the information we provide better.
We do not list all public entities involved in real estate in general, as most of these are investment REITs, development companies or construction companies. We focus exclusively on the residential real estate brokerage companies or those companies that extensively serve them with their technology or other products or services.
Holding companies really became significant in the residential real estate brokerage industry in the mid-to-late 1990s when Realogy (HFS at the time) became the first company to purchase multiple national real estate brands (Century 21 and ERA Real Estate in 1995 and Colwell Banker in 1996).
A holding company does not deliver brokerage or franchise services itself but owns a controlling stake in one or more companies that do offer those services. In our industry, the biggest two holding companies are Realogy Holdings Corp (NYSE: RGLY) and Berkshire Hathaway (NYSE: BRK).
Realogy delivers its services through company-owned brokerages and franchised operators under a variety of brands, including Coldwell Banker, Century 21, Sotheby’s International Realty, ERA Real Estate, Better Homes and Gardens Real Estate and Corcoran Group. HomeServices of America provides services through company-owned offices with regional, localized brands such as Edina Realty, Long and Foster Real Estate and Houlihan Lawrence and franchised offices under the Berkshire Hathaway HomeServices and Real Living brands.
These two companies are the industry’s titans. Realogy is particularly unique – it owns the largest brokerage company Realogy Brokerage Group (previous known as NRT) and owns more real estate franchise brands than anyone else (six). In aggregate, it has the highest combined sales volume of any industry entity or holding company, by a large margin. For any ranking of the real estate brokerage to be complete, holding companies must also be listed.
The holding company list can be a little confusing; in some cases, a holding company sometimes owns brokerages and sometimes not. Sometimes a holding company owns a franchise brand, and sometime not. Other times a holding company has the same name, or brand, as the brokerage or franchise it owns or operates.
For example, HomeServices of America owns brokerages under its HomeServices of America-named brokerage division; it also owns brokerages that operate under the Berkshire Hathaway HomeServices brand, which it also owns. RE/MAX is another example. The holding company RE/MAX also operates the RE/MAX franchise. In both examples, the two different entities operate under the same name making it easy for readers to get confused.
Therefore, clarifying the entity ranked is critically important to ensure an accurate reflection of the appropriate part of the company being included, or not. In some cases, different numbers appear attributed to what may appear as the same entity to the untrained eye, but, really, they tie to two different entities: a holding company on one side and a brokerage or franchisor on the other.
Analyzing holding companies allows us to clearly identify the influence and impact these titans have. They shape the residential real estate brokerage industry like no other company.
Franchising has had an enormous impact on the residential real estate brokerage industry since emerging in the early 1970s. Century 21 Real Estate, ERA Real Estate and RE/MAX hit the scene in 1972 with their new franchising systems and national ambitions, and within a decade had an outsized industry influence. For example, Century 21 went public in 1977 after growing its network to 3,300 franchisees in just six years.
A franchisor is a company that owns trademarks, products, intellectual property and business systems and then licenses them as a package to an organization to operate as a franchisee in a certain predetermined location for agreed upon fees. The franchise agreement between these two parties also outlines branding, co-marketing as well as franchisee obligations. Franchisors, however, are not legally or financially responsible for their franchisees.
Franchisors do not have an ownership stake in the real estate offices under their brand unless the franchisor (or holding company) own the brokerage and sign a franchise agreement. Examples of the latter include Coldwell Banker and Realogy Brokerage Group under the Realogy umbrella and Berkshire Hathaway HomeServices under the HomeServices of America umbrella (these are then generally referred to as company-owned offices).
Franchising in real estate does not fundamentally or automatically alter brokerage operations. Primarily, franchisors provide brokers a brand and an operating system designed to help them grow and improve operations, some technology, referral networks and often some training.
A franchisor derives its primary income from franchisees (brokerages) who pay an ongoing franchise fee. Typically, brokerages pay franchisors a licensing fee as a percentage of their top-line revenue. Traditionally, this fee stands at approximately 6 percent, which then staggers down at predetermined revenue thresholds. Many franchisors also require brokerages to contribute to a national advertising fund.
A franchisee (the party receiving the licensing rights), as most brokerages, usually derives the bulk of its revenue by taking a cut of the commissions its agents receive when they help a consumer buy or sell a house. This is usually a percentage on a sliding scale but is increasingly becoming a fixed fee. Brokerages often have additional agent fees for technology and marketing.
The Franchisor Landscape
Franchisors, of course, differ. Some franchisors enforcing tighter operational guidelines and branding application while others have a more laissez faire approach. Each franchisor has distinct business practices, so levels of support around products and service vary widely by brand.
In the residential real estate brokerage industry, conversion or brand franchise systems are significantly more prevalent than business format franchises.
Many food franchises such as McDonald’s and Subway operate as business format franchises, meaning that they provide franchisees a complete, comprehensive system to operate the business, market product and deliver service. Most real estate brokerages already have those systems in place; therefore, real estate franchisees typically just adopt trademarks, marketing programs and client service standards and deliverables.
T3 Sixty uses the term franchise brand refers to specific real estate brands and franchisor to refer to franchise groups that operate multiple real estate brands; for example, Realogy Franchise Group is a franchisor that runs the franchise brands Coldwell Banker Real Estate, Sotheby’s International Realty, Better Homes and Gardens Real Estate, ERA Real Estate and Corcoran Group. Some franchisors only operate one franchise brand such as Keller Williams Realty and RE/MAX.
Franchise Brands List
The top 20 franchise brands collectively represent a significant portion of the industry. In 2019 the numbers were:
• $1.439 trillion in sales volume
• 4.42 million in transaction sides
• 557,986 agents
While NAR’s 2019 Profile of Real Estate Firms states that only 11 percent of firms are franchised, companies in this group account for 63 percent of the nation’s sales volume and 45 percent of its agent count.
Real Estate Networks
There are a small selection of unique entities that we have loosely grouped together as networks. These networks have real estate brokerages that operate under an umbrella brand and offer the brokerage a variety of services such as: branding and positioning, relocation services or collective purchasing power.
There is no consistency in ownership or control across these networks; they tend to operate relatively informally as compared to franchise groups. Leadership direction of these networks is usually strongly influenced by a board of directors selected directly from the dominant brokerages within the network.
Gathering and analyzing brokerage company data in the Mega 1000 is a rigorous, multistep process. It starts by sending requests for information to the nation’s largest brokerages.
We understand it is nearly impossible to identify every brokerage that should be included; that said, we have worked persistently to include everyone we are aware of by diligently reaching out to franchisors, networks, organized real estate, any type of list, the media and so on find as many as we possible could. If we inadvertently missed a brokerage, please reach out to us at email@example.com and we will add you to our next research cycle.
T3 researches approximately 2,500 real estate brokerages, all real estate franchisors, all real estate holding companies and a selection of large real estate networks. We annually collect and analyze over 12,000 data points. T3 examines the numbers, runs algorithms to identify outliers, and tests the gathered information against T3 parameters and benchmarks. This is a huge undertaking; T3 strives to verify data before using it to sort and rank brokerages to ensure that rankings are as comprehensive as possible, as every company not included destroys the integrity of the rankings below that entry.
T3 Sixty ranks for-profit companies (brokerages, franchisors and holding companies) by all three key metrics (sales volume, transaction sides and agent count) although we consider sales volume more important as it is the core metric used to calculate agent commission, franchise fees and company revenue. Sale volume is the industry’s best proxy metric for and brokerage overall performance. The Real Estate Almanac data can, however, be viewed from transaction sides and agent count and each provide an interesting vantage point.
In most tables (for example, the top 1,000 brokerages), sales volume is listed in millions of dollars. Due to the large numbers reflected in the top franchisors and top holding companies lists, we list those sales volumes in billions of dollars.
Note that sales volume and transaction sides is calculated by adding the value or number of the homes that a company represented on either the buy or sell side. Therefore, should a company represent both sides of the same transaction, the transaction is counted as two sides. To derive the total size of the market, requires removing this duplication. For reference, the total value of existing home sales in 2019 was approximately $1.65 trillion (5.34 million homes sold (10.64 transaction sides) at a median price of approximately $309,000).
A transaction side is counted as either the list or sell side of a transaction. The rule listed above applies. If a brokerage sells its own listing, two transaction sides are counted; when it co-brokers a transaction, one transaction side is counted. Outgoing referrals are counted by the receiving brokerage and not the sending brokerage.
Agent count is a less important measure but it does, however, still prove insightful. It is also a more verifiable stat than many other numbers and, therefore, provides a valuable benchmark. A large agent count does not guarantee success, but it usually is an indicator of a growing company.
The Mega 1000 does not list office count because in today’s modern technology-driven world, bricks-and-mortar offices are no longer critical to company success. A growing number of companies are consolidating offices and many new models such as Redfin, eXp Realty and United Real Estate serve dozens of markets with no, or only a handful, of actual offices.
Mergers and Acquisitions
Merger and acquisition (M&A) activity in residential real estate is critically important as a company sale can change the industry’s landscape and rankings overnight. 2019 continued the industry’s recent spate of large acquisitions. Compass acquired Alain Pinel Realtors and its $12.1 billion of sales volume in March 2019 and Howard Hanna Real Estate closed its purchase of Allen Tate Companies and its $5.7 billion sales volume business in January 2019. As a result, these, both are acquired brokerages, are no longer listed separately in the Mega 1000.
The Brokerage Landscape
The brokerage landscape is undergoing a period of rapid change. The influx of vast amounts of capital combined with maturing technology is restructuring the way homes are bought and sold and how real estate broker- ages operate. Many new companies founded in the last decade have grown rapidly and are realizing disproportionate market share growth.
The 2019 Mega 1000 clearly reflects this.
Last year’s, 2018 Mega 1000, report showed two relative newcomers – Redfin and Compass – in the top 10. This momentum explodes this year, with Compass jumping to the nation’s third largest brokerage on the back of its acquisition spree of fellow top 10 broker Pacific Union International (No. 8 in the 2018 Mega 1000) in August 2018. Its March 2019 acquisition of another top 10 company, Alain Pinel Realtors (No. 10 in the 2018 Mega 1000), will add to its staggering growth, which the 2020 Mega 1000 will continue to reflect.
Given the industry’s current state of flux, new brokerage business models have cropped up and are having a disproportionate impact. Newer models include the tech-powered discount brokerage, such as Redfin, the agent at-fee model such as Realty ONE Group, HomeSmart and United Real Estate, the cloud-based model epitomized by eXp Realty and the proliferating iBuyer model epitomized by Opendoor, Offerpad, Knock and Zillow Offers.
Mega 1000 Brokerages
The largest part of the residential real estate brokerage industry is still populated with small, localized brokerage companies according to the National Association of Realtors’ 2019 Profile of Real Estate Firms.
Given the plethora of small brokerages, the bigger players included in the Mega 1000 stand out. Those that fall in the category we call Mega Brokers have an annual median of 2,255 transactions and $589.4 million in annual sales. Although the Mega 1000 consists of just over 1 percent of the U.S.’s 86,000 brokerages, the companies covered account for an estimated 66 percent of the total sales volume U.S. agents generate each year.
Real Estate Almanac
Leaders are evaluated based on the office they hold, the decision-making power associated with the office, the financial resources at their disposal, their organization’s industry significance and geographical reach, public announcements about imminent changes, their tenure and their personal influence in the industry.