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Real Estate Firms Show Higher Profitability
WASHINGTON -- Real estate firms have become more profitable during the recent real estate boom that set home sales records for three straight years, according to the National Association of Realtors.Six out of 10 real estate firms report higher profitability in 2003, finds a newly released survey recently conducted by the trade group. About 54% expect greater profits this year, and another 32% believe profitability in 2004 will be equal to 2003, the survey showed.David Lereah, NAR's chief economist, said that by adopting new technologies and tailoring services to their clientele while serving the needs of agents, firms are increasing the value of their business and making the economic picture for the real estate industry bright. "Many firms report they are supporting their staffs by offering technology investment, training and group affiliations that have translated into greater profitability," he noted. "The survey shows company size has little bearing on the essential services provided," he said."Technology is playing an increasingly important role for both consumers and real estate professionals," said Walt McDonald, president of the National Association of Realtors."More than six out of 10 real estate firms said the harnessing of technology was most effective in helping to generate sales and enhance profitability. Those technology trends and online resources help home buyers, sellers and real estate firms to save time and money by increasing the efficiency of the transaction process."The vast majority of real estate firms, 88%, use e-mail to communicate with clients, while 52% have a Web site and another 8% plan to have one in the future, McDonald said. In 2000, a separate survey showed only 56% of residential real estate firms used e-mail.One in eight firms increased spending on technology by at least 25% last year, while one-third of firms plan to increase technology spending this year. "The strong real estate market over the last few years has also led to the creation of new firms," McDonald said. "Six percent of firms have been in the business for less than a year, while nearly one in five has been in the business for three years or less."The profile shows 84% of firms with a Web site generated some business leads from their site in 2003, up from 68% in 1999. It also shows 12% generated more than 25% of their leads from the Internet last year.The survey provides an inside look at the demographic and business characteristics of the nations real estate brokerages. The typical firm is a single-office operation specializing in residential brokerage. More than three out of five firms have been in the business for over 11 years, and 68% report their main revenue is from residential brokerage.Turnover is fairly modest, the survey found, and sales people tend to stay with their firm, with 84% of firms reporting that no salesperson left during 2003. However, 21% of firms reported adding to their staff last year. Some 39% provide in-house training to agents, while 21% reimburse sales people for some portion of real estate sales training expenses.The vast majority of real estate firms, 93%, are single-office operations. Only 2% have three or more offices. Single-office operations have an average of three sales people, while firms with four or more offices have an average sales staff of 23 per office. The typical sales agent is an independent contractor; 76% of firms have a sales force composed entirely of independent contractors.More than one-third of franchised real estate firms have been affiliated with their franchise for over 10 years, and 43% of firms have relocation departments. Larger firms tend to engage in a wider variety of real estate specialties and often hold a business interest in related non-brokerage activities.Non-brokerage business activities are an important part of many firms business models, including mortgage lending and a variety of services such as escrow, settlement and moving. Commercial brokerage was the primary activity for 8% of real estate firms, with 4% each for building and development; farm and land brokerage; and appraisal.The National Association of Realtors is Americas largest trade association, representing one million realtors involved in all aspects of the residential and commercial real estate industries.Visit the National Association of Realtors: http://realtor.org"