A latop on the desk of a real estate office.

4 surprises about real estate firms in 2023 

NAR’s profile of brokerage businesses offers a look inside the makeup, operations and goals of firms, finding that many are still in growth mode.

October 9, 2023
4 minutes

Key points:

  • The report from the National Association of Realtors gathered data from real estate firms across the U.S., including how much sales volume they generate.
  • Most firms are small, and many are optimistic despite the slower market.
  • The biggest players take the lion’s share of sales: Of the firms with four or more offices, 24% topped $1 billion in sales volume in 2022.

The brokerage business is dominated by a handful of giants. The top five companies by sales volume — Anywhere, Keller Williams, RE/MAX, HomeServices of America and Compass — captured more than $1.6 trillion in sales in 2022.

But the landscape of real estate firms is vast and varied, and most are small, local companies with just a handful of agents. 

In its 2023 Profile of Real Estate Firms, the National Association of Realtors presents a wealth of data about brokerage businesses to help paint a picture of what the industry looks like at the ground level. The report reveals some common ground among firms, including how they attract business, and their outlook on the future in today's uncertain market.

Here are four top takeaways from the findings.

Firms are moving forward, and larger companies are focused on recruiting

The real estate market may have slowed, but a significant number of real estate firms remain bullish about the future.

The report found that 40% of all firms were actively recruiting agents this year, and that number was significantly higher among firms with three offices (80%) or four or more offices (87%), suggesting that larger firms are focused on expanding their market share. 

Even as sales have slowed across the board, 30% of firms still expect their profitability to increase this year, while another 30% expect it to stay the same. Small firms were the most optimistic, with just 34% expecting to see declining profits compared to more than 40% of firms with two or more offices.

While many firms expressed optimism despite market challenges, that confidence has dampened considerably over the past two years. In 2021, neary twice as many survey respondents — 58% — expected net income to increase.

Most firms are small and independent

While it's usually the big players that grab the headlines, the typical firm is a small mom-and-pop shop with no national affiliation.

A substantial 81% of real estate firms had a single office with around three agents, the survey found. Of all firms across the U.S., 86% were independent and non-franchised, while 12% were independent but franchised. These numbers have been consistent for decades, said Matt Christopherson, senior research analyst at NAR. In 1979, for example, 86% of firms had just one office.

But there's a reason why the big brokerages claim such a large share of sales: Even though they account for a smaller share of total firms, the large, franchised companies are home to the majority of agents, Christopherson noted.

Firms that make the leap from 1 office to 3+ see sales soar

As a firm grows, sales volume appears to increase exponentially: Firms with one office had a median sales volume of $5.3 million last year; that jumped to just over $17 million for firms with two offices, then leapt up to $81.6 million for those with three offices. Firms with four or more offices had a median sales volume of $154.6 million.

Similarly, the median number of transaction sides for one-office firms was 15, while firms with three offices handled 246 sides, and those with four or more reported 403. 

Perhaps not surprisingly, the biggest firms claimed the lion's share of sales. Nearly a quarter of U.S. firms with four or more offices (24%) had sales volume exceeding $1 billion. But among firms with three offices, only 3% were able to hit that $1 billion level.

For the typical single-office firm, 42% made less than $5 million and 7% had no transactions in 2022.

Nearly all sales come from repeat business and referrals, but ancillary services add to revenue

Confirming that real estate is all about building and nurturing relationships, firms typically generated 48% of their sales volume from repeat business, and another 47% from past client referrals. 

So where does marketing come into play? Firms with four or more offices received 20% of their inquiries via social media (smaller firms received almost none) — but as far as sales volume, the firms surveyed reported practically no sales resulting from marketing efforts including print ads, digital marketing, door knocking or open houses.

But many firms offer services beyond their primary residential brokerage services. The top three ancillary services provided in-house among all firms were business brokerage (28% of firms), commercial consulting (16%) and relocation services (13%). About a quarter of larger firms — those with four or more offices — also offered mortgage and title or escrow services.

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