New rules, more competition mean consolidation in Minnesota real estate

Twin Cities-based Re/Max Results is deepening its foothold in Wisconsin, making a rare acquisition in the regional brokerage scene that could be the start of a deluge.

The large and locally grown real estate company recently bought Re/Max Affiliates, which has three offices and nearly 30 agents in the Eau Claire area. The move builds out Results’ presence in the state, where it already has several offices.

Results didn’t disclose the terms of the deal, but it breaks a dry spell for the company: It’s the brokerage’s first acquisition in several years and one of scant expansions by any Twin Cities brokerage.

“It’s our first post-COVID acquisition,” said Brenda Tushaus, CEO of Re/Max Results. “We had to slow down due to budget constraints, but we’re back in full-swing acquisition mode again.”

Re/Max Results, like Re/Max Affiliates, is a franchisee of the larger Re/Max network that has more than 145,000 agents in nearly 9,000 offices in more than 110 countries and territories around the world.

Results’ new Wisconsin offices in Bloomer, Eau Claire and Menomonie join locations in Superior, Hudson, Ellsworth, Galesville, Holmen, Onalaska and La Crosse. All are the product of a company goal to reach across the state.

This growth comes at a somewhat complicated time in the real estate industry, after the pandemic created considerable uncertainty but also challenges.

The competitive landscape for brokers is different, too. New national brokerages, such as Compass and eXp Realty that have ventured into the Twin Cities, compete for high-producing agents. They also offer contracts that enable the realtors to pay the brokerage a smaller portion of their commission than many traditional models.

Steve Murray is the founder of Real Trends and partner at RTC Consulting, a Colorado firm that helps negotiate brokerage sales. He said while there’s been a dearth of brokerage sales in the past couple years, he expects a new wave of consolidation as sales flatten and competition increases.

He added in recent years, it’s the local companies, not big national players, that have been the most likely to buy other brokerages.

That hasn’t been the case in the Twin Cities in the past four years, at least on paper. Tushaus said such deals take lengthy discussions and negotiations with other brokerage owners, sometimes through the course of many years. She’s constantly having these conversations.

Now after the Affiliates purchase, she expects to announce at least one acquisition every year. That fits with analysts’ expectations of a new round of consolidation coming, as home sales slow and brokerage owners look for an exit strategy.

Murray said he’s fielding an increasing number of calls from brokers worn out from an industry that’s increasingly cutthroat and rapidly changing. And they’re ready to sell. He predicted “a lot more” acquisitions in the next six months.

“They just don’t want to do this anymore, and they’re profitable,” he said. “There’s no recovery coming; housing sales and deals are always challenging to put together.”

Many prime acquisition targets are locally owned, homegrown companies like Affiliates. Kristy Tauger, Bob Ritsch and Krag Blomberg had owned that and will remain as sales executives. Another former owner, Marty Tauger, will stay on as managing broker.

“They don’t actually want to to own the company and go forward,” Murray said of many brokerage owners. “They’d rather just be agents.”

Marty Tauger said while recent developments had altered the way his company did business, age was the prime motivation for the sale. All four of his co-owners had been in the business for decades and were ready to relinquish the responsibilities of day-to-day management.

The sale will also allow agents in the office a chance to better compete at a time when technology is transforming the way people buy and sell houses, Tauger said. Increasingly, he added, expensive and difficult-to-maintain software helps seal the deal.

Joining Results provided his agents access to advanced marketing tools, training, technology and a larger referral network.

“They have so many more things to give the agents than we could,” he said. “Those are things we could never provide to our people. It gives them the tools for success. For us, it was a no-brainer.”

Access to in-house legal counsel is also critical, he said, especially at a time when the rules keep changing.

Tushaus said the Affiliates deal is the 17th acquisition for Results, which has expanded mostly through acquiring other brokerages. The company now has about 1,200 agents and 50 offices in Minnesota and Wisconsin. More than half of those agents became part of Results from acquisitions, she said.

“We call this our ‘chunky growth,’” Tushaus said. “The rest of our growth has been grassroots, boots-on-the-ground recruiting.”