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Merle Whitehead – Follow The Leader Series

By |2018-05-03T21:22:55+00:00February 15th, 2017|Main category|0 Comments

Our Follow The Leader Series is an effort to write about the best ideas and best practices of great leaders in our industry who are raising the bar.  In this episode, I am grateful to share the inspirational story of Merle Whitehead, a gentleman who grew America’s 9th largest real estate firm, Realty USA. The intention is to share some background on centers of excellence in real estate that others can be inspired by.

Early Career Start

Merle Whitehead calls the Buffalo, NY area of Western New York his home. He started his career selling clothing on commission and came to the realization that commission sales are greater when you are selling more expensive things. At the age of 18, Whitehead married his high school sweetheart, Jan – bought a home, and started selling real estate at Lorigo Real Estate.  It was not long before Whitehead became a leading sales associate at the firm, and was inspired by a few others in the office to start their own firm, RPM.

The cornerstone of RPM was door knocking. Ron, Pete, and Merle would work on door-to-door solicitation every day. After awhile, Whitehead was invited to join H. Potter Realtors®.  After success in sales, Whitehead became an office manager which led to his 50% ownership in the firm by 1985, operating 11 offices and 400 sales associates.

The Big Roll Up

Whitehead was able to meet Warren Buffett a few times in his life. Buffett owns the Buffalo News and Whitehead was a big advertiser.   Buffet inspired Whitehead with a story that the real estate industry would consolidate like the automobile industry did.  Buffett mentioned that in the 20’s there were 56 automobile manufacturers that consolidated into the big three.  Buffet said that he believed the same would happen to the real estate industry and Buffett wanted to become one of those three.  Inspired by that projection, Whitehead started growing a regional real estate company.

By 1996 Whitehead managed a large transaction to merge Stovroff and Herman and H. Potter Realtors, creating the leading powerhouse in the Greater Buffalo Region.  From 1996 to 2006, Whitehead bought out his equity partners and acquired nearly 60 companies across Western New York and the Southern Tier of New York.

RealtyUSA in Albany was purchased in 2000.  He developed significant operations in Buffalo, Rochester, Syracuse, Albany, Ithaca, Corning/Elmira, and the many communities in-between. His formula for purchasing firms is to buy them for 3.5x to 5x EBITDA. Rarely does Whitehead look at companies with less than $25 Million in sales unless they are a roll in.

By 2016, Whitehead had amassed the 9th largest real estate firm in America. He learned that the 4thlargest firm, Howard Hanna was planning to open 6 offices in Buffalo, New York on the heels of purchasing the successful Nothnagle Realtors® Company in Rochester.  After a few months of negotiations, Howard Hanna agreed to purchase RealtyUSA, capitulating one of the largest brokerage firm transactions in brokerage history. Howard Hanna is now the third largest brokerage firm in America.

Opening Offices vs. Buying Offices

Whitehead says that any new office, purchased or otherwise, needs to have a book of business of at least $15 Million with a growth opportunity, or $25 Million if operating at full strength. Whitehead suggests that if you are opening a new office, it must be in an area that is underserved, and you need to build it around a great manager and a great group of producing agents out of the gate. Otherwise, the best bet is to buy a good firm and roll in as many smaller firms as possible.

Changing Names

Brokerage firms always deliberate about brands. In 2006, Whitehead dropped all of the Strovoff Potter signs and replaced them with RealtyUSA. Whitehead recanted a story that ran in the Buffalo News about the insanity of throwing away a 46 year old legendary brand and replacing it with an unknown. They swapped out the signs in 6,000 yards along with 65 offices and moved on with great success. Whitehead is a firm believer that if you are a market leader, you can change your brand with little or no loss in continuity. In fact, his experience indicates that if done correctly, brand loyalists will remain loyal, but new opportunities emerge as other rethink your service under the new brand.

Achilles Heal

The hardest thing about operating a large real estate company is that it must be managed and operated “hands on.” When you get up to a substantial number of offices, it makes it nearly impossible to visit them often enough. As a leader, you must continue to be the glue that holds everything together.  You must constantly be in front of your people and lead by demonstrating your focus and commitment to them.

Long Term Relationships

Whitehead and his wife, Jan, have been married 48 years.

Whitehead’s attorney has worked with him for 40 years.

Whitehead’s CPA has worked with him for 35 years.

Whitehead’s Assistant, Colleen, has worked with him for 20 years.

The list of people that have been with Whitehead for decades goes on. I think that is an important part of the story. To build a large, successful firm you must have long term commitments to the people that help you.

Purchasing MLSs

Whitehead and his fellow brokers in Western New York, like Peter Hunt of Hunt Real Estate, became very concerned about Associations of REALTORS® owning and operating MLSs.   They were frustrated that the Associations were making all the business decisions, deciding how to spend the revenue.  The brokers that were so vested in the outcome were not decision makers at the table.  Also, at the time a bigger concern was that companies like Microsoft or IBM would sweep in and take over the MLS.

Together, Potter, Strovoff and Hunt led a brokers group that purchased the MLS. They distribute any distributions to the brokers based on number of transaction sides.  That model worked so successfully that subsequently Syracuse and Rochester have followed that business model.

The governance for the broker owned MLS is simple, 6 seats for large firms and 6 seats for small and medium firms. Since inception, it has worked out great without any significant issues between the large and smaller firms.

Chairman of the Broker Public Portal

Whitehead considers one of his most privileged contributions to the real estate industry to be his participation in the Broker Public Portal as the Chairman of the Board of Managers. Never before had Whitehead seen so many brokerage firms and so many MLSs collaborate on any initiative in the real estate industry. Together, they have reimagined online home search to be provided by people who sell homes, not advertising.

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