Toledo, Ohio, like many area, has been negatively affected by the downswing in the economy. But that didn't stop John Mangus and his partner Kathy Kuyoth from starting a new brokerage.

"Our Fortune 500's are against the ropes," explains Mangus, broker/owner of RE/MAX Preferred Associates. "Owens Corning is in bankruptcy, Dana Corporation is facing a hostile takeover, a major shareholder (KKR, remember the LBO's from years back) in Owens, Illinois is making noise about selling their interest, and Chrysler Corporation is raising the possibility of closing a plant just outside Toledo. NAFTA has exported many high-paying jobs to Mexico which ripples through the entire community."

Yet, despite these factors, the Toledo Market is up 10 percent in 2003 from last year, says Mangus.

"My firm opened in December 2001, and by year end 2002 we had done over 1,100 transactions, and made the Real Trends Top 500 for 2002 (at number 497) and we are on track to do even better in 2003," he says.

By February 2002, Mangus and Kuyoth had recruited over 50 agents from a market dominated not by other franchise brokers, but by independents such as Cavalear Realty where the two principals were president and executive vice president respectively before leaving to start their own firm. By fall 2003, the firm had two office locations and 58 agents.

"Brokers control less of the business," says Mangus, "and top agents more."

Mangus says he and his partner were told that the area did not need another real estate company, and to prove the point, the Toledo market has a dismal history of success for international franchise firms. Franchise brokerages started by Century 21 and Coldwell Banker affiliates have churned and been absorbed into independent brokerage holdings, until only one Century 21 office out of 15 remains in the area, according to Mangus.

Until now.

Thanks to some aggressive franchising on RE/MAX International's part, Toledo RE/MAX brokers collectively have dominated the marketplace in listings sold in 2002 with 24 percent of marketshare. Three of the top ten brokers are RE/MAX independently-owned brokerages, with the remaining brokers on the list all independents.

So why is it so hard for some franchise brokers to make it in Toledo?

"Unlike Cleveland and some other areas, the independents went into an indexed commission split program, 50/50, 60/40 to 80/20," explains Mangus. "It graduates over the course of the year, where you start out at 50,50 and could end at 85/15. That kept RE/MAX out, because many agents look at what their annualized cost of having a broker represent them is and it wasn't so different in some cases that RE/MAX was advantageous. There was enough of a value package that it kept them at the independents. It wasn't until the last couple of years that the RE/MAX concept seemed to catch on in this market."

What caused the change? Agents getting their own sign and ad calls, says Mangus.

"Most traditionals in this market still have floor time," explains Mangus, "and those calls come in through the front desk and are placed with the floor person, as opposed to the call going to the listing agent, and that floor person is going to be a 50/50 person, which puts more money in the broker's pocket."

"Every trend shows that more of the top people are doing more of the business," says Mangus, "and as agents have begun getting their own calls, that has fed on itself, and the team concept has evolved. Most brokers don't want to support teams because it is expensive, and teams are fostered better in an atmosphere where they get their own calls. An agent might have a large number of listings, and by controlling that phone call, that ad call or sign call, and capturing that call, he can make the decision to work with the buyer himself or pass the lead on to the buyer's agent on his team."

What's the down side to joining a RE/MAX operation?

"RE/MAX agents have to be more self-sufficient," responds Mangus. "RE/MAX attracts agents who are comfortable being on their own, and that's not for everyone."

It's a fine line to walk between fostering independence in an agent and providing brokerage services, but it is brokerage services that Mangus believes makes the difference to an agent.

"What we really did was take many of the elements that traditionals offer in terms of advertising and services and package them together under the RE/MAX concept and make them available on an a la carte basis," explains Mangus. "Agents still need services, but what is appropriate in Toledo may not work in another area."

In the Toledo market, most of the brokers don't have a graphic arts design center. Mangus hired someone with a graphic arts degree who designs all of the firm's postcards, fliers, and ads. "We can do a layout and print it right here in the office," says Mangus.

The real advantage for agents is that they can turn their ad materials in with much less lead time. The design center is capable of downloading the ad directly to the paper's production department. This is a tremendous advantage for new listings to get advertised, or when a house sells quickly, the agent can pull the ad and substitute something else. Agents pay only when they use the service.

"We also have the person who collects the ads, and she coordinates the advertising," says Mangus, "as opposed to the agent having to track down the account person with the newspaper or homes magazine. She can email it to the appropriate party."

The firm also has a closing department, which is paid for out of the base fees. "Most RE/MAX offices will have a closing coordinator who handles earnest money and is involved in the process of getting things scheduled," says Mangus, "so that the lender and closing company are on the same page. My partner and I thought that buyers and sellers should have a positive experience, as closing is the last contact, so we felt it was worth the investment to have a closing secretary to make sure the clients got their utilities cut over, insurance purchased, etc. We like to have that double-checked."

Mangus and his partner also provide "broker reciprocity" MLS listings to any agent who wants listings on their Websites. "If a user contacted you," says Mangus, "it would populate the e-mail address, and agents really like that, as they don't have to manage data or the site. The information is up-to-date, and they can click on featured properties. Your listings come up first, and agents like that."

Technologies are supported by a server, network and T-1 lines with plug-ins in every station and conference room. Data is backed up daily.

One agent blew her hard-drive, and came into the office devastated and shaking. "I've going to be out of business," she moaned. Mangus quickly put her at ease. "When she logged into our server, all the data is backed up. In an hour and a half, we had her hard-drive restored, and she was telling everybody about it."

"Never compete on price; compete on service," concludes Mangus. "That is our mantra. If you are going to list a house and someone wants to cut the commission, you will never win that battle, so we offer services agents can't get in other places."

Published: November 26, 2003

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