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This article by Barbara Fox was published in U.S. 1 Newspaper on October 7, 1998. All rights reserved.
Real Estate's Shrinking Club
Real estate is not, strictly speaking, a commodity. Choosing an agent or an agency to sell your house is not comparable to deciding whether to buy a wrench at Home Depot or the neighborhood hardware store. Though real estate agents maintain a friendly, genteel facade, the quiet competition has always been fueled by those who work on commission and who succeed or fail based on their reputations.
In such a reputation-based business, seniority counts. But that could be changing. When Pete Callaway, Tod Peyton, and Anne Stockton hung out their shingles in 1970, Princeton had fewer than a dozen companies selling houses. Nearly 30 years later there are about the same number -- 12 residential agencies with an office in Princeton -- but only four are independent companies with their headquarters in town. Henderson had been the biggest firm in that category, but it sold to Gloria Nilson in September.
That leaves only four Princeton-based firms -- N.T. Callaway, Peyton, Stockton, and relative "newcomer" Princeton Crossroads -- unconnected to a major regional or national brokerage.
Meanwhile technology and ancillary services are becoming ever more important. Most agencies are using computers for database information, financial reports, and listings on the World Wide Web. "Companies without the infrastructure are waking up to find it very challenging," says Richard A. Weidel Jr., president of the Pennington-based firm. "You have to have an organization ready to change and move with the times." Weidel notes that his company has not only the brokerage, but also appraisal, insurance, and mortgage companies, as well as a training center. "Yesterday it was who you knew. Today it's who you know plus what you know."
How are the remaining independents weathering the buy-out trend? And how are they dealing with the changing real estate business?
"I am not ready to quit," says Tod Peyton. "I don't really want to work for someone else. I have some reservations about getting big. Everyone here is connected to the town."
"I have had calls from the large companies," says Pete Callaway, "and my answer has been no. I think it is a family business. I want to continue working. We certainly are doing very well and it would be foolish for me to change that."
"I have a file full of letters from the bigger firms trying to buy me out," says Marty Stockton, daughter of founder Anne Stockton. "I want nothing to do with big. I am happy to be little. I worked for Merrill Lynch for 10 years, and I know what big is. We all make a very good living and can do what we want to do. When the niche is so comfortable, why make it big and spoil it?"
All three have strong roots in Princeton and have parlayed those (though they would disdain to use a word with such "commercial" overtones) into profits. Marty Stockton is the ninth generation descendant of Richard Stockton; as signer of the Declaration of Independence and builder of Morven he looms important in Princeton's history. Pete Callaway's grandparents lived in Princeton and his father, Norman Tooker Callaway, was a physician here. Tod Peyton, moved to Princeton when he was 10 and attended Princeton High School and Princeton University, Class of 1960.
In 1970 these were the agencies in town:
When she died, her "star lady," Sarah Ulmgren, walked across the street to Callaway and said, "Here I am Dearie, where's my desk?" She did all of Callaway's ad writing until she was 92 years old.
<B>Bill Stewardson left Edmund Cook to go out on his own and then joined Bob Dougherty. Stewardson died young, and when Dougherty was 67, he sold Stewardson Dougherty to Coldwell Banker. He says the mediocre market then (1994-'95) only partly influenced his decision. "At the time I was ready to retire, I didn't have any logical successor within the firm," he says. "I was approached at what happened to be the right time for me."
The Henderson offices at 33 Witherspoon Street and in Pennington, Belle Mead, and Lambertville will operate as Gloria Nilson Realtors, Henderson Division. No one was willing to say what this sale was worth, but the industry standard is 2 1/2 to three times gross revenues, which could put the price at about $15 million.
The remaining companies are known as boutique firms, and their images range from Callaway's very upscale decor to Stockton's homey but simple look.
Princeton used to be a much smaller town," says Pete Callaway, "and still, many people living here like to do business with the people they have known for years. One of the things that makes it nice for a firm of our size, is that on a daily basis I can talk with all the people who wish to talk to me." Alone among the independents, N.T. Callaway is a full service office with property management, rentals, appraisals, residential, and agents specializing in commercial listings. It has 10 full-time employees and about 25 sales agents that qualify, in real estate practice, as independent contractors.
Callaway just turned 59 and is not ready to turn the business over to anyone. "From what I have seen, when an agency is merged or bought out, the broker is kept on for one to five years to help in the transition period, but they usually sell or merge because they don't want the responsibility of running the firm, and their effectiveness is on the wane."
If he sold, he would definitely have to go to more meetings and have less hands-on time with agents and clients. "I probably be doing things that I don't do as well as what I am doing right now. At my age, I would be put into positions that I wouldn't want to be."
Callaway went to Roanoke College, Class of 1966. He worked for Edmund Cook at 190 Nassau Street, "probably the leading real estate firm in Princeton at the time. In 1970 Tod Peyton and I left and started Peyton Callaway. In 1974 we decided it was best to have our own offices. He stayed in our old location and I moved."
In a boutique firm like this, you get the undiluted services of the person in charge: "I work with all my brokers to help sell and list properties. With the larger firms, to make a decision, you tend to have to check with other people," says Callaway.
"I can help my associates do their jobs. My son (34-year-old Norman) is doing very nicely and preparing himself to be in the business." Norman sold commercial real estate for six years but is doing residential now, with Tim Norris handling commercial. Karen Urisko, his daughter, works in real estate management. "She certainly has a niche here, too."
The firm's listings run, on average, to 75 to 80 at one time. Pete Callaway has, usually, from 3 to 15 listings. "I do not compete against my associates. I have a lot of friends who have bought and sold real estate over the years and many times they will ask if I am still available."
"We were one of the first real estate companies to go on line with pictures and descriptions. We saw the importance of the Internet early on and were a pioneer," says Callaway. Five sales to date are directly attributable to a customer opening up the Internet site and calling the company. On the rental side, the Internet "is a huge boost," he says. "We have so many graduate students from all over the world, and that's how they shop. We have had inquiries from Hong Kong and all over the map."
He also aims to distinguish the firm from its competitors by a carefully honed marketing program. A professional photographer (not a camera-toting agent) "shoots" the houses and makes sure to do it on a cloudy day, to cut down on shadows. Color brochures are produced from prints, not generated from copy machines. "Pete feels strongly about the quality of the advertising and the thoroughness with which things get done," says Pam Parsons, the marketing director. "I would wonder what kind of dilution takes place when your inventory is very large and you are feeding inventory into papers."
Parsons has worked in advertising and interior design and doubles as an interior design consultant. "I talk to the seller; it is easier to hear from me, as a neutral party, about how to get a house ready for market."
"I've been here for 10 years," says Parsons. "I do the market share reports and create the pie charts. I see the firm getting healthier by the year. I do think some offices will get larger and larger according to the natural pace of business, but there is always a place for the independent agency."
"I think it is fair to say we are doing very well," he says, "though we obviously have felt the ups and downs of the market. Hopefully we have given the service we say we are going to give. If we merged, I would be asked to do things differently."
One thing he doesn't do is to flaunt sales numbers. "We don't go into any of that. We don't publicize our million dollar reps." But he does put the Sotheby's logo in all the ads. N.T. Callaway has been retained by Sotheby's for longer than any other Sotheby's affiliate, and just having the logo brings in a lot of business.
If Callaway's has Sotheby's, Peyton is a Christie's firm. "We think that is very nice," says Peyton. But he says that his company deals in listings "across the board," not just the expensive ones. He has no illusions that he can control his image, price wise or otherwise. "Cook (his former mentor) used to joke that no matter what you did, people had their own perception of you," says Peyton.
Peyton moved to Princeton when he was 10 and went to Princeton High but graduated from Exeter. He was an architecture major at Princeton University, Class of 1960, and after a stint in the Army worked for several years for the Philadelphia Redevelopment Authority, helping to change a West Philadelphia neighborhood from small rowhouses to duplexes. Rejecting this lamentable kind of city planning, he came back to Princeton in 1964 to work for Edmund Cook. In 1970 he and Callaway left to form a joint business but separated after four years. He and his wife have one daughter, who is pursuing a career in clinical psychology.
"With nobody to follow, I have mixed feelings about selling," says Peyton. "I have not been interested in building the boutique into a giant boutique." Yes, he did open a branch in Pennington, "but it wasn't opened because of trying to get big, but because of where people worked. We acquired the building and then `happened into' having a branch there. Everybody is connected to the town and that branch is doing a lot of business in the community. That's hard to do, if you are coming in as a big name and you didn't start there."
Peyton says he won't play "the numbers game" and tell how many listings his office generally has, but does say that more than 90 percent of them sell. "Very few don't." He has 12 agents in the Princeton office, eight in the Pennington one, and very few part-timers.
Costs, for an independent, are higher, Payton says. "To maintain your presence you have to spend a disproportionate amount of money on advertising. The larger firms get more bang for their buck. But you can be simpler when you are not in a corporate setup. We are a small group, and we kind of know what each other is doing. We do not have as much paper work."
Nevertheless, he notes that the pressure to computerize is mounting. In the areas of licensing and insurance, brokers are being asked to crunch the statistics in customized ways, not for calendar years but for fiscal years. That's easy on a computer, harder if you are working with ledger sheets.
"We resisted the computer age as long as we could," says Peyton. "What I liked about the business was dealing with people, being able to discuss with co-workers the nuances, so you can help people. It isn't that you can't do that if you are big, it is just a different atmosphere." Says Peyton: "I'm like other guys, I keep saying not yet."
Marty Stockton's father and his three sisters were the last Stocktons to live at Morven. "We can say we have been in land management for 300 years," she says. Her mother, Anne Stockton, worked for the real estate firm owned by Lawrence Norris Kerr, and when she bought the business in 1970, she changed the name.
Marty went to Salem College in West Virginia, Class of 1973, and taught school, and then worked for Merrill Lynch for 10 years, leaving in 1990 to take the pressure off her mother, now 78 years old. "She is one of the last Mohicans," says her daughter. She comes to work every day and does what she wants to do and plays tennis twice a week.
"We have a little niche here when you talk about small offices," says Stockton. She says her agents customize for buyers and sellers but makes the point that, even after the laws changed several years ago, all her agents have declared themselves to be agents of the sellers.
Like her advertisements, her web site is kept simple. "I could put my listings in there but that is a lot more maintenance than I would want to do," she says. "I was appalled at the English on www.realtor.com (a well-known for-fee residential listing site).
"It represents us and gives facts and information about the area with pictures of Princeton houses the Stocktons once owned," she says. But she notes that keeping the web site updated with home listings would be both expensive and frustrating. "One of the appeals we have is the simplicity of our ads."
"Only two firms have not approached me," says Stockton, referring to overtures from would-be buyers. "I used to go to breakfast and used to go to lunch and now I realize I am not going to sell." Her daughter, who will be 21 years old this month, has expressed an interest in going into the business.
Her agency has 17 licensed agents, eight full-time, and does not take more than two dozen listings at a time. Marty Stockton generally has four or five listings, though she has 11 current listings now. As for buyer clients, her agents work only with those who demonstrate they are loyal, not with people who shop around with four or five agents at a time. "We have a lot of very loyal people, and it parlays itself. We give service here; it's a personal feeling."
-- Barbara Fox
Just six months ago, U.S. 1 published a story that heralded a hot real estate market. Surely it was hot when people could sell their houses on their own and save the six percent commission. So how did it work out? The results, like the market itself, were mixed.
Architect Rafe Sharon was one seller who had experience with the market. He had sold five other houses in Princeton, but this time his luck did not hold. His home at 20 Haslet is now listed with Arlene Feinstein of Remax for $799,000, considerably lower than its April asking price of $895,000.
The house at 57 Hodge Road that the owners were trying to sell by themselves has just been put in the hands of Robin Wallack of Gloria Nilson (now Gloria Nilson/Henderson Division). Its price then: $1.2 million. Its price now: $1,095,000.
Another home that did not sell but is now with an agent is 6 Carter Brook Lane in South Brunswick, just one block from the Route 27 bus. Unusual for its neighborhood -- this brick ranch has five bedrooms, five baths, indoor pool, tennis court, two dens, and a Jacuzzi. It listed for $374,000 with the notation "brokers protected." "I figured my house was unique," said Steve Tayler then.
Its new price is $348,000. "I have a very optimistic attitude about this house," says Fox & Lazo's George Manolakis, formerly the owner of Mykonos Restaurant on Witherspoon Street. So optimistic that, as a compromise between "for sale by owner" and the usual six percent commission, he encouraged the owner to offer only a four percent commission.
Homes that did sell were in the lower price ranges:
The three bedroom, two-bath house in Princeton Junction on Fisher Place was listed for $204,000 as a FSBO (For Sale By Owner) and sold for $196,000 to a couple who had seen the owners' ad but brought a Coldwell Banker real estate agent, Mary Weaver, with them. The sellers paid a three percent commission (half the usual, $5,880) and walked away having netted $190,000 overall, about $27,000 after the mortgage was paid off. They are happily settled in Vermont.
"It took about two months," says the former owner, Don Stratton, "and I would guess we spent about $50 to $100 including the advertisements. We didn't end up making any money, but I don't think we lost very much. We were happy enough. Would it have gone more smoothly with a realtor? Maybe we would have had more traffic coming into the house, but I liked the business of making those arrangements. It would have gone for the same price probably."
The home that listed for $199,000 on Ewing Street near the Princeton Shopping Center was indeed sold by the owners, but for $163,000. They called in an appraiser (as opposed to a real estate agent with a vested interest), lowered the price, put up flyers around town, and got The Call within 48 hours. Though the buyers were renting in the neighborhood of Ewing Street, they had learned about the house from the sign in Thomas Sweet's ice cream shop.
It was lots of fun, says Susan McCune. "The people who bought our house were just great. No negativity and posturing to get the upper hand. They gave us the asking price, and they took us out to a lovely dinner the night we closed. We each had attorneys (Kathryn Trenner and Nancy Goldstein) who just did the formalities." She credits the delay with the house being overpriced from the beginning, at the suggestion of a real estate agent who wanted the listing.
Find an assessor who is objective and has no vested interest, is McCune's advice. "But find an assessor very familiar with the part of the market that your house fits into." She recommends doing it yourself "for people who are up for that adventure."
Selling your home, even with the assistance of an agent, is always an adventure. And if you are a writer, you might write about it. That's what an editor for a McGraw Hill publication did, and that's why a 33-year-old house in Princeton Junction gained national notoriety. The business outlook editor at Business Week listed her house with Anne Borella of Weichert during the bull market last spring. When it didn't sell right away she wrote a first person account of what, in her judgment, went wrong. Her account was published in a three-page spread on September 7.
Kathleen Madigan and her husband, Kevin, admit they did not heed the agent's advice about the competition and preparing the house well for its initial showings. In a township where new Colonials are preferred (Madigan describes it as having a "cookie-cutter quality") hers was an older split-level with a swimming pool, often a detriment when the For Sale sign goes up. And when it went up, the foyer carpet needed to be replaced.
Madigan also assumes part of the blame, in retrospect, for the house being overpriced, initially at $258,000 -- the couple had paid $175,000 for it in 1992.
Surely most sellers would have done the same in a market for which, as she writes, "mortgage rates were low, home sales were breaking records every month, and papers were full of anecdotes of bidding wars and houses selling within two hours of being listed."
Anne Borella declined to comment on the Business Week article. In fact Borella has not read it because, as she says, she wanted to maintain a professional relationship with the buyers. The house is now under contract at an undisclosed price.
This seller's wise piece of advice: decide whether time or money is the most important, and price your house accordingly.
-- Barbara Fox
This page is published by PrincetonInfo.com -- the web site for U.S. 1 Newspaper in Princeton, New Jersey.