Housing Slump Causes Gilbert-Based RE Broker to Shut Doors

The owners of one of the Valley’s largest real estate brokers, Gilbert-based Re/Max 2000 decided over the Christmas weekend 2007 to close its 13 offices, lay off 20 salaried employees and jettison 350 real estate agents. Unfortunately, some of the bills that weren’t paid were the agents’ commission. At a meeting on the Wednesday after the closing is was disclosed that over $110,000 was owed to the agents.

The owners, Robert and Mary Kline wouldn’t respond to questions about the commissions. Earlier in the week they did tell the Arizona Republic that December 2007 was particularly rough. The company’s cash flow was not covering the rent and overhead. They felt it was time to stop the bleeding and close the company. Arizona State University Realty Studies said that the third quarter was down nearly 30% from the previous year and that was also a down year. The owners haven’t filed for bankruptcy but their creditors could force into an involuntary bankruptcy. In September 2007, Phoenix-based real estate broker, Century 21 Metro Alliance, filed for bankruptcy. It’s another indicator that the real estate market continues to be in the dumps.

Re/Max 2000’s most likely problem was that it over expanded during the real estate boom. The broker had acquired a number of offices which was probably financed. Once the market slumped, Re/Max 2000 probably was upside down on its payments. Compounding the problem is a tight mortgage market which has further delayed a turnaround in the housing market.

On Friday the Arizona State Department of Real Estate has began an audit of the records of Re/Max 2000. The Auditors want to ensure that the company was not using the money in the property-management escrow trust accounts to pay for things not allowed under state law.

John Laub is the Founder of the CEO-CFO Group.

1. “Shuttered Re/Max May Have Future.” Andrew Johnson. The Arizona Republic. December 25, 2007.

2. “Agents: Closed Re/Max Owes Them $111,000.” Luci Scott. The Arizona Republic.December 27, 2007.

3. “State to Audit Re/Max Records.” Luci Scott. The Arizona Republic. December. 28, 2007.

4. Real Estate News Access. Lillian Wong. http://blog.lillianwong.com/