Karen Potyk got her Maryland real estate license in February, following 16 years in the real estate business in the various markets she has lived in as a military spouse. But she quit the Shannon & Luchs realty firm recently when the U.S. military deployment to Saudi Arabia siphoned off most of her customer base -- other active-duty military families transferring to the Washington area.
"The bottom of my business fell out," Potyk said. "I personally felt this was not something that was going to be temporary."
Potyk, 43, now works as a destination services counselor for a relocation company, advising people moving to the area, but not trying to sell them a house.
Marie Estrada, 31, of Silver Spring, quit real estate sales in August after her first eight months as an agent with Shannon & Luchs yielded no sales.
"The market was so soft, and it's very hard for a first-time real estate agent to compete," she said. "I was not earning money at all. Instead I was spending money" on fees, dues, flowers and other business expenses. She now works as an officer manager for a building maintenance company in Bethesda.
As tough as it is on sellers these days trying to unload their houses at what they think is an acceptable price, Washington's depressed real estate market has forced major readjustments on people trying to sell houses for a living, especially those who just entered the business as it turned soft.
Brokers said fewer new agents are knocking on their doors, and membership in most local Realtor associations is down from last year. Association officials are predicting further declines in their membership rolls of as much as 15 percent in early 1991, when it's time to renew dues.
Some brokers also are hedging their bets about the real estate business, dabbling at part-time jobs while waiting and hoping for a real estate turnaround.
In each of his three years as a real estate agent with Long & Foster Realtors, Bill Howell, 33, was able to triple his income. But this year he expects his earnings to stay level with last year's -- and he is not complaining.
He has, however, put off a vacation to Europe and has spent the money on real estate seminars and training programs. And he is keeping his part-time job tending bar at a downtown hotel on Friday and Saturday nights. He also is keeping his eye on the end of the real estate downturn.
"The survivors will probably reap the rewards," he said.
Although they've had to tighten their belts as well, the Washington area's largest brokerage companies are taking advantage of the soft market to buy out some of their smaller competitors and expand their share of the market.
"We're cutting with one hand and expanding carefully and cautiously with the other," said P. Wesley Foster Jr., president of Long & Foster, the region's largest firm and one of the biggest independent firms in the country.
Long & Foster has been particularly aggressive in acquiring smaller firms: NVRealty; Begg Inc.; Frazee, Realtors Better Homes and Gardens in the Washington area, and the prominent firm Anderson-Stokes Inc in Rehoboth Beach, Del. Foster said his company is negotiating with several other brokerages in the Washington area, with more acquisitions possible before the end of the year.
He noted that Long & Foster also expanded during the downturns of 1974 and 1980-81.
To deal with the slow market and allow for expansion at the same time, the firm has cut overhead expenses by 15 percent by trimming expenditures for advertising, office cleaning and salaries for managers and other employees who don't earn commissions.
"I have cut my salary quite a bit," Foster said.
Just how big would Washington's biggest real estate firm like to become? Quite big.
Foster said his firm now claims 18 percent of the Washington market measured by the number of its listings and sales, but would like eventually to double that share.
"That would be exciting to us. But that would be long and hard coming," Foster said.
Prudential Preferred Properties, founded last year after Prudential Insurance Co. bought Merrill Lynch Realty, also is looking to grow. "We see this as a time to pick up market share and when the market turns around we'll be in a good position," said Ray Chappell, chairman and chief executive of Prudential's mid-Atlantic operations.
"What market is out there you get by getting the agents ... . the firm that gets the good agents gets the market," Chappell said.
So far this year Prudential has opened four offices after acquiring one office of NVRealty, Beltway Homes and Tony Eller and Associates in Deale, Md. Earlier this month, Prudential acquired ERA Landmark Realty in Alexandria, taking the firm's manager and 19 agents into Prudential's Centreville office. Prudential closed three low-producing offices this year.
Chappell said it is negotiating two more acquisitions, which are "within weeks of happening with our company." He added that he'd like to see long-term growth at a pace of acquiring about three firms a year.
Typically the larger firms take on as little additional overhead with the acquisitions as possible. Because real estate agents are independent contractors and not employees, there's no guarantee they will not jump ship to some firm other than the one it is sold to. But the agents are effectively the "product" in the sale of a realty firm, and frequently they do follow to the new owner.
Foster calls many of the acquisitions "tuck-ins," in which the smaller firm's agents are moved to Long & Foster's existing offices with little increase in overhead expense. The company does not like to take over leases or other capital assets, he said.
Chappell said acquisitions in today's market typically involve little up-front cash, with the bulk of the payments to the selling firms' owners based on a formula in which the seller for a defined period of time receives a percentage of future business generated by agents who have been with his or her firm.
In many cases it's the smaller broker who approaches the larger competitor about the prospects for selling out.
According to Foster and Chappell, most of the acquisitions they've considered this year have been initiated by the smaller broker.
Terri Robinson, president of Robinson Real Estate Inc. in the District, said she has had four offers for her brokerage in the past year. "No one would ever turn down a great offer," she said.
She added that the desire to sell "comes and goes. I think we're all tired of being hit over the head."
Robinson has owned her small brokerage firm for 10 years. "Frankly, it has been very difficult to keep the morale of the agents up, as well as the clients," Robinson said.
Not only is it a buyers' market for houses this year, but it appears to be a buyers' market for brokerage firms as well.
Chappell estimated that the value of some smaller firms has plummeted by 50 percent or more since 1987, when the housing market was booming. "It's that dramatic. The market has been that dramatic," he said.
Meanwhile, individual realty firm owners and their brokers are trying to cope with the real estate market downturn as best they can.
Bill Barnes, owner of William E. Barnes and Co. Real Estate in the Franconia section of Fairfax County, said his firm recently dropped the discount brokerage strategy it had pursued since the mid-1980s when it was founded under the name Steadman & Barnes Inc. Steadman left the partnership this summer, leading to the name change.
Barnes noted that a discount commission policy worked well in the past decade "when the market was at a feverish pitch."
Properties didn't stay on the market that long, and didn't require that much work to sell. "It was fair for both parties," he said.
But now, he said sellers want more attention to their properties and more advertising exposure. "You can't offer those services at a discount rate," he noted. "I don't think sellers can afford not to have someone put forth the extra effort that you have to put forth today."
Patty Baker, a broker for 10 years, had her own solution to market conditions: She took on two other jobs earlier this year to diversify her income.
From 9 a.m. to noon each day, Baker 48, does bookkeeping and other tasks for a D.C. condominium developer, Mark Inman Real Estate. From 2 to 6 p.m. she works for a consulting firm that provides translations and other services for Japanese clients.
She still sells real estate part-time on weekends and in between other duties.
"It certainly is not the way I was working real estate during the height of the real estate boom," Baker said, adding that she plans to go back to full-time real estate sales when the market picks up, but that could be as much as two years from now by her estimation.
Baker had specialized in selling small residential properties to developers, Inman among them, who turned them into condominium units.
She noted that there aren't many developers willing to take such risks in this market.
But even while working again, she is earning substantially less these days compared with the boom years of 1987 through early 1989.
"We all were making quite a lot of money" then, Baker said, noting her own annual earnings were more than $80,000. Now she earns about half that much. "Money has never been a big deal for me.
"I'm enjoying the level of work very much," she said. "I was really driving myself crazy sitting around doing nothing in real estate."