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Realty USA purchased by Pittsburgh-based Howard Hanna Real Estate Services

RealtyUSA, the largest real estate firm in Buffalo and throughout upstate New York, has been acquired by Howard Hanna Real Estate Services of Pittsburgh, creating the third-largest real estate brokerage in the nation.

The merger of New York’s largest brokerage with the biggest firm in Pennsylvania and Ohio was announced by executives at a joint press conference Wednesday morning in Depew. Similar announcements will be made across the state over the next two days, in Albany, Syracuse and Ithaca. Terms of the deal were not disclosed.

Orchard Park-based RealtyUSA will continue to operate under its own brand and leadership as a division of Howard Hanna. Executives said consumers and agents will not see any difference, but the merger will strengthen RealtyUSA’s commercial brokerage and relocation services, while bringing the heft and economies of scale of a much larger company. The two companies have very little overlap.

Compatible companies

But the surprise industry megamerger between the two privately owned companies ends RealtyUSA’s history as an independent firm. RealtyUSA CEO Merle Whitehead, who built his company from a small local operation in the Buffalo area into a statewide giant, will be chairman of the combined operation in New York state, but will report to Howard W. “Hoddy” Hanna III, chairman of the family-owned parent company, and Helen Hanna Casey, its president and CEO. Hanna and Casey are brother and sister.

“We knew we were compatible organizations, very customer-focused, very agent-focused,” Whitehead said. “As we started opening a dialogue over the years, it just made sense as we started talking with one another.”

The deal, which has been completed, brings together the fourth-largest brokerage in the nation, Howard Hanna, with the ninth-biggest, representing a rare combination of industry titans. The combined company will have 270 offices and 9,000 agents and employees in eight states, with $16.2 billion in closed sales volume and 89,737 transactions in 2015, according to Real Trends 500. In New York alone, it will have 101 offices and 3,400 agents and employees, and Whitehead projects $5 billion in combined sales this year. Both Hanna and RealtyUSA also own mortgage companies, whose merger still requires state approval.

Howard Hanna now leapfrogs MidAtlantic rival Long & Foster in industry rankings. It lags only Realogy – the publicly traded giant that owns the Coldwell Banker, Century 21, ERA, Corcoran Group, Better Homes & Gardens Real Estate and Sotheby’s International Realty – and Berkshire Hathaway’s HomeServices of America.

“We always look to move forward,” Casey said. “We made the decision in the mid-1980s to remain independent, with the goal of always being a large regional broker in the mid-Atlantic, Midwest and Great Lakes regions. And when you find a prominent company that is run with the utmost integrity and is so like-minded with complementary management styles and great managers, it makes sense to come together.”

The deal also marks the second big expansion in New York by Howard Hanna, which has been in Chautauqua County since 2003 but entered the upstate region after it acquired Rochester-based Nothnagle Realtors in May 2015, adding 32 offices in Western New York and the Finger Lakes region. That deal prompted the start of discussions last December between the Hanna family and Whitehead, who have known each other for decades. Talks included a meeting in Erie, Pa., on a bitter cold day in January, along with a meeting in Florida after a conference.

“Merger of strength”

RealtyUSA is No. 1 in the Buffalo, Syracuse, Albany and Southern Tier markets, but ranks behind Nothnagle and Hanna in Rochester. Meanwhile, Nothnagle itself had entered the Buffalo market in 2009, and expanded with additional franchise offices in the ensuing years.

“We could bang heads as competitors, or we could collaborate and form an incredible organization. And we made the commitment to do the latter,” Whitehead said.

He stressed that neither company was under any pressure to merge, but it made sense. “This is a merger of strength,” he said. “Our company was debt-free, very profitable and in a very strong position. It wasn’t away from anything; it was towards the Hanna organization.”

And the deal also provides an exit strategy for Whitehead, 64, who has been in real estate for over 40 years. “As you mature as an entrepreneur, your ego gets beat down, and you don’t need to be the guy,” he said. “I think I’ve matured to the point that I know I’m going to be better as a result of this. So I would attribute it to maturity.”

Howard Hanna, founded in 1957, operates 205 offices in Pennsylvania, Ohio, New York, Virginia, Michigan, West Virginia, North Carolina and Maryland, with 7,100 agents and employees. It posted 66,714 closed transactions last year.

RealtyUSA, whose roots date to the founding of Stovroff & Potter in 1959, has 65 offices in Western, central and northern New York, the Capital Region and the Southern Tier, with 2,200 agents and employees. It posted 23,023 transactions last year, and also owns 1st Priority Mortgage, and has grown through 60 acquisitions.

“RealtyUSA is truly one of America’s great real estate companies,” Hanna said. “Our business philosophies are very similar, and operationally they know what it takes to create the American dream of homeownership for New Yorkers.”

Guaranteed sales

Nothnagle will also continue to operate under its own brand as a Howard Hanna company, at least for now, Hanna said. Nothnagle CEO Armand D’Alfonso will become president of the combined firm in New York state.

Hanna said the parent company, which also owns insurance and mortgage divisions, plans to add 15 to 20 new positions for its insurance company and increase its marketing and technology systems with another 20 jobs. It also plans to introduce what it calls its “100% Money Back Guarantee,” which promises to repurchase homes from buyers for their full purchase price after six months of marketing if they change their minds or have to move in the first year after closing a transaction.

“It’s a tremendous confidence builder,” Hanna said. “We are very bullish on Western New York. We think the values are going up. We believe in the pricing structure. We think so much of the properties that we’re selling that we’re going to stand behind the price.”