Baird & Warner lays claim to be the oldest U.S. brokerage still in operation, launching in 1855.
In the 1960s, its then-executive John Baird tussled with the National Association of Realtors (NAR) over that group’s enforcement of redlining as Baird wanted to sell homes to Black people in areas that lenders and agents marked as white only. The fight for Illinois legislation over the matter was part of what eventually lead to the 1967 federal Fair Housing Act. In 1991, John Baird’s son, Stephen Baird, took over as president and later CEO of the brokerage.
The business’s legacy was venerated at various point such as in 2005 when then Chicago Mayor Richard M. Daley declared March 28 “Baird & Warner Day,” and a route alongside LaSalle Street was named “Baird & Warner Drive.”
But far from a relic of a bygone era, Baird & Warner is still going absent any mergers, acquisitions, or change in their Chicago focus. The company is the 26th largest brokerage in the country by sales volume, according to RealTrends 2020 figures, with $6.4 billion.
Also, Stephen Baird still runs Baird & Warner. Baird was generous with his time, showing HousingWire various artifacts from the company’s history — such as late 19th century property deeds, and 1950s Chicago Sun-Times articles — during a recent, atrociously hot Chicago afternoon. And he sat down for a lengthy on-the-record interview in the company’s 20th floor downtown headquarters.
HousingWire: What does Baird & Warner do today?
Stephen Baird: We were in the commercial real estate business for a long time, but our current iteration is three major businesses, the brokerage business – which is what people know us for, but we also have a very substantial residential mortgage company, (called Key Mortgage) and a title company. People know us from the brokerage business. But we also have mortgage originators and title closers.
We’ve always believed in controlling our own destiny. We generally don’t like partnerships, because it just limits our ability to build our businesses out and do things the way we want to do them. So, we are pursuing a little bit of a different strategy than other people are. Everybody now is talking about all these other services. And they’re generally adding them by partnerships, right? But it’s something we’ve been doing for 20 years.
I’ve been surprised by how slowly it has evolved, and how slowly some of the major institutions have reacted to the marketplace. NAR, for example, has no affiliation that has mortgage or title in it.
HW: Right, Compass and Guaranteed Rate plan to have a mortgage partnership, years after Realogy and @properties developed their venture with Guaranteed Rate. And eXp and Kind Lending also have a joint venture in the works.
Baird: The first joint ventures were in the 90s and primarily driven out of Minneapolis by a company called Norwest, which became part of Wells Fargo, and Wells Fargo was a huge joint venture player until about 10 years ago when they strategically decided to get out of the business. But I made the decision back then that I didn’t want to get into a joint venture. Because one of the problems with them is that the more successful they are, the harder they are to get out of. And the other thing is, if you want to do something you have to get your partner to agree.
Last year we closed a billion dollars in mortgages, which we funded ourselves, and we can sell directly into the secondary market if we want to. We haven’t done that at this point — we mainly sell to investors. Last year, I think, [JPMorgan] Chase was our No. 1 investor.
HW: “Attach rate” or “capture rate” is a growing part of brokerage jargon. Are most of the people who get loans originated by Key Mortgage those who bought a house with a Baird & Warner real estate agent?
Baird: In the last couple of years, the number has been smaller, more like 60%, because there’s been this huge chunk of refi business. So, if you take the refi business out, I would say it’s about 75%.
And, so about 25% of our origination volume comes from our loan officers selling to all our competitors.
HW: What about your title business?
Baird: With title, our capture rate is around 50%.
I was a little slower getting into title, because in Illinois the attorneys are very involved. They collect an average of around 80% of the fee. And I didn’t like that particular part. And, finally, a friend of mine said, “Stop being an idiot.” And it’s turned out to be a terrific business for us.
Our capture rate grows a couple of percent every year. But we also do white label for other companies.
We know we are trying to be part of all the home-buying processes. It’s almost too old to use this analogy, but in the 90s, car dealerships completely revolutionized. Before then, you went to the bank to get the auto loan, and there was a lot of stuff — like installing a stereo — that was aftermarket, a separate transaction. Then, both the auto manufacturers and dealers basically took all that on. So today when you go in to buy a car, the expectation is that they are going to do everything right there.
HW: Baird & Warner has offices across Chicago. Do you have any presence outside Chicago?
Baird: We do a little business into Wisconsin, a little business into Indiana. Now, my strategy has never been to be in every market. We go where we think we can operate effectively. It’s not like there’s a market with no brokerages.
HW: When @properties (A Chicago-headquartered brokerage itself, which is the metropolitan area’s No. 1 brokerage by market share) started acquiring brokerages in Virginia, in Georgia, did that make you rethink the whole “just Chicagoland” business model?
Baird: We used to run a commercial mortgage operation with offices in Minneapolis, Denver, and Salt Lake City. I very quickly understood how hard it is to run a local office when you’re not local. We’re good at running a local business and then when you go to other markets, you lose something. I didn’t like the idea of walking into an office and not knowing anybody. And I didn’t want to get onto a plane and fly to Atlanta and walk into an office in Buckhead and not even know how to get there if I didn’t have Google maps.
We’re a family business. We know our people. With @properties, once they sold to a private equity player, the die was cast. They want to aggressively grow and there’s nothing wrong with that — it’s capitalism — but I’m not really interested in doing that.
HW: How does the level of competition in brokerage today compare to the past?
Baird: To me the most competitive time was a time I was not here — the 1970s, when RE/MAX changed the market. At the time we were the biggest brokerage in Chicago, and almost all salespeople were men (Today, 64% of all NAR member agents identify as women). There were tons of little companies, and splits were all 50/50. And there was an NAR ethics rule that it was a violation for any real estate agent to recruit from their competitors. That rule has been repealed, obviously.
And then RE/MAX came in with a totally different model, and so because of that we had to make our agents independent contractors and terminate their pension plan and health insurance. Which I don’t like because every year we have terrible medical situations in the company, and I can’t do anything about it.
RE/MAX started a long-term trend which is to squeeze profitability out of the business. If you look at margins in the brokerage business, they’ve been on this long, slow decline since the 70s.
Commission splits used to be 40% to the brokerage, and now they are about 20%. It’s just hard to make money in the brokerage business because of the commissions.
HW: Has anything improved for the brokerage business model over time?
Baird: Getting out of some of our advertising was huge. We used to spend $4 million a year in advertising. Today we spend $800,000. The cost of advertising on Zillow is so much less than the cost of advertising in print newspapers. The internet has been a godsend. We can be way more efficient in tracking the effectiveness of our advertising.
And the internet’s also enabled us to be virtual — our offices today are smaller than they were 20 years ago, and I have twice as many people.
HW: Anything else people should know about Baird & Warner?
Baird: We have been the No. 2 brokerage in the Chicago market forever. There have been several No. 1 and several No. 3’s and they always flip — Coldwell Banker, RE/MAX, now @properties, and Compass is gaining.
But we’re still here. We try to grow our brokerage, but we don’t care whether we’re one, two, or three. Brokerage is so focused on market share, but the point is to make money.