RE/Max Merger Will Combine 7 Brokerages : Real estate: The resulting company reportedly will be the largest residential brokerage in the South County, with $1 billion in annual sales.

A RE/Max real estate brokerage here will merge with a chain of six other RE/Max brokerages, creating what the company says is the largest residential brokerage company in South Orange County.

The combined brokerages will have 200 brokers and handle more than $1 billion yearly in home sales, said Gary Thomas, president and chief executive of the new firm.

Thomas owns RE/Max franchises in Dana Point, San Juan Capistrano, San Clemente, Mission Viejo, El Toro and Lake Mission Viejo. The merger adds two offices in Laguna Beach.

Thomas said he plans to seek mergers with additional RE/Max franchises elsewhere in Orange County. The company will probably add 100 brokers in the next year, he said.

The merger comes at a time when the real estate market in Orange County has cooled considerably from the frenetic sales pace of 1988, when prices rose so quickly that many buyers jumped into the market for fear of being priced out of a home in Orange County forever.

But sales have slowed, and so have increases in home prices. RE/Max brokers’ sales in South Orange County fell 10% from last year, Thomas said.

RE/Max franchises operate differently from conventional real estate brokerages.

RE/Max brokers are independent contractors who merely pay a flat fee for the office space and services RE/Max provides them. The brokers retain all the commissions they earn on selling houses instead of splitting them with the brokerage.

Competing brokers say that that’s fine when the market is good but that the monthly service fee will drive brokers away when business is bad.

In fact, Thomas said, the opposite is true. To meet overhead costs when times are slow, conventional brokerages raise their share of the brokers’ commissions, he said. So productive brokers may prefer to work for a company like RE/Max, where they can keep most of what they earn.

RE/Max brokers pay a flat monthly rate depending on whether they want a private office or prefer to share a workstation with another broker.

“RE/Max has actually grown in depressed markets like Houston and Denver,” Thomas said.

The Laguna Beach RE/Max operation is owned by Warren Baker, who will be general manager of the merged operation. The Laguna Beach franchise brings a mortgage company to the deal, while Thomas’ 5-year-old South County operation already owns an escrow company.

The new firm should benefit from lower administrative and accounting costs, as well as a wider advertising base, Thomas said.