Power Agent Teams, Revisited

In 2007, Ralph Roberts, then the “official spokesman” of Guthy-Renker Home, published a brief essay on RISMedia called “How to Soar High with Power Agent Teams“.  In it, he recommended an approach to teaming that is much more based on division of labor and functions:

I was recently flying home from the National Association of Realtors convention in Las Vegas, and I began thinking what would happen if airlines followed the same approach that most Realtors practice. I would call the airline to book a flight, and the pilot would answer the phone. When I arrived at the airport, the pilot would check me in, check my bags, follow me to the inspection point to make sure I wasn’t trying to carry any prohibited items on the plane, and then escort me to the gate to make sure I boarded the right flight and secured a seat.

He also wrote a book on the topic, which I havent’ read so it may be that many of my questions and thoughts are answered there.

Nonetheless, with more and more brokerage companies enabling agent teams of various kinds, and more and more successful agents creating de facto agent teams by hiring administrative assistants, listing coordinators, transactions managers, and the like, it appears that the ideas of “Power Agent Teams” have taken firm root in the industry.

Those ideas, however, have not been fully developed to their logical conclusions — at least not yet by anyone I’ve read or heard from in the past three years.  I’d like to revisit the topic, therefore, to sketch out some consequences of the Power Agent Team idea and pose some questions.

Team Based on Functions

The dominant model of the Real Estate Team today isn’t really a function-based team; it’s closer to what the brokerage company used to be.  The team leader generates leads, distributes them, provides admin and tech support to the team members in exchange for a split of their GCI.  That’s a broker in all but name (and liability insurance, I suppose).

In theory, the Power Agent Team is merely a permutation of this team-as-brokerage concept.  The team leader might hire some staff to deal with administrative tasks, and team members may function mostly as buyer agents (since buyers take up more time and typically pose greater risk to the realtor), but once assigned a lead or a client, each agent works exactly as a solo agent would within a brokerage that provides admin support.

The functions-based team, however, is merely the rest stop on the highway.  I believe that the ultimate end of agent teams will be either (a) standalone brokerage, or (b) a true team of specialists.

Specialization

The logical conclusion of any functions-based team is either full-blown brokerage or specialization.  Becoming a full-blown brokerage is not especially difficult in any of the 50 states, especially for a team leader who is likely a top producing agent with years of experience.  As described above, many agent teams fill virtually every need that the brokerage used to provide; at some point, the gravitational pull of both reducing costs (splits with the broker) and freedom (no need to adhere to broker’s rules and regulations) will be difficult to resist.

The other path, however, is one of specialization.

The same person who is a powerhouse rainmaker may not be the same person who is a detail-oriented project manager.  One might be fantastic at marketing a property for sale, but be awful at negotiating.  A particular agent may be a real expert in one town, but know next to nothing about others within the market area.  By true teamwork — in which multiple professionals work on the same transaction on behalf of the same client — superior service may be delivered to the customer.

Rather than being assigned to a particular buyer agent, who takes care of everything, the client might work with Agent A to define needs and find a property, Agent B (who is a strong negotiator) to negotiate the price and terms, then Agent C to close the deal as she is an expert at ‘bulletproofing’ transactions.  A transaction manager might work with the client throughout the process, and the “team lead” might serve as the lead client relationship person who steps in as needed.

This is, actually, pretty close to how large commercial real estate deals are done today.

Unbundling?

The final step, then, is unbundling.  Is it possible that the best person for a particular function happens to work on your team?  Sure it is.  Is it likely?  Not really, no.

In some litigations, firms will partner up to provide specialists for a particular area, in service of the client.  For example, the “lead firm” might set strategy and manage the overall lawsuit, but bring in a lawyer who is particularly gifted at oral argument, another firm that specializes in scientific evidence, a specialist on international tax issues, and so on.

Why not in real estate?

As we’ve heard time and time again, the sale or purchase of a home is among the largest financial transactions of the average American.  It’s not something to be undertaken lightly, without competent professional assistance.  So why wouldn’t it make sense for the consumer to expect that he would get the best of the best, no matter what team or brokerage that person works at?

So Team XYZ might have the client relationship and pride themselves on smoothing the transaction process, but Team ABC has the best marketer in the area.  Collaboration between the two would provide the customer with the best marketing and the best transaction experience.

The C-Word

The issue, of course, is compensation.  The current model of splitting the commission between the listing broker and the buyer representative is inadequate for multi-broker, or even multi-team, deals.

Updating the compensation structure is a heady challenge.  It would require defining the relative value that each activity contributes to the overall transaction.  For example, is negotiation worth 5%/10%/15% of the overall value that the team provide to the client?  Maybe it’s more?  What about proper marketing of a property to the seller?  What portion of the value does that provide?  Is it more or less than the value provided by proper pricing, or by managing the transaction?

Do these percentages change depending on whether the team is representing the buyer or the seller?  Do they change depending on the property?  Perhaps a REO transaction has different value composition compared to a luxury property.

Commercial realtors frequently get together after the closing and divvy up the commission between all of the firms, agents, and others who took part in the transaction.  While many of these ad-hoc informal sessions are problem-free, just about any commercial broker could tell you war stories of infamous fights over commission splits.  In some cases, at the time a team member is brought in, the split will be negotiated in advance: “You do the environmental impact studies, okay?  For that, you’ll get 15% of the total GCI.”

Such informal structures might suffice for now for those teams (and brokerages) who might be interested in providing the absolute best level of service to the client.  Over time, and with research, the industry might settle on a standard set of splits for various services.

Regardless of the difficulty and the challenge of figuring out compensation, it does appear to me that an industry that prides itself on client service and seeks to distinguish themselves by invoking fiduciary duty ought to be thinking about specialization, about unbundling, and true collaboration across teams and brokerages.

Is this possible?  What needs to happen to make it possible?

-rsh