One of the most insightful set of comments I’ve ever read on this here blog (remember, I usually learn more from writing this blog than I ever “teach”) is to my last post about technology-loving agents. As it happens frequently around these here parts, at the same time I was being enlightened by you, the commenter, I was also looking at two other things.
The first is this Mike Ferry vs. Mike Ferrara Smackdown debate (ht: Chris Smith, @TechSavvyAgent) at Coldwell Banker’s recent convention. Watch at least the first 20 minutes or so; it’s pretty engaging, entertaining, and enlightening:
The second is this incredibly well-written post by Jeff Brown, who also takes me to task periodically and teaches me things here on Notorious.
Here’s my point/question: Where is the broker in all of this conversation?
In the entire 32 minute long debate between Ferry and Ferrara, has either gent used the word “broker” even once? I missed it if they did. In all of Jeff’s wonderful post, does he mention the word “broker” at all? No.
Quite a few of the commenters on the technology and agents post expressed all sorts of reasons why technology was so important. And they make some great points. I agree with many of them. But did any of them ever mention the broker? No. And some of them are brokers or managers themselves.
This conversation about technology and the REALTOR reveals that what is at stake is the notion of the real estate agent as a professional saddled with, and deserving of, fiduciary duty. One of two things has to change: the dominant business model of contemporary real estate, or the idea that real estate is a profession.
How The Hell Do You Get To That, Rob?
At first glance, it probably looks like going from A to B to C to zeta prime. I can almost see you scratching your head thinking to yourself, what the hell are you talking about?
First, let’s agree on the word “professional”. If you mean by that word the degraded term meaning, “anybody who gets paid to do something”, as in “professional video gamer” or “professional wrestler”, then yes, real estate agents are “professionals” who get paid to sell houses.
But if you mean by it something closer to the origin of the word — the learned professions — then, boy, the comments, the Ferry/Ferrara faceoff, and the Jeff Brown post all should point out some obvious issues.
Let me summarize most of the comments taking issue with my question about tech-loving realtors: “Yes, all of those skills and qualities are essential, but if you can’t get a client, then you have no chance to showcase any of those skills. So while consumers might say they don’t particularly care about our technology skills, in order to get consumers in the first place, we have to be all about technology.”
Let me also summarize the essence of the Ferry vs. Ferrara debate:
- Ferry: You are salespeople, and sales means talking to people, so go out there and talk to them.
- Ferrara: You are salespeople, but people nowadays “talk” via Facebook, Twitter, and text messaging. So learn your social media skills so you can be effective salespeople.
And finally, let me summarize Jeff’s post about real estate blogging: “Be the best, demonstrate it, and clients will raise their hands.”
Interesting contrast, no?
A Thought Experiment
With that in mind, let’s do a thought experiment.
Sally is a REALTOR who simply loves real estate, and all things real estate. She’s constantly thinking of improvements to how she might serve her clients, reading up on the latest changes to land use regulations, zoning laws, visiting every single new listing in person, studying the market stats, the process of doing a short sale, a REO, tax implications, mortgage regulations – in short, she is a total real estate expert. Every single client she has ever worked with comes away awed by her mastery of the subject, care and attention to their interests, and encyclopedic knowledge. She produces results for her clients, selling their homes for close to list price, with short time on market, helping her buyers avoid bad decisions, and so on. But poor Sally is a horrible lead generator. She can’t work her sphere, she can’t schmooze people at parties, her IDX produces nothing substantial. (Yes, I know, someone who is that great would get huge referral business, but this is a hypothetical; bear with me and assume she can’t do lead gen at all.)
Tim, on the other hand, doesn’t particularly care that much about the details of real estate. The last time he “studied” real estate was when he took his licensing exam, and not that hard at that point either. He frequently makes mistakes, but none so major as to result in lawsuits. He’s got a relatively thin grasp on ethics, doesn’t really know the market (but uses some off-the-shelf stats package to make people think he does), negotiates poorly and rarely, and simply put, just isn’t that good a realtor. But Tim is an amazing lead generator. He’s all over the web, his sites produce email and telephone inquiries every single day, he goes on four, five listing presentations every week, and wins at least one of them. He’s great at parties, Little League games, at church, at the Elks Lodge meetings, networks like a fiend, and in short, produces an avalanche of leads.
Which agent, Tim or Sally, do you think the broker would value more?
By that I don’t mean you the specific boutique broker who only cares about customer service. I mean the dominant business model of brokerage today in American real estate in which the broker is ostensibly (and legally) the person whom the client trusts with his most valuable asset, but has never even spoken one word to said client.
If you said Sally, you live in a different world and work in a different industry than the one I’m in. The Tims of the world become superstars, with legions of buyer agents under his team, and get feted by his broker as a top producer. The Sallys of our industry get encouraged to join Tim’s team as a transaction manager or a buyer’s agent.
The Missing Person: Broker
In the dominant model, where the broker is no longer in the real estate business, but in the agent recruiting business, all lead generation, all sales, is the responsibility of the agent. In the event that the broker does generate leads, those leads are usually sold to the agent via increased splits. So yes, brokers and managers will try to train you (if they do at all) on how to work your sphere of influence, encourage you to take up blogging, or go belly-to-belly with people you know, or how to farm a market effectively, and whatever else so that you, the agent, can generate leads and make sales.
This person, I’m sorry to say, is not a professional; he’s a salesperson, as per Mike Ferry and Mike Ferrara. He’s running his own small business, as per companies like Keller Williams. Functionally, there is no difference between this guy and a telemarketer, except that the telemarketer is usually handed thousands of leads he has to call, and a product/service that the employer actually creates to sell. In real estate, you have to create the product (i.e., get the listing/buyer) too, and generate your own list of leads.
There is no such thing as a “professional salesperson”. Sales is incredibly important, and sales skills are highly, highly valued by all employers — but even salespeople will tell you that what they do is a trade, not a profession.
An Alternate Universe
Since we’re in imagination mode, imagine an alternative reality with me. One in which the broker is not missing, and is in the real estate business himself.
In that universe, it would be the broker, not the agent, who is so concerned all the time about generating leads. It would be the broker, not the agent, who is spending all his time thinking about technology, social media, new marketing techniques, and so on. It would be the broker, not the agent, thinking about sphere of influence, branding, blogposts, Facebook, and Twitter. But since the broker would have had many years of experience (yes, I know I’m assuming here in some states of the union), already paid his dues, already learned how to do real estate, for him to be more concerned about lead generation, sales, and marketing is natural.
And in that universe, the broker would value Sally a whole lot more. Because she is servicing his clients. And what he wants from an agent is someone who love and studies real estate the way that he once did as a younger man.
While imperfect, this more or less describes the legal profession. When I posted two years ago that a real estate brokerage could be operated like a law firm, what I meant was this. Imagine a broker who really cares about his clients, and wants the best people to serve those clients, who understands that as the person with a track record, with experience, with knowledge and wisdom that only comes from real world experience of helping families buy and sell their homes, that he is best suited to doing business development and lead generation. A broker who takes his legal fiduciary responsibility seriously, and understands that every single agent under his name represents him. Imagine the agents this broker would hire.
And should an agent master the craft of the profession, to the point where she can say with confidence that she is a real estate expert, with a track record, with not only knowledge but wisdom — or to quote Jeff Brown, “steppin’ up with real information, expertise, and superior knowledge” — then she is ready to become a partner, a broker like him, and start working on the business development and lead generation efforts.
A lawyer at a law firm is not expected to have to worry about getting clients until his seventh or eighth year. Because until that point, until the new attorney fresh out of law school with all his fancy book learnin’ has had the experience of working on real cases, real transactions, under the close supervision of the partner whose client it is, she isn’t deemed ready to worry about getting clients. That’s the job of the partners, who have already demonstrated expertise and superior knowledge.
Similar dynamics exist with medical doctors. A hospital or a private practice group does not take a brand new graduate of a medical school and throw him out there to get his own business. The senior physicians recognize that this promising young man has a way to go to learn the profession of being a doctor.
Why can’t we have this in our industry?
Real Estate As a Profession
I happen to believe that real estate is a profession. Maybe I’m a fool, and maybe I’m naive. But I have so much respect for the true professionals who love real estate so that I don’t have to. This is now my eighth year in the industry, and every year, I learn something new that makes me admire those who practice real estate brokerage the right way: advising clients on the most important and deeply emotional transaction of their lives. I work in this industry because I have enormous respect for the brokers who do it the right way, who really care about the clients of their company, who refuse to cut corners to go recruit every Tom, Dick, and Harry with a pulse and saddle them with the burden of business development. They are few and far in between, but they exist.
So hope exists.
But insofar as brand new agents come into the business thinking their job is to help people buy and sell homes, and then learn that actually, their job is to go sell brokerage services to every single person who crosses their path, this is not a profession but a boiler room. As long as brokers totally abdicate their responsibility both to clients and to agents, this cannot be a profession. As long as brokers go missing in the real estate industry, because they’re too busy being in the recruiting and retention industry, real estate will never be a profession.
If this state of being is what you like, what you prefer, what you admire because ‘it is what it is’… that’s fine. But at least have the courage then to lobby the state governments to remove the silly fiduciary responsibility bullshit from real estate, and let’s call a spade a spade. Because I can tell you this: consumers see right through it. And they treat you like salespeople, because you act like salespeople.
Can it change? Yes, I believe it can. Will it change? I haven’t the faintest idea.
But I do know how it’ll change, if it changes. It will start with brokers returning to the real estate business.
And interestingly enough, it is technology that will allow them to return to the real estate business. Therein lies my hope for the future.
Have you seen me?
24 thoughts on “Have You Seen Me? The Role of the Broker in Contemporary Real Estate”
Rob- I had this same epiphany about a year ago. I think we fail to take advantage of the scaling properties of technology when each individual agent or team is coming up with their own solutions for lead generation, marketing, etc. If we put lead gen into the hands of the brokerage, then the brokerage can have increased control of their brand again. If you think about it, Redfin is actually doing this right now. The reason their agents can do so many transactions is because the agents aren’t focused on lead generation, the brokerage is. A lot of agents won’t go for a program like this because they would prefer a system where they make 80% of $60,000 instead of 50% of $200,000.
Rob, You sure know how to ruin a well-writen, thought provoking post by making such a dumb ass statement as “There no such thing as a professional salesperson”. : )
🙂 Apparently, you missed this clause: “but even salespeople will tell you that what they do is a trade, not a profession”
Rob, I figured it would only be a while before your whole Real Estate Brokerage is like a Law Firm argument :-). I remember all the conversations around this interesting discussion a few years ago.
I am a real estate broker. I have managed 175 agents and now have 2 agents in my new brokerage that I am slowly building. I suggest that the real estate broker has always been there, you just don’t know where to look.
A Broker’s job is complicated and mostly behind the scenes. We are the ones that troubleshoot and negotiate disagreements with clients, the ones that maintain a standard of care for Department of Real Estate Compliance, mediate partnership breakups, and oversee operations of the Branch or the Company. The Broker makes sure the office functions and provides the tools the associates needs, mitigates threats of lawsuits, and manages office staff. The Broker should build the culture of the office and attract like minded associates.
We are the ones in the hot seat – the ones responsible for the actions of our agents. The buck stops with us. We are also the ones that have struggled with no profits.
In one way I believe your argument about the Broker becoming being more visible is now in play. The “profession” in my mind is splitting into two distint business models – the choice for the agent to be a follower or a leader. Most will follow, the brave will lead.
Over the last few weeks I have been watching the major franchises via social media at national conventions. Each model claims to be the best with catchy new slogans, funny commercials, a company supported CRM systems. The Kool Aid flows out the convention doors down the streets. Someone has to pay for all this and the agents on this path are like a frog in warm water. Little by little the Broker has chipped away at the split offered to the agent to return to profitability. They are in business to make a profit and they are going to do so.
Those are the followers in our industry, happy to march in order and to be “part of something” bigger. The price tag is high but its the community and sense of worth they are looking for.
It has always amazed me that agents will gladly pay 6 to 8% to market the company rather than themselves, rather than lead and take the money to build their own brand. They are being managed rather than leadership listening.
The other side of the coin is a brokerage like mine. High commission splits, careful hiring practices, training, and productive agents with the autonomy to market themselves, not the Company. Passion for leaders comes from the ability do business as they see fit, and leave the “back end” to the Broker.
I was looking forward to this dialogue with you, Jeff, as well as a few other brokers whom I consider to be still in the real estate business. I don’t think the issue is that I don’t know where to look — as I’ve pointed out, this doesn’t mean YOU the boutique broker who really cares. I thought I was pretty careful to talk about the “dominant business model” today. To be fair, do you think your model of brokerage is the dominant one today?
You might value the Sallys of the world over the Tims; do you really think the majority of brokers out there do?
There is absolutely nothing wrong with being a great salesperson. Sales is not easy to do; in fact, it’s really, really hard to do. And there’s nothing wrong with just doing what the consumer expects and doing it well. But there is something incongruous with saying one thing (“profession”) and doing another (“salesperson”), and I’d rather see some consistency so we stop the schizophrenia in the industry.
Rob, you are always so damn logical and usually right!
Recently I did a humorous You Tube video on the state of the “dominant business model”, which sadly noted is not mine ;-(
You know who is missing from this conversation? The consumer. Who do they value? Tim or Sally? I wish we could confidently say that it would be Sally, but the evidence doesn’t seem to bear that out. People hire who they know and like. So while I’d love to see brokerages take on the lead gen element more often and effectively, the fact is people often will use the great technology from a real estate company, like Redfin, and then turn around and hire their sister that has done 2 transactions in her life. The agent successfully pulls off lead gen based on relationships and a broker can’t take that part over.
I also think it’s a bit of an extreme picture, which I know you love, to say that someone that is excellent at lead gen, is unable to be responsibly educating themselves about the economic environment, market conditions, transaction legalities, etc. I don’t think they are mutually exclusive.
Are real estate agents salespeople or professionals? I know you’ll debate me on this point, but I think some treat it as a profession, and others simply do not. Sadly, I’m not sure the consumer sees the difference.
As I’ve said in the body of the post, I know the hypothetical is extreme. That’s the point of the hypothetical, and I realize neither Sally nor Tim exist in reality. But it is clear which one the vast majority of brokers would value more. Bringing up “they’re not mutually exclusive” is a logical dodge that allows you — and many others — to avoid talking about the real issue: the broker’s business model, which incentivizes something other than “professionalism”.
Which one would the consumer value more? I disagree that we haven’t heard from the consumer. I think we have. The NAR survey that triggered this whole line of reasoning might be flawed, but it isn’t nothing; consumers have said what skills/qualities they value in a REALTOR. And lead generation was most definitely not one of them.
Furthermore, while it’s true that consumers simply don’t know enough about real estate to be able to evaluate a real expert from someone who’s faking it, I do think that people who have dealt with and worked with a true professional realtor get it at a visceral level. Out of such experiences are referrals and relationships built.
But your larger point, really, is that the whole “profession” based approach might be a loser from a dollars-and-cents standpoint. A broker who does insist on professionalism, who does what Jeff above talks about, may not be competitive in the marketplace because consumers don’t value those things. Maybe. That really is the $64 billion question, isn’t it?
Believe me, I have no desire to dodge the brokerage model question. As you well know, that conversation is one that I’m pretty passionate about. But when you talk about the changes I would like to see in brokerages, valuing professionalism, agent competency, you have to examine the consumers decision making process. In some ways, this is a case of the tail wagging the dog.
I saw the survey and I think you’re right, it’s flawed on a number of levels. What consumer is going to say that expertise is not important to them? Yet, if consumers were really being honest, we’d see different results. They say they want knowledge, expertise, and professionalism. Yet many clearly don’t select their agent that way. We see this in the tremendous number of agents that exist in the business year in and year out that do little to no business and still fall into a transaction. And that very fact is what keeps big brokerages from letting those agents go.
So to say that a brokerage would be the one to manage lead gen to free up agents to be professionals you have two issues 1 – Will the consumer value it? 2 – How will a brokerage effectively generate the leads given the way most agents generate business now, through relationships?
One thing people miss here is that the decision making process is different in real estate than in either selecting personal services like a doctor or lawyer, or typical product purchase transactions.
Real estate is the funky hybrid or bastardized mutt, depending on your opinion of the industry. It’s a personal services contract on the listing side, but a product purchase on the buyer side. Lindsey’s two questions reflect the actual differences between the two sides of the coin.
With buyer lead gen, salesmanship is the key to success (conversion). On the listing side, relationships and trust come in to play far more, but as Jeff points out, given a fair fight, salesmanship backed by results will win more often than not. The exception to lead gen on the listing side is with relo and asset management. A national company like CB can dish out relo and REO listings all day because of the relationships built at the corporate level.
It is not impossible to do what Rob is suggesting. When I started 21 years ago, CB Commercial had new agents work as interns for experienced commercial agents. They received a monthly stipend, did the grunt work, but learned the business from the bottom up. Those that lasted the full year usually went on to very productive careers.
I would argue that NRT fully understands the importance of their ability to generate leads and if you consider the corporate biz CB doles out to agents, they are doing exactly what Rod is saying – giving leads to agents who can get the job at hand done without having to worry about biz development.
The problem with the big broker handling lead gen is that they havent figured out why it hasnt scaled well for them. This gets us back to Lindsey’s questions and the fact that at the corporate level, most brokers still dont the many facets of customer behavior.
The flipside is KW, who has carved out its niche as agent centric, but now may realize that having the largest army doesn’t mean you will win the war.
If we bring this back to the law firm concept, I know attorneys who have left large firms and by doing so, have inherited the task of biz development. Some are good at it, some are not. I also know a few very good attorneys who have left their own practices to rejoin a large firm because of the resources available to them.
I don’t believe there is one right way to operate a brokerage, but I do believe there are many ways to do it wrong and many in this camp cant identify what’s broken, so they cant implement a fix.
Whenever I think about the residential real estate industry I always first look at Wall Street, and its evolution, then figure that the business of real estate is about 20 years behind. If you know the history of the retail side of financial services, and believe like I do, that their model is better than ours, it certainly is a good place to start when trying to figure out where we are, what we do, what our customers want and where we are headed.
Some of this goes back to your previous post about technology-loving agents, so please pardon the regression. Remember when (stereotypically) your stockbroker was your “friend” and you had a “relationship” with them; golf, dinner with the wife etc. Even though you knew your stockbroker worked on commissions and it was those commissions that paid for his house at the lake, country club and Mercedes payment, people still had to trust them, wanted responsiveness, knowledge of the market and the rest of the NAR survey’s hit list. IMO that’s where we are now. Today’s real estate agent is yesterday’s stockbroker.
As some of you older guys (and ladies) know, the old stockbroker tuned into an “account executive”. These AE’s use the tools of their brokers to gather assets, no longer “picking” stocks for their customers but following a rather simple strategy of gathering assets – then leaving the hard part of turning a profit to the money management arm.
Along with this growth came new methods of trading, second and third tier marketplaces and firms like eTrade, even old-fashioned Charles Schwab got into the new model. It all changed – even how the AE’s were paid.
There are firms in the (real estate) marketplace now that can turn on this model rather quickly – they have the technology in place – the true “professional” would follow to these firms. Unfortunately, the execution completely breaks down the current model and leaves a lot of carnage along the way.
I think some firms do have the technology; the question is whether they have the will to use that technology to professionalize the industry or not.
I always enjoy reading your posts. You’re one of the few who has the balls to “call the baby ugly” when it really is.
I think the overwhelming majority of brokers I’ve run into in my 28 years in the industry are just as bad as the agents. For example; when I got out of the development business I was recruited to work for a particular agents’ team at one of the largest brokerage operations in Atlanta. The brokers who ran the place were empty suits. They worshipped guys like the “Tims” in your example while touting the firms’ role as a leader in customer service, knowledge, vomit and more vomit.
While working on a “team” of one of the top-producing agents in Atlanta, the top guy, the “Tim” in your example, got a listing on an in-fill development. I asked if my name could be placed on the sign with his and, if so, I would gladly take responsibility for all of the marketing. He didn’t see the benefit in that, yet about 45 days later, as the developer comes into his office unannounced, Mr. Big Volume comes into my office in a panic. He wanted my entire list of 200+ builders so he could show the developer all of the people he had marketed the property to. (In reality he had done nothing more than put up a sign and list the lots in the MLS). I told him not only “no”, but “Hell, no”. I reminded him of the opportunity he had to include me on the listing but now he could face the music alone.
After I left to start my own firm, this same Mr. Big Volume agent brings me a buyer for a custom home on a lot I had a listing on. The lot had been listed with another company and Mr. Big Volume saw the ad they had run and called the agent. As you might imagine, the agent tried to get the builder to work with her once more. The broker I used to work under when I worked with Mr. Big Volume called the builder and suggested that he cancel the listing with me and list it with his firm so he could avoid paying two commissions. This was not only unethical, but completely untrue. I met in their offices to discuss the matter with their attorney. After the broker told his side of the story, the attorney was in complete agreement with him. Once I told my side and pointed out the language in the contracts, the attorney did a complete 180 and suggested the broker comply with my request or face possible repercussions from the real estate commission. Oh, and by the way, I had to show Mr. Big Volume Agent how to fill out a New Construction Purchase & Sale Agreement. He didn’t know how.
While at another firm, who briefly tried to acquire my growing enterprise, the broker handed the glassy-eyed agents in a particular sales meeting a very impressive set of graphs and told them how they should tell their clients it was a great time to sell their home. A week later the same broker handed out another set of graphs. This time, it supported his case that if sellers wanted to sell, they needed to drop their prices. When I mentioned that the data looked funny and asked if it was for the community we worked in, he responded that it didn’t – that it as all of metro Atlanta. He went on to say that it didn’t matter and that we didn’t have to tell our clients that because they wouldn’t understand. When I asked him how this played with the idea of fiduciary duty, he pulled me aside and asked if he could count on me to be a team player. I responded, “no, not if it means lying to my clients to pay for your salary and these fancy offices.” Off I went to set up my own shop once more.
Rob, the problem in the industry is that the brokers are working at cross-purpose to the public. They report to the owners of the firm who are looking for more revenue and the brokers are pushing the agents to do whatever possible to get homes sold – even if it means doing things that are not in the best interest of their clients. And the fact that the buyers and sellers are clients of the broker, but the broker answers to the owners of the firm is not the best arrangement.
In the brief time I spent at two of the “most respected” brokerage firms in Atlanta, I saw enough cases of breach if fiduciary duty, enough undisclosed dual agency and gross mismanagement to keep an enterprising young lawyer in BMW’s and Ferragamo loafers for a long, long time.
The problem is, nobody can say anything about these practices. If you do, you’re blackballed in your local market. So it’s a little game we play; they pretend not to do anything wrong and we pretend not to notice.
Your future broker sounds a lot like common rain-maker/team setups. The primary personality/brand (Tim) spends money to market themselves, convert leads to clients, and maintains office staff. Buyer agents and listing specialists (the Sallys) actually do the real estate work.
The picture of the ideal future-broker/future-agent is a real puzzle. Technology will definitely be the enabler making new business models possible, but exactly how? Seems like a new window of transparency for consumers is needed so that the Sallys of the world are found, and Greg’s former associates are found-out. I dunno.
Bruce, Very well stated. The challenge is that the Sallys of the world are often overshadowed by the Tims and the brokerage firms foster and support this inequity. It’s a lot sexier to advertise the agent who sells $40 million (but can’t tie his own “real estate” shoes) than it is to publicize Sally.
Speaking of which, the Mr. Big Volume I spoke of earlier – in 2010 he ran an ad claiming $35 million in sales. How much did he personally do? $2.1 million. His “team” did the rest but he got all of the credit.
He and the lady who owns the second brokerage I worked with controlled 158 listings in 2009. How many did they sell? 15.
What was their average discount from the original list price before selling? 32%
And yet the locals line up at the door to give these people listings.
I’ve been suggesting for some time now that agent teams are the proto-brokerages of the future. You’ve hit it right on the head.
Wasn’t it the guys over at 1000 watt who said teams were stupid and everybody knows it?
I’m starting to agree with you Rob. Perhaps every agent needs to look around at what they do best and hire talented people to perform the functions they don’t do well. It’s very much like a successful medical practice. The doctor doesn’t manage the insurance billing, records management, scheduling, bill paying etc. He (or she) does what they know best.
But I don’t think that’s how many teams are run. I think many of them are just micro-brokerages with the lead agent acting as a pseudo-broker.
Wow! Awesome article Rob! Lovin’ your perspective cuz I’m not seeing it anywhere else. It is REFRESHING!
Hey Rob, thanks so much for your very kind words. I love reading your stuff cuz you write what you perceive as truth. That makes you a rare commodity. We disagree from time to time, but not when it comes to the big picture.
After being both an agent then a designated broker for some amount of time, business models have come and gone. Frankly, I don’t think their importance should be discounted, but these days I think the pendulum as swung too far — they’re WAY overrated, imho.
Regardless of the model, representing buyers is worlds apart from being primarily a lister. Dad once observed, and I now wholeheartedly agree that possibly the only thing easier than converting spoon fed motivated home buyer leads into closed escrows, was convincing teenaged boys to read Playboy. Frankly, in my experience that’s only mildly overstated. Anyone paid more than 35-40% to do that job should thank their lucky star. Buyers want a house and don’t want their agents to impede that process.
Since sellers are obviously far more results oriented, real skill is involved beyond that of lead generation. You can, generally speaking, spell skill as — results. Then the model comes into play in terms of how much the brokerage pays its agents. It’s been my view, and for the record it’s why Dad retired in the 1970s, that most agents are comically overpaid. He predicted what we’ve seen from then till now, pretty much on the money. (pun intended)
A commenter made an excellent point earlier. They said, paraphrased, most agents haven’t yet figured out 50% of $500K is more than 100% of $150K. My friend, Russell Shaw isn’t a designated broker, but operates a quasi-brokerage in terms of his team. He generates leads up the ying-yang, then his agent specialists lists and sells them like crazy. He closes several hundred sides annually, and doesn’t list or sell himself. Those who utilize that ‘model’ tend to do pretty well these days. I don’t know what he pays his team of agents, but I’d bet dollars to donuts it’s not nearly as much as his competition is paying their agents.
Agent pay + overvaluing buyer agents is the elephant in the room. Those who generate business, especially listers, are now, always have been, and always will be the biggest earners. Without them, buyer agents starve. Without buyer agents, listing agents can and always have thrived. Until we all agree on what drives the business and who should get paid how much, things are gonna remain more or less bolloxed up.
I guess I take issue with something you’ve said here Jeff. It’s not hard to put a motivated buyer under contract. That’s true enough. But that doesn’t mean that it shouldn’t require some significant skill and someone that is ‘results’ oriented.
I recently was referred to a seller that purchased a year ago in an area I would consider ground zero of the OC bust. They were a relocation buyer at the time and trusted the agent to advise them about communities, market value, local conditions, and amenities. They found someone they liked, and they liked her all the way through the transaction. But a year later I’m sitting at a kitchen table with a homeowner that has lost over $150,000 in equity and living in a community in which 62% of the last years sales were in some form of distress – bank owned or short sale. In some of the comparable areas they could have considered, those numbers were around 29% as opposed to the gruesome 62%. In my mind, it was ill advised to buy in this particular community for the price they paid.
So while it may be easy to put a buyer under contract, I think there is significant skill, responsibility, and aptitude that should be held in high regard. When representing investor buyers, as you well know, skills are even more critical.
Although you should know, I love the Playboy analogy. 🙂
Hey Linsey — First of all, no disrespect intended. Those who know you, realize you’re the exception that proves the rule. Also, skilled or not, it’s a bit of a high standard to hold agents, buyer or lister, to the level of economist — knowing when they shouldn’t have sold for how much. Heck, I get credit for leaving San Diego’s market in 2003, but beat myself up all the time for being at least a year late, if not two.
Your OC seller was told by their agent that bottom had been reached. We both know that’s been said about your market and mine since mid-2007, and every year since. To say they shouldn’t have bought a year ago means the agent shoulda known bottom wasn’t reached yet. I think that. You think that. But what we think and a Starbucks card will get us both all the coffee ‘n cookies we can stomach. 🙂 To pound this nail in even farther, I’m still refusing to sell SoCal income properties to anyone, with the lone exception of owner occupant type buyers. Time may end up proving me wrong, a risk I’m happy to take.
The skill you speak of is what sets you apart from 95% of your so-called competition. It’s why you’re more successful than they are. If I ran a ‘team’ someone exactly like you would run my buyer agents. Of course, every time I even think about revisiting what Dad did, I take a nap. 🙂
Oh, Dad’s analogies were usually fun.
To me there are sincerely-pro-quality-agents and sincerely-pro-quality brokerage owner/managers. The problem is the Prato Principal is universal. There are a lot more agents than brokerage owners/managers, so examples of excellence are way more scare. This means leveraged numbers of agents are being lead, trained, ignored, etc. by the 80% that are clueless, apathetic or dim witted.
It’s no surprise it looks like broker owners/managers are absent, 80% of them are. It’s a natural law.
I may be wrong, but I’m not in doubt.
Undoubtedly great article, i’ve never read from anyone such perspective – cool one Rob
Nicely done Rob. There may be more brokers with elements of what you discuss gestating than you realize. We can hope at least…
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