Last week I had a blast talking about the industry to Imran Poladi and his sidekick Jim on the Real Talk with Imran Poladi podcast. I only wish I were in on their Superbowl prop bets segment – maybe next time? You can listen to the whole thing below.
One of the things I mentioned (at 36:40 in the podcast) was my belief that the brokerage of the future will either be 100% transaction-only shops, or 0% W-2 employee model shops. The traditional split model, even with caps, is marching towards the graveyard. That’s the thesis I’m currently researching and I plan to develop into a longer series in the near(ish) future. Stayed tuned.
Well, I just ran across Inman’s Special Report: How to build (or find) the ideal agent training program from a couple of days ago and… the article fits in neatly with my thesis about brokerage. I suggest you read the whole thing. I did, and… I had some quick thoughts I wanted to think out loud with y’all.
The Missing Key Takeaway
Inman’s report lists the following as Key Takeaways:
- Brokerages can offer to help new agents by providing a mentor, lead generation training, tech training and a boot camp to kick things off.
- Social media training and coaching can also be very helpful to a cross-section of agents.
- The most challenging business areas for experienced agents — and, therefore, where they need training — is in running and managing a real estate business.
- The training seen as most important to general agent success is time management and lead generation.
Now, those takeaways are all very good and all, but the missing key takeaway is probably the most important one:
- How the hell does a brokerage get the agent to actually take the training?
Don’t get me wrong: the ideas and suggestions — like a new agent bootcamp with good follow-up mentoring and coaching — are solid. But the key problem remains.
Independent Contractor, Yo!
That key problem, of course, is the fact that agents are 1099 independent contractors — and you as the broker can’t make them do jack shit. You can have the world’s best training program, guaranteed to make superstars out of newbies. But if you can’t get that newbie to actually go through the program, what does it matter?
Horse, water… you know the deal.
So we have the funky and funny sight in our industry of brokers practically begging their agents to please, please get rich. Well, it’d be funny except that it’s just so sad. I mean, the Special Report literally says this:
A good mentor will help them make money straight away, pointed out a broker from Michigan.
Not asked and not answered is the question of whether a brand newbian straight out of real estate school, who doesn’t know diddly about actually doing a deal, should be making money straight away by handling a family’s most important financial decision. Just because you can doesn’t mean you should, right? Especially if you’re a broker who takes that whole fiduciary responsibility thing seriously.
Care or Care Not; There Is No Sorta Care
This is one of many reasons why I think the future of brokerage is either 100% or 0%. As a broker you either care or you don’t care about training, service quality, coaching, etc. Kinda, sorta caring gets you nowhere.
The 100% shop lets you not care. If the agent doesn’t want to put in the work to get training, why care? As long as agents are paying a desk fee or whatever, and you offer them a menu of options for getting trained and coached and so on, what does it matter whether they actually do it or not? Whether the agent is productive or not, do you really give a damn if you’re a 100% shop? Just go recruit more agents and at least a few of them will be self-motivated enough to run a real business.
If you care, though, then the only real solution is to make them W-2 employees so that you can give them a real choice: take and master the training, or you’re fired. The pressure to make money straight away is gone, since they’re getting a paycheck. That in turn means the broker can avoid having to put some newbie on a family’s biggest purchase. It also means that the broker makes significantly more money when a transaction does close.
There is no halfway solution, logically speaking — though I must admit that not everything is logical in business, especially in our industry. The traditional split model combines the worst of both worlds; brokers desperately want agents to go out and be productive, but brokers can’t do much more than offer agents a menu of options for training and beg them to learn skills.
Like I said, I’m working on mapping out my thoughts and theories with help from people who really know how brokerages work. You can expect a series of think-pieces on brokerages that will be meatier and more comprehensive. I’d love your thoughts on any of this. The discussion here always helps me think things through.
7 thoughts on “Quick Note on Brokerage of the Future: On Agent Training”
Oh great !!! The establishment will create a group of loyal w2 employees all arriving at their places of employment at 9.06 am, (the autonomous car service)this morning was 35 seconds late so they are subject to a fine for being late,their second in two years,a third is an automatic termination,blah,blah,blah,get a life please,the RE establishment is dead a new better system will evolve and it wont be with bunch of worker bees,loyal to nar and the lousy mls’s, ZTR,,they will be history. Is anybody in the RE establishment aware of what just happened (the recent election).
I enjoy reading your comments.
Could you develop the idea about last year’s election changing the way we do business? I’ve never thought about it this way before.
Sure, it was a total rejection of the old corrupt establishment that almost brought the USA to its knees.the destruction by the left, a diminished middle class, a shrinking residential RE market, recent collage grads working in the service industry (read Walmart,Wendy”s for $10 to $12 per hour) etc.a commercial market getting ready to go bust ,all the while the lies and distortions coming from the White House regarding their successes.
It feels implied in this posting that a broker cannot enforce any type of conduct or practice from a 1099 agent, but contractors do work under a defined work contract, so if their work is poor or they fail to live up to the agreed-upon work product, then the contracting party can certainly elect to end the work agreement due to specific provisions of the contract.
I know many brokers that have ended contracts with their 1099 agents because they do not perform as expected. I’m not yet clear on your thinking why a w-2 distinction would make the difference.
A brokerage can (and should) elect to create provisions that weed out the bad eggs. What unfortunately is the case is that brokerages are all too needy on their agents for monthly fee’s and dues and overlook poor performance and items of integrity to protect their own bottom lines. Business owners in the real estate world need to stop being afraid of setting high standards and raising the bar … getting more used to the word “your fired”
Thanks for the comment!
While it is true that the broker can always choose to end the relationship with the agent, and vice versa, the issue with the 1099 is that the broker cannot dictate what to do, how to do it, when to do it, where to do it, etc. etc. without having that agent be classified as a W-2 employee anyhow with all of the attendance tax and regulatory consequences.
In this context, you cannot require that a 1099 independent contractor attend a training class or implement what he has learned without imperiling the independent contractor status.
It’s one thing to build a model specifically with the W-2 model in mind; it’s a different thing to get surprised by the IRS or state labor department folks. 🙂
I think you need to apply for RE License and get some knowledge of what it takes to be an Agent, l mean that respectfully,but I must remind you that we just had an election that was decided by people tired of big government.,including the IRS and the state governments.
Hi VARestate broker – There you go again, making a lot of sense about changing the old status quo.
I have said for quite a while, the industry needs to get away from this 1099 model and go to W2 model. With brokers having to pay Social Security and minimum wage, the gluttenous field of agents will be drastically reduced and the franchises will whither away and we will be back to mom and pop firms.
The huge firms are skeered to death of this W2 concept because the brokers will have to make an immediate investment in a new agent instead of the ridiculous way things are done now. The current business model is way past it’s time to die.
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