A new exit strategy for agents?

Broker as investor: Tearing down the old business model

Quiet exit image via Shutterstock.Quiet exit image via Shutterstock.

Editor’s note: This is the final installment of a four-part series on a new model for real estate brokerages, in which brokers would invest in their agents. Read Part 1, Part 2 and Part 3. Renwick Congdon will explore his vision at Real Estate Connect San Francisco, during a Thursday, July 11 panel discussion, “Broker as Investor: Tearing Down the Old Broker/Agent Relationship.” Also participating in the panel will be Kevin Lisota, CEO, findwell; Debbie Lewandowski, director, First Team Estates; and Brian Boero, partner, 1000watt (@1000wattbrian).

It’s the question that never goes away: How to attract top-producing agents who “stick” after their brokerages have invested time and money to help develop their careers?

I’ve heard it repeatedly from brokers all over the country, and in this series of commentaries for Inman News, I’ve been making the case for disrupting the recruiting and retention status quo.

It’s not salespeople that real estate needs, it’s business owners.

In brief, my suggestion would be to recruit “agent-owners” who would find investors and create their own limited liability companies (LLCs). This structure could satisfy the craving for “ownership” that’s attractive to the entrepreneurs of tomorrow, but which is elusive in the current broker-and-agent structure.

I shared the LLC idea in January, while attending the CEO event co-hosted by Inman News and the New York Times, during a discussion about attracting younger agents. Craig McClelland, chief operating officer of Better Homes and Gardens Real Estate Metro Brokers in Atlanta, was in the audience.

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McClelland liked the LLC idea, but he’s thinking of spinning it in a way that could help solve another, related brokerage headache — the dreaded “knowledge walkout” that’s lurking as a significant number of experienced, high-producing agents approach retirement.

Maybe you can’t call on that accomplished agent’s actual experience after retirement comes, McClelland reasons. But you might use an LLC structure to hold on to something else that’s very valuable — that agent’s brand.

“I took the LLC idea from the Inman gathering and said, ‘That’s a great hook, a great value option,’ ” he said. “What if we took the LLC and made it more of a retirement program?”

His brokerage is now contemplating offering agreements to agents who are approaching retirement, with the proposition that the brokerage would own a portion of the LLC and the agent would own a portion.

“When you retire, then we will keep you in the LLC, and we have the right to keep your name in order to market to your sphere of influence,” he explained. In other words, the “Mary Smith Team” would live on … and the retiring agent would continue to draw a referral rate from it.

The concept is under study at the brokerage, McClelland said, along with yet another spin on the ownership concept.

“Maybe we would license their brand,” he said. “We would have a license on it for a certain number of years.”

He sees licensing as a way to hang on to an agent’s carefully built consumer trust after retirement.

“People know and like Mary Smith, and they like and trust her brand,” he said. “They know they’re going to get a certain standard of service.”

Conversations with a few trusted agents yielded a warm reception. Both concepts — the LLC and brand licensing — are currently being fleshed out by company lawyers.

Obviously, there would be many more details to resolve before either idea, or yet another spin, might be implemented. But that’s OK. The important thing is to try new ideas to meet the needs of a new reality.

Remember, the rules we have been playing by for the last 30 years may not be rules after all.

Renwick Congdon is CEO of Seattle-area based Imprev Inc., a marketing technologies company he founded in 2000. A serial innovator and entrepreneur, Congdon serves on the board of directors of the Seattle chapter of Entrepreneurs Organization, a network of more than 8,000 business owners in 40 countries.

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