Leaving the real estate nest
Letters From the Home Front
By Kris Berg, Wednesday, October 7, 2009.
Flickr photo by mikebaird.My daughter had a monumental crisis on her hands this week. It seems that a certain feline we call Fluffy (and who, for the record, isn't) had chewed through her iPod earphones again.
"Get me new ones!" my daughter wailed.
And in that moment, she's like a real estate agent working in the '90s.
Back in the '90s, her broker would have immediately shoved aside everything he was doing at that moment, like gazing smugly at the production board or interviewing a new daughter, and dutifully rushed to give her what she needed.
Her broker today (that would be me) plays a new role.
"Here is the car, here are the keys, and Best Buy is that way," I said.
You see, if I am able to look beyond today, I know I can't orchestrate her happiness or success, at least not in the long run. And I certainly can't be her Girl Friday at the ready every time the music stops.
Ultimately, the best I can do is give her the tools that will allow her to accomplish her goals should she have the willingness and the desire. How, or even if, she chooses to use those tools is entirely up to her.
Ask not what your broker can do for you.
When I walked into my first brokerage in 1997, the broker was the textbook doting mother raising a very big bevy of codependent agents. I was met in the shiny lobby and shown to my dedicated cubicle. I was given my own land line connected to the very expensive phone system and my own intranet e-mail address connected to the very expensive company Web site.
My broker paid for pretty business cards embossed with the trusted logo that would guarantee my instant credibility, even though I wasn't quite sure at this point what, exactly, "escrow" was.
I needed other stuff to ensure my success, of course. Computers? Check. Fax machines, copiers and a back room brimming with stationary and high-gloss promotional materials? Roger that. All that was missing was the work -- oh, and a little matter of how to do the work. ...CONTINUED
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Submitted by Jon Astaris on October 7, 2009 - 10:47am.
Agents are looking to brokers for guidance, a bit of hand holding, wisdom, encouragement. The brokers however are just as lost and confused as the agents, they however need to put on the mask of seasoned calm and composed warrior because, well, they are brokers.
The problem is that technology has run so fast and has gotten so far ahead of all of us that no one has any idea what they are doing, least of all the "leaders" who by virtue of their place among us must pretend to know. Eventually they will lead us into an incredibly tight spot as they do when they run in circles. Let's pray we'll come out of it with our lives.
Submitted by Jay Thompson on October 7, 2009 - 12:23pm.
That's it. I'm folding up shop and coming to work for you.
To use a tired (and impossible) cliche, I'm with you 110%.
Brilliant article Kris. Again.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Emily Medvec on October 7, 2009 - 1:20pm.
Emily Medvec, Realtor
Santa Fe Properties
1000 Paseo de Peralta
Santa Fe, NM 87501
Best Anytime Cell 505.660.4541
www.emilymedvec.com
www.buysantafehomes.com
Submitted by Emily Medvec on October 7, 2009 - 1:21pm.
Kris,
Your article speaks many truths. Depending on where one is in this brave new landscape of real estate, the bottom line continues to be about adapting to change at warp speed. Survival is all about adapting and thriving is all about innovating. This is key for both brokerage and brokers. Dependency quickly breeds bad habits and inefficiency. In the end, success and survival will go to the companies and brokers who welcome the opportunities hidden in the new technologies and uncertain market and new distribution of real estate information. Day care is simply not dollar productive. Thank you for your fine article.
Emily Medvec, Realtor
Santa Fe Properties
1000 Paseo de Peralta
Santa Fe, NM 87501
Best Anytime Cell 505.660.4541
www.emilymedvec.com
www.buysantafehomes.com
Submitted by Jillian Lake on October 7, 2009 - 1:48pm.
I like the article. But there is more to be said about the imminent failure of the big broker model. The two greatest expenses in any business are the real estate lease or real estate servicing of the building you own, and your personnel. These big brokerages have huge lease obligations that require feeding. I have hated big brokerages since I was in one and left, much like Kris. But more needs to be said about splits and why they are what they are. Example, if Kris' firm or another is "virtual" or remote, is that why you can pay a higher split? I think more specific discussion about actual, real splits is due. Because I know Willis Allen has a 6% "admin" fee that comes off the top of every commission regardless of your status. And that probably helps pay the blue chip rent.
But their broker and managers are great and tech savvy and helpful. So they're not fuddy duddies. They just have bills to pay. The future is coming fast though, so who knows? Maybe they and others give up the cushy buildings and everyone will work at home...for a higher split one would hope.
I would be curious to know what Kris or the other broker/owner independents offer as a split because they (we) don't hire agents to not make some money.
Submitted by Jay Thompson on October 7, 2009 - 4:34pm.
Jillian -
I'll bite...
I have a new (about 20 months old) brokerage. We are about as "virtual" as you can get -- we have no brick & mortar office. You're absolutely correct in that the overhead for an office is killing many a large brokerage (as well as some small ones).
*Generally*, we start our agents at an 80/20 split and they move quite rapidly up to a 90/10. Our only fee (other than the split) is $25/month for E&O. That's the fee whether an agent has zero transactions in a month, or a hundred.
We also have a cap -- a max amount an agent can pay into the brokerage.
No admin fee, no franchise fee, no desk fee. Just a 90/10 split and $25/month for E&O.
This is far better than what I got at a "traditional" C21 franchise. No, it's not "100%" (which is a fallacy anyway. *NO* brokerage offers a true 100%. The brokers would be bankrupt swiftly).
I won't go all into what our agents "get" for that 10%, but a lot of it is independence to run their business how they want. They also get my time. Any time. Some leads are provided, and they can chose (or not) to answer the office phone line if they want and keep any leads that come through that way. There are other smaller items as well.
We've hired 16 agents since opening, not a staggering number, but not bad growth. We've also turned away several agents because 1) I refuse to hire anyone with just a license and a pulse, 2) we only hire agents with at least 3 years of experience; and 3) I want great agents that have the a superior work ethic and share my customer service philosophy.
Does that help?
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Jim Duncan on October 8, 2009 - 2:01pm.
Jay hit on the key point that is being missed by many, yet the revolutionaries are catching on -
Hiring any agent who can get licensed - a frighteningly low and deceptive bar - devalues the broker, the brokerage and the industry.
If more brokers adapted to and adopted Jay's (and my) brokerages' minimum standards, we'd have a lot more profitable and successful agents and a better, albeit smaller, professional rank.
And once again, Kris, you demonstrate your ability to knock a home run with one line -
"I can't offer our agents a prescription for success any more than I can tell them what their favorite color should be, because they each bring different skill sets, personalities and talents to the table. And I won't underwrite their business nor write their business plans in exchange for a bigger take because I respect them and their independence too much."
Jim Duncan
434-242-7140
http://www.realcentralva.com
Realtor/Blogger
Submitted by Jim Lee, Knoxville TN Realtor on October 11, 2009 - 3:30am.
Abut 40 years ago when I was in the restaurant business one of my area supervisors took me aside and told me about a wonderful book he just finished reading titled "Do them a favor and fire them."
The point of the book was that not everyone is cut out for some businesses. That was just before he fired me. ;)
It turned out that was a huge favor to me.
Brokers would do themselves, their firm, and the non producing (and never will) agents by giving them their license and suggesting another career path.
It will either be a wake up call to do better or find something they are better at.
Jim Lee, CRS, ABR, GRI, NAR Certified e-PRO Trainer
Realty Executives Associates, Knoxville, Tennessee
www.KnoxvilleHomeCenter.com mailto:Jim@JimLee.com
(865) 693-3232, My Personal Toll Free # 1-800-662-2488 ext. 163
**********************************
Submitted by jim canion on October 11, 2009 - 8:20am.
Jim Canion ,Co-Founder
http://www.connectrealty.com\
Almost three years ago Stefan Swanepoel (Real Estate Trends 2007)predicted the implosion we are now seeing in the brokerage model. At that time a small group of knowledgable realtors(including a current Inman contributor)and tech. oriented entrepreneurs began putting together a new business model that is completely different from the existing franchise models but at the same time is not as extreme as what Kris, Jay ,and many others in the industry are discussing.
This new model is based on providing top of the line tools and business support at a reasonable cost to the agent. In addition, utilizing the savings in franchise fees and most brick and mortar costs to pay higher commision splits and revenue sharing with all the agents (not just the top 10)..
Lets not give up on the very essence of what makes a good agent.The existing franchises are not going under because they did not provide service and support; rather it is simply a matter of inability to sustain the high cost of providing any support with all the current models costs.
We felt at that time (2007)there would be a huge void created by the downfall of the big boxes and that is now coming to pass even sooner than expected. That does not mean that we should give up on providing the support to assist agents in becoming top quality professionals. Yes these tools and training are very costly but with the right business model we can make it happen. We are witnessing an explosion in so many areas the agents must become proficient. The quality of service to clients must improve to keep agents from becoming less valuable in a transaction. There are to many people in the industry ( and we know who they are) who are critical of the current commission model. Companies like Redfin and Zip even feature rebates and salaried agents rather than trying to help agents become the focus of the transaction. In summary, lets not turn our backs on the very foundation of the industry. Its the agents who will lead us out of the wilderness. They must be supported with more than hanging a license,E&O,and a pat on the back..
Submitted by Barrett Powell on October 11, 2009 - 11:59am.
Kris,
Thanks for sharing. I think your right, but only the market will tell if consumers really do move to the new market in numbers large enough to effect real permanent change. The Change We Need.
Barrett Powell, Owner, Broker in Charge
RE/MAX Southern Advantage Companies
288 East Street, PO Box 1427
Pittsboro, North Carolina 27312
http://barrett.powell.remax.com
http://www.REMAXSouthernAdvantage.com
Submitted by Ray Wood on October 11, 2009 - 12:01pm.
I agree with everything said about the old brokerage model and where it's headed. But one important development went unmentioned.
The cozy little protected nest is still there. It's called "Super Agent and Associates" and it takes form in todays' real estate team. These teams look very much like the old brokerage model. The splits are similar... like 50% for a Buyer's Agent. The support structure, the copier, computer, workroom, etc, etc are all the same.
The more things change the more they are the same.
I wonder what kind of real estate professional these new nurseries will produce?
Ray Wood
Assoc. Broker, ePro
Prudential Jack White-Vista Real Estate
Wasilla, AKRay Wood
Assoc. Broker, ePro
Prudential Jack White-Vista Real Estate
Wasilla, AK
Submitted by Hank Perry on October 13, 2009 - 8:51pm.
Kris, nice writing - and as usual you raise some fine points about the failures of traditional brokerage to provide a solid value strategy. Yet at the conclusion of your article, while I found myself in agreement of your philosophy, I wondered what it is that you consider to be a true attractant or unique selling proposition of your firm, aside from your many talents and the ability to hold the compass? My comment is not intended to be argumentative because I have already stated you raise many solid points. Yet I am left with, what sets you apart - to agents and to consumers?
Submitted by Heather Rankin on October 14, 2009 - 12:41pm.
Kris
I've found what I am looking for with my AZ license, just not with my UT. I need the freedom to run, stay within the law, offer the best I can be to my clients, and do what I do best. I work at home 95% of the time, have my own lazer printers, fax, computers, phone, etc and yet still pay exorbitant cuts to the big brokerage who has my license. I've started a blog (only one in the brokerage), am active on AR, Twitter, FB and others and am, surprisingly, alone. I don't think they understand what I am dong :) so for now, I wait. Being rural can have disadvantages.
Kris, agree on another home run. "And I won't underwrite their business nor write their business plans in exchange for a bigger take because I respect them and their independence too much."
Cheers!
Submitted by Goran Forss on October 15, 2009 - 5:43am.
Great article. We saw the change coming earlier and we left the large traditional brokerage for a nationwide 100% commission brokerage. Here are the specifics: You do pay a monthly fee of $295 plus a $395 yearly E@O, which is waived the first year. There are NO other fees (marketing, franchise, junk etc). 100% of commission sent directly to the agent from escrow. Brokerage provide support, website, some training, leads, backup of files for 5 years, high tech solutions. Extremely efficent.
We've been in this virtual environment for 6-7 months and it has worked flawlessly. This is not for everyone though. There is no brick and mortar office, no floor time or weekly mandatory meetings.
TeamForss.com
951-760-6027