Nataliya Gorokhovskaya recently got her real estate license to help her husband invest in properties. She’s not interested in helping others buy and sell homes full time.
But she’ll collect big bucks if she hooks up friends and acquaintances with real estate agents at Northwood Realty Services.
The brokerage, which serves western Pennsylvania and eastern Ohio, is recruiting people like Gorokhovskaya to feed business to its agents in exchange for referral fees.
Northwood Realty Services’ “social agents” epitomize a new type of middleman in real estate: enterprising individuals that could generate more deals for certain brokerages, but also create a new cost of doing business for full-service agents.
Real estate agents who are on their last legs have long sold their books of business to other agents, either charging referral fees for leads that convert into deals, or accepting a lump sum for contact databases.
But Northwood Realty Services is now seeking out “very social individuals who were interested in real estate, but didn’t necessarily want to pursue a full-time career as an agent,” said CEO Tom Hosack in the brokerage’s March announcement of its social agent program.
“I don’t have to be in the office every day,” Gorokhovskaya said, describing the appeal of joining the program. She says she’s busy enough running a property management business with her husband.
Social agents never represent buyers or sellers for Northwood Realty Services. Their sole purpose is to pass on leads to the brokerage. In exchange for leads that convert into deals, full-service agents at the brokerage pay social agents referral fees between 20 and 25 percent. Northwood Realty Services takes a 20 percent cut of every referral fee earned by a social agent.
Social agents are not paid a flat fee for every lead they hand off to a full-service agent. They earn a fee only if they refer a lead to an agent who ends up buying or selling a home with that agent.
Informational packet on Northwood Realty Service’s “social agent” program.
Northwood, which claims about 1,000 agents, has closed 36 deals with clients referred by social agents since the brokerage began officially hiring them in January, according to Hosack.
Social agents must obtain a real estate license because Ohio and Pennsylvania state law requires individuals or companies to have them to refer business to real estate agents for a fee.
That “can be accomplished in as few as two months, so income generation can start very quickly,” Northwood Realty Services said.
While social agents have to cough up some dough for a real estate license, they don’t have to pay other expenses that typically come with the trade, like Realtor and multiple listing service (MLS) membership fees.
That makes the role appealing to people who might not want to spend the money necessary to be a traditional Realtor. “It’s relatively expensive to be in the real estate business,” Hosack notes.
Social agents can avoid paying some traditional real estate fees because they contract for an affiliate of Northwood Realty Services, Northwood Realty Referral Company, and not Northwood Realty Services itself, Hosack said.
“You do not have to be a Realtor — in fact, you actually cannot be one,” Hosack said of being a social agent. “That is why it is a different company: so that they don’t have to join the board or MLS.”
Social agents have a lot flexibility to operate as they please. But they still can get guidance from coaches and support staff at Northwood Realty Services, and they’re required to follow all the same advertising rules as traditional agents.
In conceiving “social agents,” Northwood hasn’t birthed a new breed of real estate agent.
Agents who discover they have a knack for snagging prospects sometimes set up side businesses around lead generation, perhaps increasingly so amid the rise of online marketing channels.
What Northwood is doing is formalizing and evangelizing this type of agent.
Not everyone in the industry might like that idea.
After all, social agents are middlemen. Like listing portals, they stand between traditional agents and consumers, poised to potentially earn slices of commissions that might not have escaped the clutches of full-service agents in the past.
If lots of brokerages follow Northwood Realty Services’ lead and bring on social agents, it’s plausible that more real estate agents will find themselves paying hefty tolls to work with buyers and sellers that they would have connected with organically in the past.
Northwood has not come under fire for hiring social agents, according to Hosack. That reflects a shift in the “psyche” of real estate agents, he said.
Fifteen or 20 years ago, agents would have objected to the business practice, he said, but today they “have become accustomed to a cost of doing business,” amid the proliferation of lead generators.
“We had very, very little pushback,” he said of Northwood’s social agent program. “In fact, it’s more of the opposite: We have agents out there actively trying to recruit social agents to feed them business.”
Hosack believes that social agents can help compensate for many full-service agents’ reluctance to prospect for new clients.
“We’ve been trying to get agents to do more prospecting, and they kind of don’t want to do that,” he said. “This is something where we’re trying to find people who have those talents and take advantage of them.”
Joshua Trocchio, who stopped being a full-service agent so he could focus on teaching, has referred one person to Northwood that resulted in a sale.
Based in Pittsburgh, Trocchio said he’s also introduced the brokerage to at least six other potential buyers and sellers, each of whom he said he identified through casual conversations, some at school or in the gym.
“It keeps me still in the [real estate] loop … but it doesn’t involve all the pressure on me,” he said, speaking of the perks of being a social agent. “I get the best of both worlds.”
In most states, real estate agents or brokers aren’t required to tell a consumer that they will earn or pay a referral fee for the consumer’s business.
Under the “social agent” program, Northwood hasn’t been providing a formal disclosure to clients that their full-service agent at Northwood will pay a referral fee to a social agent for their business.
But after Inman asked about the matter, Hosack said Northwood is creating such a disclosure, “given the current regulatory state” and “in an effort to be more transparent.”