I recently sat with Compass CEO Robert Reffkin in his slick new offices on New York City’s 5th Avenue, when suddenly the image of Texan Gary Keller oddly flashed before my eyes. It was an illusion that quickly lifted, but something clicked in my head that I had missed before.
On the one hand, could two people be more different?
Keller, a Texan and former real estate agent, guitar-playing dude, is the highly disciplined owner of the big, successful and seasoned juggernaut Keller Williams. Not old school by any means, the company pre-dates the CD player, the mobile phone and Teenage Mutant Ninja Turtles. Keller was born in 1957, the year the Russians launched their Sputnik satellite aboard a rocket.
Thirty-eight year old Reffkin is a New Yorker, a Columbia MBA and a former White House fellow who is scrambling at warp speed to get a real estate startup off the ground. The year he was born, Time Magazine made the personal computer its Man of The Year. His company, Compass, is five years old, launched during President Obama’s second term in office.
But the differences stop there and the similarities are striking.
They both have big plans for the real estate industry. They have IQs higher than the Rocky Mountains and they are fast-talking passionate entrepreneurs in spirit and action. They both love to mess with the old guard — fearless.
But most important, they embrace the same business model despite different affectations.
And that model is centered on the success of their real estate agents, not the broker-owner. It includes company equity, training, technology support and putting agents at the forefront of the real estate show.
Not surprisingly they have become magnets for agents — KW more for newbies and Compass for top producer luxe types. Both companies are on fire, as many other real estate firms smolder in spent ashes.
“Agents first” is their mantra and they seem to walk the talk. I am suspicious of fanciful storytellers, but I actually believe they each love their agents and sincerely want them to be successful.
Even symbolism is important to both of these real estate characters. Gary Keller’s office is in the basement of KW headquarters; Reffkin talks nonstop about the importance of his agents. This is not a top-down model even though both have charismatic personalities.
The energy at both headquarters is vibrant, young and eager. Not too many old farts in suits hanging around, wringing their hands and fretting about how the world is changing too fast around them.
And yes, both companies seem to suffer from churn as many agents do not fit into an agent-centric model; they are not suited to be in charge and to rule their own destiny. And KW’s burn-and-churn rap rings truer than what we know about Compass’s too-soon-to-tell track record.
(In fairness, because they are not publicly traded, neither company is transparent about some critical numbers that we judge others by. Absent information, it is one reason why both enterprises seem a little mysterious and messy at times.)
Traditional brokers are often codependent with their worst agents and often blame their company woes on sideways agents. They certainly weigh on the company’s P&L even though their accounting does not truly reflect the liability and costs associated with poor-producing agents.
Consider the fact that many broker-owners have too much expensive office space to house many failed agents who are not in the field where they belong. You could argue that by shelling out disproportionate commission splits to lure and keep their best agents, many brokers only exist to support terrible agents — a sorry state of affairs.
We are entering a new phase in the history of the industry.
With disruption peering through the keyhole, the dicey broker model is being challenged by more than Keller Williams and Compass. It is under siege by the fiercely independent, tech savvy and successful agent who is often associated with a team.
Teams are a clear manifestation of troubles with the broker model. Agents are not quite able to brace the world on their own, but with a team they can conquer a market.
And agile and fast moving brokers who make agent success their strategy are also winning.
Times are changing
Just a couple of years ago, retiring Realogy CEO Richard Smith on the Inman Connect stage contrasted the Keller Williams agent model to that of Realogy, which he described as a “broker model.”
In the last few weeks with a leadership change in the works, that point of view seems to be shifting. Hey look, Realogy recently changed its message on its dot-com home page:
We bring the power of Realogy to help real estate agents become more productive and build stronger businesses. This makes our franchise brands and brokerage offices the most attractive destination for agents to call home.
The word inside the New Jersey real estate octopus is that the franchisor is aligning the company around the agent. That is a sea change, watch closely as this new plan unfolds.
This is part and parcel of an overall shift in the industry, as people are beginning to realize the agent may be the last line of defense against disruption by new tech startups who continue to noodle on business models that might cast out the real estate agent all together. Unlikely, but not impossible.
New ways of thinking about the industry
Since the commercial internet was launched 21 years ago, there are more agents than ever roaming the streets of every nine-digit ZIP code in the U.S. Empowered with new technology, they outwork everyone in the industry and they are winning.
Not everyone is drinking the agent Kool-Aid. The National Association of Realtors’ influence, power and budget comes from its agents, but it still spends way too much of its time and money trying to buy off Congress; save and placate big broker-owners, MLS organizations and local trade associations; and invent and fund things that have a tenuous connection to agent success.
Instead of behaving like the Joint Chiefs of Staff, the trade group should realize it only has one customer, the Realtor. Then, it would 10x its clout.
Three years of new progressive leadership and a new CEO at NAR may change that, but a culture of corporate big cheese gamesmanship will take time to overthrow.
In the scheme of things, what the head honchos say and do does not really matter to the successful Realtor.
No one gives them a salary, health care, maternity leave or a 401(k). They are grateful for anyone who supports them, but agents must depend on their own wit, hard work and smarts to succeed.
And while Zillow likes to brag about how consumer-focused it is, no one in the real estate value chain, including the search portals, is more aligned with the customer than a qualified and dedicated seven-day-a-week, sandwich-in-their-car real estate agent. Just consider that agents only get paid when the homebuyer gets the keys to their new home. And often, the agents are there when the moving truck rolls up. No one else is.
And it is successful real estate agents who funded and made NAR, Zillow, Century 21, Keller Williams and Re/Max, not corporate chieftains in fancy offices, new Teslas and outsized expense accounts who are paid from the bounty of agent dues, ad dollars and commission splits.
In the changing real estate industry landscape, one thing is constant. Most people want and need a professional real estate agent when they sell or buy a house. They don’t really need a realtor.com, an NRT or a Berkshire Hathaway.
While they were on planet earth before everyone else in the modern real estate infrastructure, Realtors are not dinosaurs.
Yes they are in your face, but good agents are here to stay.