Do you hear that? It’s the sound of the first shoe falling.
As the market shift we’ve been hearing about forever comes to fruition, some of the folks who got into real estate or switched brokerages on the power of big signing bonuses and a “retirement plan” that consisted entirely of stock options or the downline from subsequent agent recruitment are waking up with something of a hangover.
Many of them are finding out that there’s more to being in real estate than signing up other people to sell real estate. There’s actually (gasp!) selling real estate.
Hefty incentives and monthly marketing budgets are on the chopping block as big-box brokerages that made their bones on incentive-based recruitment and retention find themselves struggling to honor the promises they made to agents during the go-go good times of the pandemic real estate market and hedge-fund-fueled growth.
If you watched last year’s LuLaRoe documentary, LuLaRich, you know how MLMs work. (If you haven’t seen it, stop what you’re doing and go watch it right now. I’ll wait.) The ones who get in early are the ones who get the perks and the big money. The ones who get in on the tail-end, well, they don’t.
Hear me when I say, I hope these companies find a way to live up to the promises that they’ve made. I hope they do right by their agents. Nobody likes changing brokerages, and there’s too much attrition among new agents in the industry already.
But some of these real estate companies made short-term promises and pretended they were long-term assurances. Some of them continued to make promises even when those of us who’ve been around a while could see the shifting market on the horizon.
What will newer agents do now?
Now, the newer agents who got in on the strength of those promises find themselves having to scramble to learn how to do more than recruit for their downline. They need training, and they need marketing, and they need perspective. They need long-term planning, and they need to build a book of business so that they have a real retirement plan in place.
That sounds like crowing, but it’s not. I don’t blame the brand-new individual agents who got snowed. I blame the companies who acted like this party was going to go on forever. They know better.
Everybody say it with me: Real estate is a cyclical business.
Brokers need to provide enhanced training and mentoring to help them get up to speed. A lot of these newer agents got thrown into the deep end during a historically active market. They may need to go back and spend some time rebuilding.
They need to ask what solutions their brokers are going to provide other than telling them to keep building their downline. They need to look at the people who made promises to them and ask some hard questions. They need to find out what those people are going to do to help them build a sustainable business.
If their brokers don’t have any answers that make sense, some of these new agents need to look for a brokerage that will offer real solutions.
Old-school agents are today’s best resource
I have to say, one of the best things that has come out of the past few months has been here in the pages of Inman. I’ve loved reading the old-school market analysis offered by veterans who’ve seen the worst-of-the-worst that a downturn can throw at you. They’ve shown you how to crunch the numbers, how to read the tea leaves, and how to have tough conversations with both buyers and sellers.
Newer agents whose incentives have run out, who’ve gotten little or no guidance, and little or no practical experience from their incentive-based, big-box brokerage, should be spending less time trying to get folks into their ever-dwindling downline and more time reading up on real estate reality so that they can learn what it really means to run a real estate business that’s built for the long haul.
As an indie broker, I can’t help but take some satisfaction in seeing some of the smoke and mirrors clear away and show the shallow promises behind some of the major players in the industry. While they’re busy trying to cover their tracks, I’ll be working with my team just like I do every day, helping them to grow sustainable businesses that are based on a solid foundation.
Troy Palmquist is the founder and broker of DOORA Properties in Southern California. Follow him on Instagram or connect with him on LinkedIn.