Broker Business Models and Evolution
The business model between real estate Brokers and their agents hasn’t changed much in the last three decades. But, think how far every other aspect of the real estate industry has changed. Does that mean the 1973 Broker/Agent business model is still viable? No. But, it does mean those who benefit from that business model are the ones who are least likely to promote its change.
In the age before the Internet, before the computer for that matter, the Broker/Agent business model made sense. The Broker was the critical source of all information. The Broker acted as the business hub for hundreds of agents. Today, information comes at us from every imaginable angle. There is no single source of information. Today, everything is online and instantly available.
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Remember when the personal computer cost $5,000? (It’s only been about 20 years) The Broker provided banks of computers to be shared among its agents. Does anyone refer to “computer time” anymore? Back then, the idea of personal copiers and facsimile machines was crazy talk. If you wanted to copy and fax a contract, agents had to go into the Broker’s office. Obviously, things have changed. Today, there isn’t a technology that a Broker could offer an agent that isn’t already readily available.
“Going into the office” is another concept, at least in real estate terms, that is rapidly becoming an artifact of the past. If you don’t go into the office for information or technology, what do you go into the office for? There was a time, before Starbucks, when agents met with their clients at the office. Today, the only way a client will visit an office is if it happens to be on the way of where they are going. Used to be, agents would use the office to meet between themselves and discuss any number of issues. Today, that is done online.
So if the value added benefits of Broker affiliation have been minimized through information sharing and technology, is the Broker/Agent business model still valid?
The “Brand” is the one hammer the franchise Broker still yields. But, given a decade of lax requirements, no regulation and Broker greed, hasn’t that differentiation been diluted as well. Brokers like to talk about being selective in their agent hiring, but the fact is most are not. And while the industry likes to self promote to each other, the reality is fewer and fewer people really care about the “name” on the yard sign. This fact was confirmed recently in a “Consumer Reports” three-year study of the real estate industry. They concluded no difference in terms of customer satisfaction and customer retention between large, small or independent brokerages.
The Consumer Reports study also confirms the axiom; real estate is local and it is personal. Given that, doesn’t the “agent” have the more critical role in the Broker/Agent business model?
Wynd Realty believes, as the industry downturn begins to heal, every methodology of real estate should be questioned and potentially changed to better reflect the current marketplace. Many things the Brokers brought to the table have been made obsolete or replaced. And, what new technology or invention do you see that would make the Broker a critical component again? Now is the time for the agent first business model. And, what if we’re wrong? As long as you are willing to pay the fee, you can always return to the way it has been.
The Changing Role of the Real Estate Broker
Identify and Assign Value to the Sales Process
A few years ago, MSN published a poll of the most over-rated professions. They defined over-rated as the delta between the money made and the effort put forth. Real estate agent finished third in the voting only behind professional athlete and actor. Obviously the poll wasn’t scientific and none of its results should be taken to heart. After all, where were the lawyers? That said, finishing third in the slacker poll does point out a long held misperception about real estate agents. We all know, agents work very hard. Problem is, the work has nothing to do with real estate and is not readily noticeable to the average pollster.
Real estate agents are lead generation professionals. The lion’s share of an agent’s weekly workload is getting leads. The time spent engaged in the actual trade of real estate is not nearly as much time as people think. But getting leads is a 24 x 7 lifestyle. If you are an agent busting his/her hump trying to make a living in real estate and you hear the opinion makers bash real estate as a profession, you have to ask yourself where that mentality is coming from.
To find the answer of where this trash talking starts, look no further than the logo on your business card. Professional athletes and actors at least have in-born skills very few people have. Even lawyers had to pay a small fortune for their education and pass the bar exam. Real estate Brokers, … not so much. If the MSN poll were to be taken again, this time divorcing the sales agent from the real estate Broker, I suspect we would have a new number one by a landslide.
I am certain the role of a traditional real estate Broker had value at one point in time. Exactly what a Broker brings to the table today is not entirely clear. It’s not clear because in part a Brokers main function is to create the illusion and impression of value.
As you know, real estate agents and their Brokers have a relationship founded in law. An agent has to have a Broker. No Broker, no job. And not only that, historically this imposed marriage cost the agent a percentage of all their income. And it doesn’t stop there. In addition to a percentage of an agent’s income, the Broker dictates a monthly fee to be levied for the purposes of its own marketing. If you think these business practices sound more like something out of an old 1950s “Untouchables” TV show, you would only be partially right. Yes, these business practices sound like the crimes from that old show; only with different names. But, the real connection between the two lies in the era from which that show was created. It was the carefree Eisenhower days that produced most of the business dynamics between today’s real estate agent and their Broker. Fast forwarding through a generation or two, and in re-evaluating the business relationship between an agent and their Broker, I can’t imagine many people being of sound and sober mind agreeing to keep things the way they are.
Changing the roles and the rules between sales agents and their Broker is long over due. The real estate industry as a whole was late in integrating Internet technologies. The old guard feared what eventually has happened; easily accessible uniform data. Everyone has equal access to the same data. Where is the differentiation in that? The aura of having special knowledge was gone.
The Internet also brought dozens if not hundreds of new companies all specializing in servicing the needs of today’s agent. Need a website? No problem, any number of companies can give you a site much better and cheaper than your Broker can. Need the latest in marketing tools? Throw a dart, they are everywhere. Training has always been the bright star and staple of any Broker’s value-added pitch. But, the training isn’t in real estate. The training is in lead generation. And, until you have sat through a group discussion on the merits and effectiveness of mailing recipe cards, you can’t possibly know the true value of a Broker’s state-of-the-art agent training program.
Technology has eroded much of the traditional Brokers value proposition. Culture is slowly eroding the rest. Call it what you will, but today we live in a “look at me” society. Websites are in names, headshots everywhere and everyone is self-promoting the same commitment to service and integrity. This individually centric approach is put on steroids as agents move their sales and marketing messages to popular online member communities. There, the individual takes center stage. And why again would an agent want to drag their Broker with them?
You need a Broker to help you when issues aren't clear. You need a Broker to offer other opinions. While this may be true, the format again is very outdated. There are literally hunderds of blogs, forums and user communities dedicated to real estate. Want a second opinion, just ask. Having trouble? Again, being involved with the community at large can offer all the support anyone would want and certainly more than any single Broker can provide.
Now is the time for change. And it starts from a point of perspective. Too long agents have “worked” for their Brokers. Now, agents should have their Brokers work for them. Strip away the marketing fluff of the Broker’s brochure. Forget the caravans, weekly meetings and leader boards. You don’t need contests, sales tips and quality time with your fellow agents. Look at what the Broker really brings to your business. And, think of what that means in terms of value.
Discount real estate brokerage services are not for everyone. If you are unsure of the direction in your realty career, discount services may not be for you. If you need the comfort of belonging to a group of like-minded individuals, national franchise brokerages offer a wealth of both comfort and same-ness. Need to go to the stacked stone corporate office? Discount brokerages are virtual, offices don’t exist. Why do you think there are Starbucks every 35 feet? Perhaps in some sort of weird, perverse way, traditional Broker affiliation is part of the weeding out process. Maybe it is all just part of paying your dues as a real estate agent?
Discount realty brokerages are here to stay. There is no reason to turn back. Veteran sales agents can cut their bottom lines while freeing themselves from unnecessary financial partners. Part-time real estate agents can be part-time real estate agents. The cost of maintaining a license is no longer prohibitive. For a little more for than $100 a year an agent can remain “active” which allows them to jump on any opportunity that may come their way.
It is sad to see an American institution come to an end. In their day, national brokerage franchises built huge empires. They created tremendous, almost unimaginable wealth for themselves. Every city and small town in America has their strip malls decorated in the logos of the franchise kings. What is to become of them? That is not clear.
What is clear, is the increaseing role of the localized agent. Real estate is local--always will be. Agents will continue to brand themselves and build their businesses locally. Agents will get together and form local "practices" in much the same manner as lawyers and doctors have. Afterall, how successful have national medical franchises been?
Now is a great and exciting time for change. Wynd Realty and its agent companies not only want to be a part of this change, but we want to help lead the direction as well.
We would love to know what you think. Good or bad. Please let us know by dropping us an email at:
A t l a n t a - A r e a R e a l E s t a t e
Team Building
Sales teams are formed to accentuate each others’ strengths, distribute work load and share the expenses. In a traditional brokerage format, a five person team would pay upwards of $500-$700 a month in Broker fees. That same team would pay only $50 a month with Wynd Realty.
Realistic Part Time
In a traditional brokerage format, yearly Broker fees can be over $1,000 per agent, even for part-timers. Keep your license active with Wynd Realty for less than $120 a year.
