For years we have written about the declining role of the real estate Broker. Emphasis on, “declining”. While there are a lot of reasons for this, the overriding factor remains how unimportant the Broker’s role has become to the agent. As a result, many agents see Brokers as nothing more than interchangeable logos.
Oddly, this means real estate Brokers are considered both useless AND critical, at the same time. To understand this dynamic, consider the top three functions of all real estate Brokers.
We have a system of real estate brokerage that is responsible for keeping our industry from turning into the DMV! The numbers associated with the real estate industry are staggering. The volume of data required to support this industry is incomprehensible.
In 2015, the United States had 5.2 million home sales. Considering the financial magnitude of an individual’s decision to buy or sell, common sense tells us, we need to have an appropriate level of paper trail and legal protection for all these people. So, now imagine a world where all 10 million people, both sides in the 5M home transactions, had to go to a government office, queue up on small hard plastic chairs and meet with a clerk who will decide if the required paperwork has been filed to complete a sales transaction. That would be madness.
In 2015, there were 86,000 real estate Brokers in the United States. Think of them as DMV clerks. Left on their own, real estate salespeople may or may not be good stewards of documentation. But for the Broker, its job number one! The sales process has to be documented by somebody, and virtually anyone would be better than a government bureaucracy. And clearly, the topic is too important to solely depend on the self-reporting and management of agents.
A real estate Broker’s other number one job is actually a critical component to our nation’s economy. If you factor 5 million sales of any product with an average price of $200K, you will get a calculator showing you so many zeros, you aren’t sure what you are looking at. Even carving out the 6% agent commission gives a number beyond comprehension.
But remember, that incomprehensible number represent taxable income. And, it’s a lot like documentation. Left on their own, self-reporting Independent Contractors may not be as good a steward of contributing to our Government’s costs as they should be. Even a tiny independent Broker like Wynd Realty reports well over million dollars paid in agent commissions every year. As a collective, the amount of realtor income nationwide is a staggering figure.
Income reporting is taken very seriously by all Brokers. Want a tax cut; what if the nation’s 86,000 Brokers decided NOT to report income?
The third most important aspect a real estate Broker performs is that of being the jerk. Don’t worry, it’s in the job description of all “paperwork cops”, so it didn’t come as a surprise. “Hate to bug you again, but we need X”. No way around it, getting all the “boxes checked”, at the very least, comes across as pushy.
But, when it comes to the jerk store calling, nothing beats getting in-between fighting sales agents. For obvious reasons, agents need to maintain a certain level of civility with each other. When the dust of a disagreement settles, agents may need to work with each other again. Particularly if they are both farming the same neighborhood. So, Brokers are specifically called in to be the “bad cop”. And, regardless of what the argument is about, it’s the Broker’s job to be the jerk their agent couldn’t be.
So that’s it in a nutshell. Sure, there are many other aspects of being a Broker, but the real heart of the matter is very simple. For agents, Brokers allow them to work. For the State, Brokers document the sales process and ensure rules are followed. And for the IRS, Brokers report income.
It is interesting to note, nothing mention here has anything to do with “real estate”. The Broker’s role is NOT where the rubber meets the road. This was actually the genesis of Wynd Realty’s strategy of un-bundling brokerage services from realty services. Agents are the “real”, real estate industry; not the Brokers. Why agents continue to pay Brokers like they were important, remains a mystery.