It may be broken, but here's a plan to fix it!

Ah, finally get to catch up on reading some RCG posts. What a prolific group this is! Makes you wonder just how important a degree in creative writing might become to the average agent in the future. I’ve been busy cuz I’ve been doing alot of recruiting these days.  So, when Eric, in a recent post  wonders about the mega agent model works I can’t help but commenting that it works great for the mega agent and not so great for the mini agents on the team and especially not so great for the customers of said Mega Agent who may not want to be foisted off on a newbie. Ardell says that the industry is broken because agents don’t help train newbies anymore. Couldn’t agree more. Fact is, there are agent training programs within offices, called Mentor Programs, but they cost the newbie a lot. I just heard about one such program that offers the mentoring agent 70% of the commission! No wonder its broken, but I have an idea of house to fix at least a part of it.

I wonder if people outside of this industry know that 85% of all new agents have left the business within 2 years and that average agent income is around $32,000 below the average household income of $34,000! When we talk about the industry being broken, how could it not be when out of every 100 agents, 85 of them have under 2 years of experience practicing in an industry that demands a high level of legal education and an equally high and complicated knowledge base. I’ve blogged before about the need to raise the bar for new agents. But I don’t see it happening unless I want to get on the Real Estate Commission which I don’t want to do. Untrained agents are like driving over a train track with the train coming. Shoot, I once had a seller move out a month early because his agent misread the financing deadline for closing of the transaction! Like Ardell, I could tell thousands of other stories. Isn’t the fact that there are so many newbies who are inadequately trained but allowed to handle any kind of transaction greatly affecting the quality of service to the clients? Doesn’t this create most of the problems with transactions?

So, now I’m in a position to make a difference. I can’t affect the other agents but I can sure affect the ones at LTD. There is a huge fault with the traditional business model for a real estate company, starting with recruiting.  When recruiting, brokers use the same practices to recruit new agents that you find in multi level marketing. They point to the super agent making all kinds of money and driving the ego car and hold them as the example of what the newbie can become. It’s enticing and makes the mouth water. The newbie can hardly wait to get a piece of that fortune and so eagerly joins the firm with all the zeal and ambition that should make them succeed. They are given the standard goals: take forms classes, establish a farm, knock on doors, do open houses, develop a sphere and take floor time.  But sadly, they don’t usually succeed with this advice. At least not 85% of the time.

Part of the problem is the upside down business model in the traditional company. This model and the model taught in broker training, is that once an agent has earned enough, typically $50,000 and splits this 50/50 with the brokerage, then that agent no longer earns money for the company, and is, in fact, a drain on the office, supples, training, etc.  Instead of being tied to the ongoing success of the agent, the office does just the opposite and depends instead on recruiting new agents instead of developing what talents they already have. Why, because their model is make $25,000 from as many agents as they can. Thus the revolving door.  Agents that carry heavy listing farms are also recruited but not for the reasons many might think. The heavy listing agent is sought after by almost all companies because they get the companies name on the streets with signage and have listings advertised to get the phones to ring. Do sellers know that their home isn’t advertised in the paper to necessarily get it sold as much as it is to take up print space and serve as image marketing? Plus the phone rings at the office to give the ‘up’ agents leads thereby providing a way for a new agent to get business.The newbies often do the open houses, not to sell the home, but to develope clients.

But what I think is an even greater cause of this failure are the many, many hats an agents wears, all requiring a different personality, skill and intelligence level. They must understand and implement all of the forms used in listings, sales, Federal forms and laws (asbestos, lead paint, fair housing) without which they can look at jail time and/or fines, disclosure subleties, etc. A typical agent must also learn how to read people, how to know just when to push and when to hold back. They must be strong enough in a listing presentation to sell themselves as the best while empathetic enough to work with buyers and understand their points of view. A good buyer’s agent must know how to perform a buyer consultation.and know how to find the exact right house out of the many thousands that are on the market, and not have buyer’s remorse.   A typical agent must know geography, house styles, demographic trends, know how to price, employer information, school information, church and communtiy information, transit information, structure and design.  Additionally, this practice requires a high level of negotiating skills, assistance during the inspection where many deals take a nose dive, plus the ability to stay on good terms with other agents in the market place without which they are doomed.   Agents are asked for advice on mortgage progrmas, title issues, need to understand and explain builder addendum (if that’s possible) and warranties, understand the escrow process and data base management, etc.

This is but a small list of the knowledge and skills an agent must have or fail. But, as if that weren’t enough, they have to be able to wear a marketers hat, as well. What is the best way to attract clients? How do you ever set up those lucrative programs aimed at building a referral base. Do you advertise in magazines, newspapers, online, do you buy lead sources like House Values, do you blog, do massive mailings, do you establish a farm?  Who will build a web site and teach how to make it a useful lead source. And on and on.

Do you see why it is ludacrous to ask all these skills of one person? How could any well balanced individual know all of this stuff and still have a life. Even the mega agents who scale as Eric has suggested might be a good real estate model, these agents must be even more talented since now they must also be managers, and, worse, they are ultimately responsible for errors made at any level by the team, any lawsuits, ommissions or mistakes by the assistant will be born also by the mega agent.

What we see in other companies in America are several different departments with different specialties and responsiblities.  When I owned two restaurants, a nightclub and a boatyard and marina, as you might imagine that I had 10-12 departments reporting to me at any one time. And I certainly didn’t know how to repair a twin screw diesel engine nor could I entertain as well as the All Male Revue! I contracted out marketing, I hired bookkeepers, I paid well for department heads that were specialists in their fields. Why not have a real estate company set up the same way, i.e., with different departments doing what they each do best. The agent should be the person who is face to face with the clients, not the person who is mailing out postcards or doing the research on the different lead generator sources. Even deciding how to outsource the different parts of the job is time consuming.  Each agent should work with the PART of the business that best suits his or her personality style, and you determine this with a personality assessment and lots of coaching, i.e., if you want to work at night and you are not shy and have a commanding presence, you’d probably like being a listing agent. If you get your kicks out of assisting someone in finding their dream house, you’d probably love working with buyers. If numbers fascinate you and you love the work of high finance, you’d probably prefer investment real estate and if you can’t tear yourself away from watching a home get built, you’d probably love new construction. For the well connected, whether by church, networking groups, family, and all kinds of social groups, and you love to give parties, then a referral based practice might work best for you.

Agents need to know themselves and find their own best fit in the business, then I firmly believe that they will succeed at a much higher level and make it through the first two years better than if they follow the typical one size fits all advice of their broker. Or, worse yet, take every referral coming from the relocation department and only make about 30% and lose belief in themselves.  As the agent grows, learn the ropes and learn what they love to do best, then migrate throughout the different departments within the company and take on more challenges.

We need a new model. We need to create companies where the agents are treated as individuals and trained as such. Where it’s acknowledged that they can not wear all the hats at once.  We need to have all the effective marketing in place and offer assistance with implementing it. We need to provide FREE leads to our agents. We need to create an economic model where the agents continuing success is directly tied to the continuing success of the office.  We need to give agents the reason to stay loyal to the company and to take away all the stumbling blocks to success.

It’s a huge order, but doable. I know and it works. Start out with bright, likeable and agressive people, have programs set up in the different fields within real estate so there is enough diversity, have the marketing materials and programs researched and implemented so that the agent can be with the client and do what they do best.  Have the negotiation, legal and transactional support to augment the knowledge base of the agent, and mentor and coach as long as necessry. This is no Walmart model, nor is it a Costco model. It’s not the super agent model where only the super agent makes a good living, it’s a Super Office model where all can do well, all are supported, teamwork is highly regarded and there is incentive to grow the company, too. A happy and successful and nutured agent will cure this industry of what ails it. 

38 thoughts on “It may be broken, but here's a plan to fix it!

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  2. Eileen, heck of an article. However, do you know who would argue with you on whether or not the business model of real estate is broken?? How bout the brokers?? You bet they would.

    But never mind the brokers. I believe that you are right and some specialties are in order for agents. The key is to see a rise in a more maverick broker, hopefully the Internet will help.

  3. Eileen – what a great post! I have to agree with you. It comes down to what “They learn what they live” – So if there is no guidance from a honest broker – the office runs amuck. Honest brokers – deal with honest people and expect honest agents, anything less is unacceptable.

  4. Eileen,

    What do you say when a new agent asks you “What do I say when they ask how long I’ve been in the business?” I usually look at them like they have two heads 🙂 People didn’t ask me that question when I was new. I guess I didn’t “look or sound new”, so the subject just didn’t come up. I have no personal experience with that question.

  5. Sorry this post was so long. If I had prepared better, I’d have made a blog and put it on there to refer to.
    So thanks for reading all of that.
    Ardell, that’s a good question. what we do here is say “my partner, Eileen and I” etc, etc.For instance, in an initial interview, if the agent is absolutely green, they’ll say, Eileen and I will sit down with you for a couple of hours…. and then together with you, we’ll narrow down your search, etc etc. Then we’ll go look…..and then Eileen will draw the documents and do the negotiating with you. Isn’t that great to have 35 years of experience ………etc.
    Remember, though, they don’t have to pay me to be their partner. That way, they build experience but don’t go broke.
    Something like tht. When they need me, they use me, if not, then they’re able to find ways where their newness is an advantage, like I’m out there looking all the time since I’m new and have time to find your perfect home.

  6. Eileen,

    I’ve tried that, but once I am in the picture, going out to look at property with them, or helping to stage a listing…”their” client never talks to them again, and only wants to talk to me.

    How do you get past that?

  7. Todd:
    By brokers I assume you mean the traditional brokers, and yes, I would expect they would argue since they’re holding on tight to what they know and can’t quickloy change.Too big, too much overhead to hand money over to the agents.What do they have to offer other than name, but agents just don’t know that the 20 and 30 somethings could care less “image” and like maverick companies best. How long before these loyal agents figure it out?

  8. Ardell
    I haven’t had alot of trouble with this.Our leads get used to the agents here, so don’t know me personally, which is how I wanted it. When it’s a past client of mine, though, I stay very involved. I’m guessing you’re getting a lot of clients from your blogging, so of course, the relationship is strickly with you since you don’t talk about a team.
    Re: staging. I don’t do the staging cuz it’s so hard to tell a seller that what he loves the public doesn’t, but I do pay for a professional stager and I prepare the seller for an unbiased opinion. Lots of times they get the staging 6 months early in case there’s lots to do.

  9. This is a great post. I think that what you’re describing would have happened a long time ago — in infinite variations — were it not for the real estate broker’s safe harbor in the income tax laws. In other words, if agents were subject to withholding taxes, instead of being independent contractors, brokers would work more like business owners and less like pimps. Kudos to you for trying something different. This kind of model — a controlled and predictable level of quality — is what will compete successfully with the RealtyBots. My hat is off to you.

  10. I gotta ask, how do you find the time? I picture you sitting in that robe at 1am blogging away and I know you’re very hands on. You’re also still on Realtalk, though I have noticed they’re getting shorter there:)

  11. Eileen,

    I can process 500 or more emails, by using Outlook, in about 7 minutes. I recently used Real Talk to poll the Country about market conditions. It’s a TOOL, a very useful one. Once you know how to use it quickly and to YOUR purpose, you will find it much easier to navigate. Too many use it as a hobby.

    As to blogging, one of my most “famous” pieces on “good enough” took about 45 seconds from beginning to publish stage. One of the benefits of “Stream of Consciousness” blogging.

    I’m hiring as well, two new agents this afternoon, one has been in the business even longer than I have…should be short work.  I’m firing even more than I’m hiring at present, gearing towards the spinoff.

    I have to be “online” monitoring new listings as they come on market fairly constantly. As soon as a property comes on market for one of my clients, I evaluate it quickly and jump up to go see it if it passes my smell test. Any agent who isn’t sitting at a computer these days is working harder and not smarter.

    We use the computer to get feedback on our listings, to seek out new listings for our current buyers. We are on the computer…so sideshifting for 3 minutes to do a blog entry is a “break”, not a job.

  12. Eileen,

    How long does it take you to do a blog article? For me the only “time” involved is choosing photos. Usually pretty quick, except those “10 for Galen” which I did while walking for exercise and listening to an old Janis Ian CD. Again…blogging is my “break from work”…not my work. Same with Real Talk.

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