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Predicting the Future of Residential Real Estate Brokerage

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100%

Okay, so they’re not really all “100%”.  Re/Max is now a maximum of a 95% split.  Further, most of the 100% companies have various other more traditional splits (IE: 70 – 30) for those who can’t pay the standard monthly bill.  But the overall trend for the industry is that most “mega agents” wind up at a 100% company and many of the major marque agents wind up eventually even leaving Re/Max to start their own company.  Re/Max was, at one time, the most agent-centric company in the business.  That has changed a bit.  Now at their national conventions the only “approved” business coach is Brian Buffini.  The others, who used to be quite visible ( Mike Ferry, Howard Brinton, to name a few) at those conventions are no longer welcome.  Only Buffini.  I am just guessing that someone named Brian Buffini pays a specific amount of what he can collect from Re/Max agents to Re/Max International.  That one is just a guess, but there was no guess work involved when Re/Max sued First American last April.  First American backed out of the deal and stopped payments.  The lawsuit from Re/Max prompted a probe from the Colorado Real Estate Department looking into the possibility of a HUD kickback violation

Actually, I don’t think they did actually violate the law.  But I have to say I loved their defense:  we were basically just selling a mailing list.  We have a lot of agents, let’s pimp them out.  This is from the company that revolutionized the residential brokerage business.  Not very revolutionary, is it?

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The 100% concept was started by a very remarkable man named Dale Rector.  He was a true visionary and he was the founder of Realty Executives.  He made Realty Executives into a very successful company that for many years was the top selling company in all of Arizona.  Prior to Re/Max, Dave Liniger worked for Dale Rector here in Phoenix and had been sent by Dale up to Denver to start a Realty Executives office there.  Instead, Dave started Re/Max.  A few years later he took it national.  He successfully accomplished what Realty Executives never did: massive expansion on a global level.  The real estate world would never be the same.  Agents who could produce did not have to “give the broker half”.  They would pay the broker to be there (a desk fee) and pay their own expenses and keep all of what they earned.  Dale Rector’s original dream had become a reality for agents all across the nation and eventually, most of the world.  But it was Dave Liniger who made that dream a reality.

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Anytime anyone discovers or develops anything that could be a meaningful advantage in business it does not take long until someone else comes along with a knock off version, usually for less money.  Real estate brokerage offices are no exception.  By the mid 70’s, when Re/Max was just getting going and Realty Executives was going strong a different kind of company started sprouting up all around the Phoenix area.  Realty Executives / Re/Max knock offs.  There were dozens and dozens of them.  Some were very well run, others were very poorly managed and went out of business.  The company I have been with for 31 years, John Hall & Associates was one of those “original knock offs”.  Less offered and less service to the agent but at a much lower price.  In the early 80’s came the knock off – knock offs.  West USA, was started by Clay Fouts.  Clay started at John Hall about the same time I did, in 1978.  He liked the idea of what John had done and saw that he could provide similar services for less.  Clay’s original value proposition was simply having a lower price per month for agents than John Hall.  When he started West USA he got several hundred of his original agents from John Hall.  He took some from Realty Executives too.  Eventually came the knock off of the knock off of the knock offs.  Companies that would charge the agents $25 – $50 a month to hang their license and take a few hundred dollars out of each closing.  These companies went on to pass West USA (West USA was the largest company in Arizona with about 2,000 agents) and there is now a company with well over 3,000 agents: HomeSmart.  This business model is scalable and can be started just about anywhere.

If HomeSmart doesn’t eventually open an office in your city don’t worry.  Someone like them or someone lifting their business model will eventually do just that.  How can a brokerage firm make any money at $25 – $50 a month?  Use your calculator to multiply that times, say 3,000.  Add in the fact that they are not providing office space, a desk, phones, etc. and you can start to get the picture.  Maybe they only have 200 – 300 agents they are collecting $200 a closing from and they are still quite profitable.

The competitive pressure these companies have put on “traditional brokers” with regard to commission splits has changed the landscape for all real estate companies here.  For example – a little known fact – the two largest national 100% companies, Re/Max and Keller Williams charge agents considerably less in the Phoenix area than they charge elsewhere.  For example a Re/Max agent here could pay around $600 a month without office space.  That same set up in the San Francisco area would be about $1,600 a month.  Watch that price drop once the knock off knock off knock offs are well known to the agents there.

The customers of the big brokers are not buyers and sellers.  Buyers and sellers are the customers of the agents.  The customer of the big broker is the agent.  The brokers are in the agent acquisition and retention business.  If successful, their expertise typically is limited and is solely in getting and keeping agents and avoiding lawsuits.  They seldom even know much about the little detail of getting and keeping buyers and sellers – as they never did it very much.  The skills required to be a successful agent and the skills required to be a successful broker are not the same skill set.  There are a select few who have both skill sets but that is quite rare from what I’ve seen.

There are specific communities and areas where a company is so good at getting business that they can hire all the agents they want and dictate the commission splits.  However, this is not the pattern in most areas.  The pattern is typically that the company doing the most business has the most top producing agents.  If those top producing agents left to go somewhere else their business would go right with them.  So what is a brokerage company not making enough money to do?  There are just a few choices: 1. cut back expenses, 2. close, 3. find a way to drive in business or 4. find a way to get more agents.

As almost all of the companies are completely inept at driving in business they are forced to choose options 1, 2 or 4.  Option 4 is achieved by having a company agents would really like to affiliate with – so to survive they have to be really really great or really really inexpensive.  The later is typically much easier to achieve.

Russell has been an Associate Broker with John Hall & Associates since 1978 and ranks in the top 1% of all agents in the U.S. Most recently The Wall Street Journal recognized the Top 200 Agents in America, awarding Russell # 25 for number of units sold. Russell has been featured in many books such as, "The Billion Dollar Agent" by Steve Kantor and "The Millionaire Real Estate Agent" by Gary Keller and has often been a featured speaker for national conventions and routinely speaks at various state and local association conventions. Visit him also at nohasslelisting.com and number1homeagent.com.

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8 Comments

8 Comments

  1. Cindy Knight

    December 16, 2008 at 12:42 pm

    Awesome post Russell and how true we started at Re/Max, opened our own office, in Feb opened a Realty Execs – plan to run like a HomeSmart and we’re working on option 4.

  2. Jim Whatley

    December 16, 2008 at 1:00 pm

    I all ways enjoy your articles. Real Estate co. are changing will change. I think for the better, the innovative hard working agent will all ways do well.

  3. Ken Brand

    December 16, 2008 at 2:59 pm

    I enjoy reading and thinking about your perspectives. For me, your next to the last few sentence is pure Platinum:

    “so to survive they have to be really really great or really really inexpensive”

    If you want to thrive you can’t limp around in the middle. For me, I’m going to work my ass of to be OMG fantastic and charge appropriately. The idea of beating feet down the dirt cheap path is not for me.

    Which ever trail taken, blessing to all hardworking agents who deliver on whatever promises are made.

    Keep the flash light shinning Russell! Thanks.

  4. Missy Caulk

    December 16, 2008 at 9:32 pm

    Good historical perspective. Having read Dave’s book it is point on.

    I was with RE/MAX for 12 years, went to KW last December along with 18 other agents, it had nothing to do with desk fees, just the wrong Brokers bought it from the original broker.

    KW had a reputation of young, inexperienced agents in Ann Arbor, no more. We have had amazing growth in 2008, and currently have the most market share now.

    A lot can happen in a year. IMO Gary tweaked the Remax concept and made it more affordable for new agents.

  5. Jonathan Dalton

    December 17, 2008 at 10:40 am

    When I moved, I opted for a split plan. The idea of writing the larger check wasn’t all that palatable. In fact, even the $225 I pay on the split didn’t feel good after years of $10 office fees (and less than favorable broker splits.)

    At the level I’m at now, there’s almost no financial difference between the 100% and the current split. When I hit the next level in the next year or two, then it will come time to make a decision.

  6. Sharon Simms, St Petersburg, Florida

    December 22, 2008 at 6:17 pm

    Russell – I think the reason many top agents leave RE/MAX is that RE/MAX hasn’t adapted well to teams, so the expenses are huge to stay with RE/MAX when you have a team.

  7. Linda Davis

    December 28, 2008 at 10:46 am

    Brian Buffini may be the only approved business coach at RE/MAX and your guess could be right about what he pays for that privilege but Brinton and others are certainly welcome at the annual convention. In fact, Brinton, Knox and a host of others will be speaking at the convention in March 2009, just as they have at most of the past conventions I’ve attended.

  8. Ramon

    July 10, 2016 at 9:54 pm

    Interesting stuff, I changed template on my website and after that the search rankings plummeted
    Added this on my wall, very interesting!

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Business Marketing

Use nostalgia as a marketing niche for your business today

(MARKETING) A market that is making waves is found in the form of entertainment nostalgia. Everyone has memories and attachments, why not speak to them?

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nostalgia

Is it just me or does it seem like there is something for everything nowadays? Let me clarify, as that is a rather broad question…

With the way communicating through technology has advanced, it’s become much easier to connect with those who have shared interests. This has become especially evident with interests in the entertainment community.

Entertainment nostalgia

It now seems like there is an event for every bit of nostalgia you can imagine. Autograph shows, meet and greets, and memorabilia collections of all kinds are held in convention halls all around the world. (To give you an idea of how deep this thing goes, there was a “Grease 2” reunion convention sometime within the last five years. Being that I’m the only person I’ve ever met who likes that movie, it’s amazing that it found an audience.)

This idea of marketing by use of nostalgia is something that is becoming smartly tapped and there are a variety of directions it can go in.

For example, the new Domino’s ads feature dead-on tributes to “Ferris Bueller’s Day Off.”

What’s your niche?

If you’re a fan of anything, it’s likely that you can find an event to suit your needs.

And, if you want to take it a step further, you can think outside the box and use nostalgia as a marketing tool.

I recently began dabbling in social media gigs that have brought me to a few different fan conventions. One was a throwback 80s and 90s convention that featured everyone from Alan Thicke to the members of N*SYNC. Another is a recurring convention that brings together fans of sci-fi, horror, and everything under that umbrella.

I was amazed by the number of people that came out to these events and the amount of money that was spent on the day’s activities (autographs, photo ops, etc.). I was energized by the fact that you can take something you have a great appreciation for and bring together others who share that feeling. Watching people meet some of their favorite celebrities is something that is priceless.

Hop onboard the nostalgia train

If you’re a fan of something, you don’t have to look too far to find what you’d enjoy – going back to the aforementioned “Ferris Bueller” example, there is a first-ever John Hughes fan event taking place in Chicago next month that will bring fans to their favorite Brat Pack members.

In the same thought, if you have an idea, now is the time to find others who share that interest and execute your vision.

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Business Marketing

5 tips to help you craft consistently high-converting email marketing

(MARKETING) Email may seem too old to be effective but surprisingly it’s not, so how can you get the most out of your email marketing? Try these tips.

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Email marketing

Email marketing might seem archaic in comparison to modern mediums like social media, blogging, and podcasting; however, it actually remains one of the highest converting options marketers and small businesses have at their disposal.

But Why Email?

Hopefully, you believe in email as an effective marketing channel, but in case you have doubts, let’s hit the reset button. Here’s why email marketing is worth investing in:

  • Email is one of the few marketing channels that you have total control over. Unlike a social media audience, which can disappear if the platform decides you violate their terms, you own your email list.
  • Email is considered very personal. When someone gives you access to their inbox, they’re telling you that you can send them messages.
  • From a pure analytics perspective, email gives you the ability to track behaviors, study what works, and get familiar with the techniques that don’t.
  • The ROI of email marketing is incredibly high. It can deliver as much as $44 in value for every $1 spent.

5 Tips for High-Converting Emails

If you’ve been using email, but haven’t gotten the results you’d like to, it’s probably because you’re using it ineffectively.

Here are a few very practical tips for high-converting emails that generate results:

  1. Write Better Subject Lines: Think about email marketing from the side of the recipient. (Considering that you probably receive hundreds of emails per week, this isn’t hard to do.) What’s going to make you engage with an email? It’s the subject line, right?If you’re going to focus a large portion of your time and energy on one element of email marketing, subject lines should be it.The best subject lines are the ones that convey a sense of urgency or curiosity, present an offer, personalize to the recipient, are relevant and timely, feature name recognition, or reference cool stories.
  2. Nail the Intro”: Never take for granted the fact that someone will open your email, and read to the second paragraph. Some will – but most will scan the first couple of lines, and then make a decision on how to proceed.It’s critically important that you get the intro right. You have maybe five seconds to hook people in, and get them excited. This is not a time to slowly build up. Give your best stuff away first!
  3. Use Video: Email might be personal, but individual emails aren’t necessarily viewed as special. That’s because people get so many of them on a daily basis.According to Blue Water Marketing, “The average person receives more than 84 emails each day! So how do you separate your emails from everyone else? Embed videos in your emails can increase your conversion rates by over 21 percent!”This speaks to a larger trend of making emails visually stimulating. The more you use compelling visuals, the more engaging and memorable the content will be.
  4. Keep Eyes Moving: The goal is to keep people engaging with your email content throughout. While it’ll inevitably happen with a certain percentage of recipients, you want to prevent people from dropping off as they read.One of the best ways to keep sustained engagement is to keep eyes effortlessly moving down the page with short and succinct copy.One-liners, small paragraphs, and lots of spacing signal a degree of approachability and simplicity. Use this style as much as you can.
  5. Don’t Ask Too Much: It can be difficult to convey everything you want to say in a single email, but it’s important that you stay as focused as possible – particularly when it comes to CTAs and requests.Always stick to one CTA per email. Never ask multiple questions or present different offers. (It’ll just overwhelm and confuse.) You can present the same CTA in multiple places – like at the beginning, middle, and end of the email – but it needs to be the same call. That’s how you keep people focused and on-task.

Give Your Email Marketing Strategy a Makeover

Most businesses have some sort of email lists. Few businesses leverage these lists as well as they should. Hopefully, this article has provided you with some practical and actionable tips that can be used to boost engagement and produce more conversions. Give them a try and see what sticks.

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Business Marketing

Here’s how one employer was able beat an age discrimination lawsuit

(MARKETING) Age discrimination is a rare occurrence but still something to be battled. It’s good practice to keep your house in order to be on the right side.

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Jewel age discrimination

In January, the EEOC released its annual accounting for reports of discrimination in the previous year. Allegations of retaliation were the most frequently filed charge, which disability coming in second. Age discrimination cases accounted for 21.4% of filed charges. As we’ve reported before, not all age discrimination complaints rise to the level of illegal discrimination. In Cesario v. Jewel Food Stores, Inc., the federal court dismissed the claims of age discrimination, even though seven (7) plaintiffs made similar claims against the grocery store.

What Cesario v. Jewel Food Stores was about

In Cesario, all but one of the seven plaintiffs had spent years with Jewel Food building their careers. When Jewel went through some financial troubles, the plaintiffs allege that they began to “experience significant pressure at work… (and) were eventually forced out or terminated because of their age or disability.” Jewel Food requested summary judgment to dismiss the claims.

The seven plaintiffs made the same type of complaints. Beginning in 2014, store directors were under pressure to improve metrics and customer satisfaction. Cesario alleges that the Jewel district manager asked about his age. Another director alleges that younger store directors were transferred to stores with less difficulties. One plaintiff alleged that Jewel Food managers asked him about his retirement. The EEOC complaints began in late 2015. The plaintiffs retired or were fired and subsequently filed a lawsuit against their company.

Age discrimination is prohibited by the Age Discrimination in Employment Act of 1967, (ADEA). The ADEA prevents disparate treatment based on age for workers over 40 years old. However, plaintiffs who allege disparate treatment must establish that the adverse reactions wouldn’t have occurred but for age. Because none of the plaintiffs could specifically point to age as the only determination of their case, the court dismissed the case.

A word to wise businesses

Jewel Food was able to demonstrate their own actions in the case through careful documentation. Although there was no evidence that age played a factor in any discharge decision, Jewel Food could document their personnel decisions across the board. The plaintiffs also didn’t exhaust all administrative remedies. This led to the case being dropped.

Lesson learned – Make perssonel decisions based on performance and evidence. Don’t use age as a factor. Keep documentation to support your decisions.

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