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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

Unpopular opinion: Coworkers are not your ‘family’

(MARKETING) “I just want you to think of us as family,” they say. If this were true, I could fire my uncle for always bringing up “that” topic on Thanksgiving…

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family coworkers

The season 10 opener of “Undercover Boss” featured Walk-On’s Bistreaux & Bar. Brandon Landry, owner, went to the Lafayette location where he worked undercover with Jessica Comeaux, an assistant manager. Comeaux came across as a dedicated employee of the company, and she was given a well-deserved reward for her work. But I rolled my eyes as the show described the team as a “family.” I take offense at combining business and family, unless you’re really family. Why shouldn’t this work dynamic be used?

Employers don’t have loyalty to employees.

One of the biggest reasons work isn’t family is that loyalty doesn’t go both ways. Employers who act as though employees are family wouldn’t hesitate to fire someone if it came down to it. In most families, you support each other during tough times, but that wouldn’t be the case in a business. If you’ve ever thought that you can’t ask for a raise or vacation, you’ve probably bought into the theory that “work is a family.” No, work is a contract.

Would the roles be okay if the genders were reversed?

At Walks-Ons, Comeaux is referred to as “Mama Jess,” by “some of the girls. I have to wonder how that would come across if Comeaux were a man being called “Daddy Jess” by younger team members? See any problem with that? What happens when the boss is a 30-year-old and the employee is senior? Using family terminology to describe work relationships is just wrong.

Families’ roles are complex.

You’ll spend over 2,000 hours with your co-workers every year. It’s human nature to want to belong. But when you think of your job like a family, you may bring dysfunction into the workplace.

What if you never had a mom, or if your dad was abusive? Professional relationships don’t need the added complexity of “family” norms. Seeing your boss as “mom” or “dad” completely skews the roles of boss/employee. When your mom asks you to do more, it’s hard to say no. If your “work mom or dad” wants you to stay late, it’s going to be hard to set boundaries when you buy into the bogus theory that work is family. Stop thinking of work this way.

Check your business culture to make sure that your team has healthy boundaries and teamwork. Having a great work culture doesn’t have to mean you think of your team as family. It means that you appreciate your team, let them have good work-life balance and understand professionalism.

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Business Marketing

UI/UX design trends in 2020 for maximum user friendliness

(BUSINESS NEWS) 2020 brings back classic UI and UX themes centered on beautiful visuals, rich written content, and authentic presentation. These are the trends to know.

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UI/UX design trends for 2020

User interface (UI) and user experience (UX) protocol have shifted so much in the last few years that it can be daunting to try to keep up with what’s hip and what’s…well, not. Fortunately, Shakuro has compiled a list of trends to guide you through 2020. Here are our thoughts on design trends you can expect to see (and use) this year.

Content
When creating content this year, make sure it emphasizes the meaning behind your work rather than simply focusing on SEO. Too often, the meaning behind our words becomes more about selling a product or service and less about the product itself.

Other areas to focus on vis-à-vis content development include dynamic presentations for variable audiences, visual representations of data (charts, tables, and infographics easily check this box), and mobile-friendly UX and UI—something which should be at the forefront of your mind at all times.
Finally, Shakuro suggests taking 2020 to establish your own organic, opinionated content. Reposts and testimonials are fine in moderation, but the core of your page should belong to you.

Visuals
Desirable website visual trends are somewhat contradictory, but as long as you stick to the core premise—keeping your website organic and appropriate to your brand—you should be fine.

2020 sees the return of asymmetrical design trends; for example, you might have a logo on your landing page that takes up a third of the left side of the page. However, another trend anticipated by Shakuro is the use of negative space to emphasize an image—or, if you aren’t confused enough, an image that takes up the full screen with a focal point in the middle. A/B testing with different designs will be your friend this year.

Animation, high-definition renders of images, and a profound focus on aesthetically pleasing images (especially illustration) is something else you’ll want to incorporate into your design. One tip that holds true for all is that the integration of design and development from the bottom up; doing this will help streamline your process going forward.

Colors
Unlike in prior years, color schemes are largely unchanged; you’ll want to ensure that any changes you make evoke a subtle, soft quality, and some services (e.g., Shakuro) suggest incorporating natural colors as opposed to bright or bold ones. Aside from these two minor updates, keep doing what you’re doing—as long as your selected palette isn’t so dissonant that it causes stress, you’re probably safe. Just so you know Pantones color of the year for 2020 is classic blue.

Text
More than anything, your text should be written to be read by humans—not search engines. This is a common trend this year; you’ll notice that many of the items on this list are more geared toward making the human experience pleasant and noteworthy rather than simply “good enough.” This philosophy also carries over to your text design, which should communicate your brand via visual. In short, don’t use Comic Sans if you want to convey professionalism.

Another couple of minor text changes to make involve moving text overlays and combining text with visuals (e.g., videos or high-definition photos). These themes aren’t new to UX and UI by any means, but they were overplayed for a few years; luckily, it looks like they’re coming back into favor.

Experience
Perhaps the most difficult—and important—aspect of your website is the user experience. This is a good time to remind yourself to check on your mobile experience as well; often, a user’s mobile experience will determine whether or not they return to your page.

An easy way to stand out to your audience is by customizing your navigation options to fit your visual theme rather than using a default navigation setup. This can be tricky, however: you don’t want to create a site that’s unique to the point of being gimmicky—and, thus, difficult to navigate.

And, if you’re looking for an easy way to lower your audience’s blood pressure, designing a UX that requires fewer refreshes, page clicks, and redirects is a sure way to do so.

2020 may not be the flashiest year in terms of web development, but what these trends lack in star power they make up for in subtlety and depth of meaning. Don’t miss out on what could be the most content-rich year for your website!

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Business Marketing

Hiring Managers keep you on your toes, so you should step up

(BUSINESS MARKETING) If you want to stand out from other job applicants, weird outfits, stunts, and baked goods will only get you so far – and in fact, may backfire.

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hiring managers interview

In an increasingly competitive job market, how do you make sure that your application doesn’t get buried in a pile of paper? How do you stand out from the pack?

According to research by employment search website Simply Hired, hiring managers get an average of 34 applications per job listing, but they spend time genuinely considering an average of only 12.6 percent of them – that’s less than one third. Some applicants may feel the need to go above and beyond the average application and do something unusual or unexpected to grab the hiring manager’s attention.

Simply Hired conducted a survey to find out whether or not “nontraditional” strategies to stand out are worth the risk, or whether it makes sense to stick to a traditional resume and cover letter. They surveyed over 500 hiring managers and over 500 job applicants to find out what sort of outside-of-the-box approaches applicants are willing to take, and which ones do and don’t pay off.

Most notably, the survey found that a over 63 percent of hiring managers find attention-grabbing gimmicks totally unacceptable, with only 20.2 percent saying they were acceptable. Hiring managers were also given a list of unusual strategies to rank from most to least acceptable. Unsurprisingly, the least acceptable strategy was offering to sleep with the hiring manager – which should really go without saying.

Interestingly, hiring managers also really disliked when applicants persistently emailed their resume over and over until they got a response. One or two follow up emails after your initial application isn’t such a bad idea – but if you don’t get a response after that, continuing to pester the hiring manager isn’t going to help.

While sending baked goods to the office was considered a somewhat acceptable strategy, sending those same cookies to the manager’s home address was a big no-no. Desserts might sweeten your application, but not if you cross a professional boundary by brining them to someone’s home – that’s just creepy.

Another tactic that hiring managers received fairly positively was “enduring extreme weather to hand-deliver a resume” – but waiting around for inclement weather to apply for a job doesn’t seem very efficient. However, hiring managers did respond well to applicants who went out of their way to demonstrate a skill, for example, by creating a mock product or presentation or completing their interview in a second language. A librarian who was surveyed said she landed her job by making her resume into a book and creating QR codes with links to her portfolio, while a woman applying to work at the hotel hopped behind the counter and started checking customers in.

It’s worth noting that while most hiring managers aren’t into your gimmicks and games, of the 12.9 percent of applicants who said they are risked an unusual strategy, 67.7 percent of those actually landed the job.

Still, it’s probably a safer bet to stick to the protocol and not try any theatrics. So then, what can you actually do to improve your chances of landing the job?

Applicants surveyed tended to focus most of their time on their resume, but according to hiring managers, the interview and cover letter are “the top ways to stand out among the rest.” Sure, brush up your resume, but make sure to give equal time to writing a strong cover letter and practicing potential interview questions.

In the survey, applicants also tended to overestimate the importance of knowing people within the company and having a “unique” cover letter and interview question answers; meanwhile, they underestimated the importance of asking smart questions at the interview and personality. In fact, hiring managers reported that personality was the most impactful factor in their hiring decisions.
It appears that the best way to stand out in a job interview is to wow them with your personality and nail the interview. Weird outfits, stunts, and baked goods will only get you so far – and in fact, may backfire.

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