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Opinion Editorials

Dual real estate revolutions gaining velocity

Revolution #1

In case you haven’t noticed, the local MLS is available to the public through literally a hundred if not a thousand websites in your market. In fact, I’d go as far as to say ya can’t swing a dead cat without hittin’ some Realtor’s IDX. (In essence, the MLS on an agent’s website.) This means that if you’re a buyer, or even if you’re merely curious, you can see pretty much anything listed in your community. I have one, though so far, it’s pretty much been for my family and friends. I don’t sell San Diego real estate to anyone with the lone exception of  those who wish to live in a 2-4 unit setup. Even if you live in East WhatsIt Ohio though, you can see whatever you want in San Diego’s MLS on my site, and hundreds like it.

Back in the day, the only way a buyer could see all that was for sale was to get an agent. Only brokers/agents had access to the MLS. See, it was their property, the listings that is, and that’s the way they treated it. They harbored the silly belief that since it was the fruit of their labor, and their entity, they’d do whatever they chose to do with it. Imagine the cheek. It worked very well, as far as buyers and sellers were concerned. ‘Course some folks always think they have a better idea. This is almost always dangerous, especially to their members when NAR begins thinking they have a better way.

See, they gave away the store. The only thing of value they had on their shelves was their listings. Now they don’t have that. What geniuses brokers/agents have at the helm of their ship, the SS NAR.

Here’s a scoop for ya — consumers don’t have a ‘right’ to my info just cuz they declare it so.

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They have a right to professional service and solid expertise, ethically rendered with integrity. Wonder how it’d go over if decades ago those same consumers had declared their right to Coke’s formula? It’s the only thing Coke has of value. Once that formula can be used by anybody, they’re toast. Yet many seem to think the real estate industry was created to be their bitches. I beg to differ.

All the fuss lately about using or not using aggregators is moot from where I sit. Who cares, anyway? Any agent worth two quarters to rub together will sell their listings without using any of ’em. They’ve been doin’ it for generations. If ever an industry has been sold a bill of goods — by their own leadership — real estate is it.

It’s possibly too late now, but order needs to be restored.

I suggest a revolution. Let the biggest brokerages in each market completely withdraw from their local Board and MLS. Then they can start over from scratch. NAR would have a stroke to be sure, but they’d stop pretending everything they’ve done for the last several years has been in the brokers’/agents’ best interest. If you believe that, you should go buy some Vegas property for zero down and wait for the appreciation tsunami.

Like Bill Cosby used to say to his kids, “I brought you into this world, and I can take you out.”

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The various Boards of Realtors need the brokers, not vice versa. Ditto the MLS. It’s time broker-owners stop allowing the tail to wag the dog. The only thing they need to do to accomplish that is to reach down and grab a pair.

Revolution #2

The agent-centric business model has failed miserably everywhere it’s been tried for the last 40+ years. Get over it. It wasn’t a good idea from day 1. How bright must we be to know that you don’t put worker bees in charge of the hive. They’re worker bees, not risk taking, capital spending, gladiator-in-the-arena bees. The broker/owner to agent ratio has to be somewhere around 100 to 1,000/1. Yet we’ve been (That’s the editorial ‘we’, as I’d never allow it in my firm.) allowing the 1 to rule the roost since the early-mid 1970s.

Geez, guys, how’s that been workin’ out for ya lately?

Since most don’t know the history, here’s how the broker-centric model works. The broker’s in charge. The agents are to be seen and not heard. If the agents had what it took to own their own successful business, they would. But they don’t, so they don’t. They don’t get to dictate to the business owner how to run it. The broker generally pays for the bulk of the marketing. They directly or indirectly generate and/or distribute leads. They don’t view dead wood as a good thing. They do a lot more, or the same business with a lot less agents. The agents make more money even though their splits are much less than agent-centric models.

This is why teams are literally outperforming their own brokerage owners sometimes.

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With rare exceptions most successful teams today are using the pre-1970’s broker-centric models. What’s hilarious to watch is how their buyer-agents are earning more bottom line money than their counterparts in the same office. Their counterparts are often making 50-125% bigger commission splits, yet bring home less bacon. Meanwhile, the poor broker/owner is not only payin’ the overhead for the schmuck to whom he’s payin’ 50-90% splits, he’s hearing ’em complain. All this while month in and month out he gets to watch a team’s team leader make as much or more money than he is as broker/owner of the company.

Imagine an entire company based on today’s team concept. You don’t have to, cuz I lived it. It closed more sides than anyone in my local market, San Diego, for five consecutive years, than anyone. They did it with never more than 30 full time agents, and about a dozen part-timers. Over 1,000 sides a year. Their competitors? Some had as many as 16 offices. They had triple, sometimes quadruple the number of agents and still couldn’t keep up. In my experience there were two basic reasons for this.

1. Broker/owners acted like broker owners. They were in charge of their own businesses. What a concept. They were brave enough not to kowtow to a buncha wannabes who, frankly, couldn’t find their asses with a map, two guides, and a GPS.

2. If an agent wasn’t cuttin’ it, they were shown the door. Non-producers were not treated as mascots, as they are today in agent-centric models. In other words, you were a professional producing agent, or you were gone. What a concept.

Oh, and by the way? That brokerage wasn’t part of either the local Board or the local MLS, both of whom came hat in hand, begging him to please join and share with them his bounty. Go figure.

The tiresome “raising the bar” discussion

The cry for ‘Raising the Bar’ is well meaning, but mostly misguided.

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There are those with very good intent who want the industry to make it more difficult to become an agent or a broker, and/or want continuing education to be more rigorous. I understand their thinking. I’m 60. Been hearing the ‘raise the bar’ mantra since I was a teenager. How’s that been workin’ out for us? Don’t answer, it was rhetorical. But if we all take a few steps back so as to view the big picture, maybe we can begin to come together on a different approach. The big picture? It comes down to two realities merged into one prototypical person — and they represent, easily, around 70-85% of currently active licensees to one degree or another.

They work for a brokerage without producing much if any business. Also, regardless of the many classes they may’ve been coerced into attending, they don’t know much about the law, procedures, and general practice of real estate agency. Combine those two — lack of production and general industry ignorance — and you get the periodic outcry for ‘raising the bar’. Hey, I have a idear, why don’t we insist as broker/owners that our agents be producers or be gone? Producers generally know what they’re doing on all fronts.

What a concept! The vast majority of all listings/sales of 1-4 units is done by far less than 20% of the licensees out there. Said another way, if tomorrow all brokerages were suddenly operating the broker-centric model, the merit based culture would be the natural result. The huge majority of agents out there who take up space more than anything else would, like steam, heat the air then disappear. They’d never return either, cuz bottom-line production requirements would be the barrier they’d never be able to navigate.

Would love to hear your thoughts.  Back to the future may just be what’s beginning to happen now.

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Written By

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.

30 Comments

30 Comments

  1. Lesley Lambert

    January 30, 2012 at 9:59 pm

    My mom was my first broker (she started real estate in the 80's) and this was how she trained me. I credit my training in the above methods as being what has allowed me to survive and even thrive in a bad market. Some good points that I am certain a lot of people don't want to acknowledge.

    • Jeff Brown

      February 1, 2012 at 8:32 pm

      As the industry is slowly forced into the broker-centric model, Lesley, something tells me they'll acknowledge it. 🙂

  2. herman chan

    January 30, 2012 at 10:05 pm

    hi jeff! i think in theory a merit based brokerage would work, but the fact of the matter is many brokerages don't' chop off non-producers b/c brokerages make money off the non-producing agents by selling classes, certs, desk/franchise fees, tech fees, blah blah blah.

    • Jeff Brown

      February 1, 2012 at 8:18 pm

      Hey Herman — They do that cuz their model simply is a big FAIL.

  3. Nick Molnar

    January 30, 2012 at 11:07 pm

    Sorry Jeff, that day is dead (or dying). If all an agent has to offer is listing data and a well-trained team, they should make plans to exit the business. Launching a brokerage is now well within the capability of a smart high-schooler with a four or five figure budget (depending on the market). And the listing data ultimately belongs to the sellers. It sounds like you offer a real value to your investor clients and help them in ways they are unable to help themselves. Why do you think residential brokerage should offer anything less?

    • Jeff Brown

      February 1, 2012 at 8:24 pm

      Somehow I think we're not communicating, Nick. That's exactly what I'm suggesting. You're right about anyone being able to START a brokerage, but they'd fail just like the brainiacs who've been bringing in extra income streams just to stay afloat. The listing data belongs to me, period.

      I own the listing, period.

      The old model fired incompetents. They slowly but surely ended up with quasi all-star teams after a relatively short time. Nothing's changed since then, Nick. Sellers want their homes sold, at the highest possible price and in the shortest period of time. It was true when I first started in '69, and it's true today.

      That day may be dead, but the teams are showing their broker/owners the way. Agent-centric models simply do not work. They're doomed from the start.

  4. Drew Meyers - ESM Exec Designs

    January 31, 2012 at 10:38 am

    Exactly why I think (know) brokers like m realty in portland and m squared in wash dc are on their way to killing their respective markets…

  5. Bruce Lemieux

    January 31, 2012 at 4:08 pm

    The 70s offered many delights like awesome clothes and spectacular shag carpet. People who ran 26 miles were labeled as freaks. Now, you're a freak if you don't. It was a golden age.

    Still, I wouldn't like to see the return of cars that rust and don't run, double digit mortgage rates, or restricted access to home listing data. Consumers should have easy access accurate and non-spammy home listing data. Good for consumers, good for our industry. I'm less concerned about how they get it (syndicated, IDX, etc).

    Revolution #2 really resonates. The methodology for the big brokers in my market is simple: grab as many agents and market share as possible. Remove all risk to operate a profitable business, give cubes, free business cards and office managers (often to babysit) — and take a high split. As agents get better and want a bigger share, they are lured by the do-it-yourself, agent-centric models. Now, agents need to invest heavily in processes, technology and coaching to acquire and convert leads – which is time not selling. Now imagine a world where the broker manages the business, generates the leads, and coaches – and holds accountable – the agents who spend 100% of their time selling. Sounds like a pretty good trip back to the 70s to me.

  6. Jeff Brown

    February 1, 2012 at 8:30 pm

    Love the comparisons, Bruce. As far as #1 goes, the public has unfettered access through hundreds, sometimes thousands of IDXs in each local market. My gripe is MLS/Board treating its members like street walkers. There's simply no need, and the professionally listed home sells quickly and for more without the aggregator circus clown acts. 🙂

    Does my model interest you for your brokerage?

    • Bruce Lemieux

      February 1, 2012 at 9:07 pm

      As it turns out, I'm in the last stages of launching my own brokerage. The organizational model will look a lot like a team where the broker (my wife and me) will concentrate on lead generation and listing conversion, with a couple buyer agents focused 100% on sales. At this point, I don't see how new 'listing agents' would come on board since I'll have a very structured listing process, but I don't need to figure that out right now. I'm excited about our listing model – we'll see if my market likes it once it launches. When it's completely out of my brain and fully realized in a marketing plan, I would like to send it over to you so you can shoot holes in it. An unvarnished critique would be appreciated — I know that you’re very good at being ‘unvarnished’ 🙂

  7. Stephanie Crawford

    February 4, 2012 at 6:52 pm

    Bruce, send that model over to me while you are at it. Would love to check it out 🙂

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