A changing industry
Back in the days when brokers were in charge, agents knew their place, and NASA’s scientists were the only folks we knew for sure using that thing called a computer, life was simpler. Today? A few generations of weak broker/owners have pretty much capsized the ship, having first capitulated to their so-called top producers eons ago. Having the crazies runnin’ the asylum isn’t a business model. Think I’m being harsh? Ask anyone who’s been a real estate brokerage owner the last 35 years what they think of agent splits — then sit back, be quiet, and wait for the rant to commence. And it surely will.
But let’s narrow things down a bit. Since I’ve been able to see the evolution of the American real estate brokerage up close, personal, and from both sides of the table, my perspective might be of some useable value. Let’s start out with some naked truth. Most in the business hate it when anyone says this out loud. Why? Cuz most know the speaker has found them out, and they can no longer pretend, at least to themselves, that they’re all that valuable to their brokerage.
First, let’s review what our industry looked like as we finished the 1960s.
History lesson: there were once two classes
Those whose desks had a sign saying ‘The buck stops here” — and everyone else. There were two ways to make more money, at least potentially. You could become a more productive agent. Or, you could take the risk and open your own shop, becoming a broker — the ‘go to’ guy. 99% of folks opt to let somebody else be the boss and run things. Nothin’ wrong with that whatsoever.
Within the agent class, there were, again, two basic species. Those who represented buyers only, unless a buyer forced them into listing their home. The other were the listers. Listers tended to hang out together, as did buyer agents.
There were then two things separating those two classes. First, listing agents as a group tended to make far more money than their counterparts. Second, listers entered the arena as gladiators regularly, facing the chance of failure daily. Buyer agents? They pretty much made their living off of the listers. Listers have always known this. Buyer agents have always denied this, but also always knew deep down it was accurate — and resented it deeply. Not all of ’em mind you, but most. They loved the idea they were perceived to be of equal value to the brokerage.
Buyers’ agents are not of equal value to a brokerage
Yet, how could they be? Any lister, in fact most listers, did both, and still do. See, their listings produced buyers. I know, cuz back in the day, during the nearly seven years I toiled on the house side of the biz, that’s how I worked. When I turned 16 I was told I could be a producer (gladiator/lister), or I could be a pilot fish.
That one empirically inarguable truth — that listings, and therefore listers, attract buyers — is why buyer agents by definition, feed off of listing agents. Listers don’t need buyers’ agents, but buyers’ agents perish without listing agents.
Why do you think it’s so easy for a dynamically productive listing agent to hire buyers’ agents for 30-50% commission splits? Don’t say this too loudly, cuz it’s politically incorrect, but it’s cuz that’s what they’re worth. Remember, our worth in the free market is pretty much dictated by the ease or difficulty in replacing us.
There is no arena for the buyer agent. The listing agent enters the arena every time they ask for a listing appointment and/or make a listing presentation. The competition is fierce. Why?
They’re facing other fearless gladiators in front of God and everybody — risking total failure every time out. That’s why.
How the process works now
If they’re on a team, they show up for work, are given the day’s leads — by the lister in charge — then begin making contact. They show property to those with whom they connected ’til the buyer basically says, “I’ll take that one!”
That’s not how it works for you? Yeah, I know, you work by yourself or on a team made up of buyers’ agents exclusively, making excellent use of technology, specifically an IDX set up. Good for you. The only thing of value on that IDX are the listings the gladiators won from the arena. You’ve merely figured a way to live off their production without them in the room.
Back to the basics
There’s only one causative reason that matters as far as the negative trend real estate brokerages have been experiencing since the early 70s. Those who’ve not taken the capital risk the owner has taken have successfully taken over.
The only fly in that ointment is that those who took over are not those who take risks. They prefer to blackmail those who do. Oh, does that offend thee? My mentors told me back in 1971 when most of ’em retired, many of them WAY too early, including Dad, that the agents were gonna take over. They shouldn’t, I was told, but they accurately predicted they’d succeed. It would be due to the majority of company owners who were both shortsighted and who’d become fat and lazy.
Before we saw the first one, they told me of the franchise concept. It would further destroy what had succeeded for decades. The commission splits for woefully mediocre agents would skyrocket. It would be the end of brokerages as they knew it, and would take less than 20 years. They were off on that last one. It’s been 40 years since that day over fries and a Coke, when they told me my future.
Turns out they were seers. To all those agents, who’re shortly about to learn about new market trends on the brokerage front, how’s it been workin’ out for ya lately? Yeah, thought so. The model calling for the gladiators to do most of the fighting while the onlookers take home over half the bounty was doomed to failure from Day 1. Duh. Just as buyer agents live off of listers, the majority of agents who’re mediocre or worse, have killed off one of the best workin’ models in our lifetime. And the worm is about to turn — and sooner rather than later. We’re reapin’ what we’ve sown.