The AG Flash Poll prompts this response. Will the future have more “independent brokerages”? Yes! But that isn’t the whole story. I believe what has happened in the Greater Phoenix Area over the past 30 years is exactly what will eventually happen in every major real estate market in the next 15 – 20 years. Every last one of them – just like it happened here. I’ll tell you why, why it happened here first – and you can forecast for yourself how long it will take to happen in your area. Will independent “one man shops” or little boutique shops continue to sprout up? Absolutely. Will they ever make much difference or have much of an impact overall? No, no really. Impact comes from having LOTS of agents. Not the number of “top producers” – simply the number of agents who are there, active in the real estate business. The main obvious stat to measure the health of a real estate brokerage is: number of active agents. There are many who believe differently. Internal studies by large brokerages (franchises and independent) show that those beliefs are wrong. Just like the “health” of an agent can be accurately forecasted by the number of active listings – the future “health” of a brokerage can be seen by the number of active agents.
So what happened in Phoenix in 1965 that started “the change” I’m predicting across the land?
Realty Executives happened. The visionary, Dale Rector had an idea: the 100% commission concept. This was a real game changer of an idea for the industry. Although Realty Executives dominated the Phoenix market for several decades it was an associate of Dale’s – the now very famous, Dave Liniger was sent to Denver by Dale to start a Realty Executives office there. This was in 1973. Dave decided he didn’t need to start an operation there for Dale – but decided to start one for himself, RE/Max. Not only did RE/Max take the 100% commission concept across North America, they went on to take it across the world. They even went on to pass Realty Executives in sales right here in their own backyard.
Although the big name, franchise companies are the only major players on a national scale when it comes to number of agents – here in the Phoenix area – all the big name companies are utterly dwarfed by the 100% knock-off brands. Once it was obvious to those individuals who wanted to start real estate companies that the easiest way to attract agents was offer a higher commission split – the game was on. By the late 70’s Phoenix had so many new low cost (less than $100 a month desk fee, with $150 coming out of your first closing each month) 100% companies that it was hard to keep track of them. Like any industry, there were some companies that would thrive and prosper and others that would meet an early (broke) demise.
For the past 15 years the vast majority of Realtors in the Phoenix area have been with 100% companies. Low cost 100% companies. Over the years, almost all residential brokerage companies here have had to raise their commission splits or change to some version of the 100% concept, just to compete at all. The company I have been with for 32 years, John Hall & Associates, was started in the late 70’s based on minimum broker expense, maximum commission to the agents. Fees are higher today and much more in the area of broker support. Currently with around 600 agents it is not a “large” 100% company – the “large” 100% companies here each have THOUSANDS of agents and the really big one has over 3,000 agents. The Phoenix real estate brokerage market is now heavily populated by companies that charge as low as $25 a month (total monthly agent expense!) and they will take $200 – $300 out of each closing.
Even big national companies like RE/Max and Keller Williams charge agents much lower fees in the Phoenix market than they do in all of the other markets.
Knowing what I have written above, it is not much of a stretch to predict that this will start (slowly, at first) to happen across the country. The Los Angles area already has a few of the knock-offs – currently these offices can charge $400 – $500 a month to the agents. My prediction? Not for long. In the future, any broker will have to either provide real, meaningful help and support to their agents or they will be in a commission price war (which they will lose) with a small army of one of the many low cost, low service (really really low service) new era brokerage firms.
Here is to what I believe will be a GREAT 2011. Hope I haven’t upset anybody!