Connect with us

Hi, what are you looking for?

The American GeniusThe American Genius

Opinion Editorials

Technology still not the answer to a successful real estate practice

Closing in on half a century in real estate

Earlier this month I quietly acknowledged my 42nd year as a licensee. All but just over six of those years have been spent as a designated broker. Read: where the buck stops. The first nearly six years were spent as an agent listing/selling homes to owner users, not investors. High tech in those days meant your car didn’t sport a carburetor. The MLS was housed in a small phone book, with thrice weekly ‘Hot Sheets’ delivered in the form of stapled pages directly to each office. On my first day as a licensee there were no ‘For Sale’ signs made of anything but a steel stake with a sign screwed to it. No giant wood post type signs.

Today? Many are embarrassed if the computer they use is more than a couple years old. Put in context though, their smart phone has more computing power by far than what NASA used just 100 short days before I became licensed.

Ah, context. A wonderful thing, isn’t it?

The agents in Dad’s firm back in the mid to late 60’s, if they were good, and the vast majority were very good, might close 30 sides in a year. Based on today’s commission splits (A side = 3% of purchase price. Agent gets 80% of that.), those 1960’s agents, in a market with a median sales price of say, $200,000 would make $144,000. Contrast that with what they made back then. The math is simple — just divide by 10. Actually, they made less than 10% of today’s agent with the same number of closed sides due to the far lower commission rates paid back then. Think 20-40% of the 3% and you have the true picture.

The average full time agent in Dad’s firm generated over a couple dozen closed sides a year. Please, anyone, anywhere, show me a real estate brokerage whose full time agents number more than a couple dozen, and average two closed sides monthly. It might exist, but if so it’s definitely the exception proving the rule. For the record, if we use San Diego values now, those agents don’t make $144,00, they make $252,000.

Advertisement. Scroll to continue reading.

More context

San Diego county’s population is roughly three times what it was back then. The percentage of agents producing excellent results are about the same too — we’ve not seen that change in over 40 years.

Wanna know the only real change in real estate brokerage in all those years? I mean change that matters a hill of beans? Teams. Aside from the advent of teams, nothing I’ve seen in the last 42 years has had any empirically discernible impact on a typical agent’s ability to earn. Measured in terms of transactions per period, and allowing for population/housing growth, things are pretty much the same.

But what about…?

But what about all the high tech help agents have at their fingertips now? What about it? If you’re reading this as an agent or broker, please, tell us about all the agents you know and/or work with who’re closing 24 sides a year or more — and not part of a team. You can’t cuz those you know are but an embarrassingly small slice of the pie out there.

Technology? There’s little or no real evidence demonstrating, again, empirically, that it’s impacted real production a whit. Sure, there are agents here and there who’ve figured out how to leverage technology to generate leads. That part doesn’t make ’em special. It’s those even rarer agents who figure out how to convert those leads at an impressive rate. No, even with the massive onset of high tech that has made itself part of the everyday brokerage existence, real production hasn’t been affected when it comes to the foot soldiers of the industry.

Agents are doing the same business they were a couple generations ago, but with shinier objects. They’re not producing any more than their predecessors when productivity is measured the only way it matters — the bank account.

Advertisement. Scroll to continue reading.

Ultimately it’s like Grandma said — The more things change, the more they stay the same. What really makes an agent/broker successful today is exactly the same things that made Dad’s crew flourish.

The equation hasn’t changed in the last 1,000 years. Be more knowledgeable and skilled than the next guy, while talkin’ to and gettin’ belly to belly with as many as possible. High tech when I started was a telephone. Then came the first computers. Then cell phones. Then all the magic software guaranteed to triple the business of the agent who bought it. Among all that was the IDX which was and still is, heralded as second only to turning water into wine.

Wrong, high tech breath.

The same level of business is being done by the same kinds of agents/brokers as was the case nearly half a century ago. They might be taking a different route to get belly to belly, but the bottom line results are virtually identical.

Nothing’s changed. We’re mowing the same lawns as our dads did and not a blade of grass more.

The moral of the story?

You have three choices: Either retain your status quo — Create a team — or, stay solo, but with the ‘assistant’ business model.

Advertisement. Scroll to continue reading.

High tech ain’t the answer — at least not so far.

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.

43 Comments

43 Comments

  1. Cindy Allen

    October 27, 2011 at 10:11 am

    I got into the business in 1989, and the fax machine (with thermal paper) arrived at my chosen brokers office about a week after I did. While I agree that technology hasn't increased the number of homes an agent sells, I do think it has untethered agents from the office. I'm no longer stuck waiting by the phone for a counter, my phone goes with me. I don't have to run to the office to pick up a hard copy of an offer, it's delivered to my phone by email. And no more running to another broker to pick up keys… The "key" hangs on the front door.
    Those things alone would seem to free up agents to have more "face time" with prospects.
    So why do you suppose agents aren't using that "free" time to generate more leads? Perhaps it's more about human nature – a comfort level at an average income, that keeps agents from using the "free" time technology has allowed.
    Or maybe we're all so busy playing with the next "shiney" new technology we're too tied distracted to bother to get "face to face" with the prospects we now have time to generate.

  2. Matt Nowak

    October 27, 2011 at 10:39 am

    While nothing will ever replace traditional face-to-face time, technology has made the customer more educated about the real estate process. In turn, they expect more responsive and personal contact from agents.

    Instead of making customers wait, I have been able to access MLS on my smartphone and do a multitude of tasks that would have been impossible if I didn't have my smartphone with me. Mind you, I am doing such taskes WHILE I am face-to-face with customers. I am giving them the information they seek instead of me saying, "I'll get back to you."

    I believe some agents are not using technology properly. They are using it in an attempt to replace other modes of communication. Technology should be used to enhance communication and engage customers more effectively.

  3. Bruce Lemieux

    October 27, 2011 at 12:24 pm

    Great article. To be successful in this business, you need prospects, know your market and be good at sales. Technology may help some on the first two, but does nothing to help you close.

    I do think that technology allows us to be much more productive. Without it, I would have to have at least one more fulltime assistant (copy, fax, schedule, etc). And, technology has changed the nature of how we spend our time.

    On the other side of the coin, technology has introduced a whole slew of distractions that may easily be eating-up any productivity gains (as I comment on a blog post which does absolutely nothing to help acquire new clients or close deals).

  4. Jeff Brown

    October 27, 2011 at 1:36 pm

    Hey guys — I think your comments hit the nail on the head. Even with all the technology available, and all the time it saves, the production needle for the industry simply hasn't moved. I like the observation wondering what use agents are making of all this 'saved' time.

    My view is the takeaway is this: Most agents should be W2 employees in another industry. They're pretty much not worth the space they take in a serious brokerage office. Harsh — or plain truth?

    • Matt Nowak

      October 28, 2011 at 11:12 am

      That's quite harsh, especially since I don't understand the correlation between this article and the opinion that some agents shouldn't be agents. With that mindset, it could be just as easy to say that any agent that doesn't understand the importance of technology & social media and how they relate to engaging customers is going to get left behind if they believe that "traditional" forms of communication are the ONLY way of doing business.

      We shouldn't eschew technology because we fear shiny new objects. We should utilize what works best for us and remove the rest. For example, I have a colleague that has received many leads that have ended in closings by using Facebook. Yet that medium doesn't work for me, so I don't use it.

      The important thing to take away from the use of technology by agents is that it is a necessary tool to connect with customers. Isn't that why agents have blogs, Twitter accounts, and use Facebook in their marketing plan? How much money is wasted by agents by creating glossy direct mailers that they hope customers will read? Are open houses not working as well as they once did because consumers can now go online to view homes?

      By the way, my computer is 6 years old.

  5. Bruce Lemieux

    October 27, 2011 at 4:36 pm

    As long as brokerages are 100% commission based, and the barriers to entry are so low, we'll always have a large number of low performers in the industry — regardless of what happens in technology. I do think that proper adoption of the right technology can enable (not make) great agents do very well in this business — something that would be much harder to do without it.

  6. Matthew Rathbun

    October 27, 2011 at 10:03 pm

    I want my jet pack!

  7. Jeff Brown

    October 28, 2011 at 11:19 am

    Me too, Matthew. 🙂

  8. Jeff Brown

    October 28, 2011 at 11:56 am

    Hey Matt — I do see where you're coming from on this, but have a different view. Maybe cuz I'm second generation and have seen firsthand since the 1960s, plus had mentors from even earlier days, I have a different perspective. Also, I may have a somewhat richer context from which to see changes — or things having never changed.

    ". . . I don’t understand the correlation between this article and the opinion that some agents shouldn’t be agents."

    The correlation, the crucial point of the post, is that though technology has indeed done wonders for our business, the per agent production is still a joke. It's not changed in any meaningful way since my first day in the office back in the fall of 1969. I think this empirically 'harsh' fact is a fact nevertheless. Most agents, as in the vast majority, should be working 9-5 W2 jobs in another industry. They're simply not cut out to be truly effective, productive real estate agents. This was true two generations ago, and is the factual reality today.

    Yes, agents use social media, blah blah blah. They use it to connect. So what? So in 1964 they only had the telephone. So what? The common denominator is CONNECTING. Yet with all the magic powers of high tech, social media, and IDX, the production remains the same. That fact isn't debatable on any level, period. Since that's both the historical and current empirical truth, how today's mediocre to failing agent is 'connecting' with folks is completely irrelevant.

    Again, it's about results, and nothing's changed in the last half century.

    I agree with you: It's moronic to say that if agents don't adopt this or that technology or strategy that they should be doing something else. I'm saying that even if the Lord Himself came down and whispered how they could make $100,000 a year, most agents would STILL be workin' a 9-5 W2 job 1-2 years later.

    I'm not making predictions here, Matt. I'm reporting both history and our current status quo. The 'harsh' realities of past/current real estate brokerage is that a dominating majority of agents are a waste of space.

    Now THAT's harsh. 🙂

Leave a Reply

Your email address will not be published.

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Advertisement

KEEP READING!

Business News

(FINANCE) An anti-trust lawsuit against major players in the residential real estate industry sheds light on misinformation and misunderstandings about commissions - when you're...

Business Marketing

(MARKETING) Opcity is the Austin startup making big changes to the ways that lead generation happens in real estate.

Business News

(REAL ESTATE NEWS) NAR CEO Dale Stinton is set to retire after his successor is named. Stinton is known for his steady leadership and...

Austin

When looking to buy a home, taking the long view is important before making such a huge investment - where are the best places...

The American Genius is a strong news voice in the entrepreneur and tech world, offering meaningful, concise insight into emerging technologies, the digital economy, best practices, and a shifting business culture. We refuse to publish fluff, and our readers rely on us for inspiring action. Copyright © 2005-2022, The American Genius, LLC.