Connect with us

Hi, what are you looking for?

The American Genius Real EstateThe American Genius Real Estate

Op/Ed

Real estate’s agent-centric broker models are doomed [op/ed]

By comparing the numbers of broker models, one insider believes it becomes apparent that not only is one clearly more financially feasible, but could lead to a restoration of the nation’s faith in the industry.

A little over a year ago, our friend real estate investment broker, Jeff Brown at Brown & Brown Investment Properties wrote the following strongly worded editorial that got many in the industry talking. While some technologies have changed in the 17 months since he penned this piece, the business models have not, and this remains one of the most interesting pieces on the topic, but whether you agree with it or not is a different story. Enjoy:

Agent-centric broker models are set up to lose and fail

Last October, I entered my 44th year as a licensed real estate agent, the last 36 of which have been as the designated broker and owner of the family’s real estate investment firm. I’m second generation. The date on my first license was barely 60 days past my 18th birthday. I aspired to be merely wet behind the ears. In those years – BA-C (Before Agent-Centric) – more business was done by less people in terms of transaction quantity than is dreamed of these days.

I was blessed (unknowingly) with the rarest of opportunities, starting from below the ground up in a hugely productive real estate company, family owned – read: Dad – and run on the Broker-Centric model. Below, the two models are defined through the lens of my experience on the inside of both.

Broker-Centric (BC) model defined

There are many factors, but the main thing is that the broker is in charge in every sense of the word. They produce the bulk of the leads, pay for them, and in many cases, design their in-house distribution. They pay for office space, and the various machines/computers necessary to do business. They don’t charge agents for much, if anything. They take virtually all of the financial risk and liability.

Commission splits in the BC model of yesteryear aren’t even believed by most modern day agents. Exclusive listings paid 20 percent of the listing side, while exclusive agency and open listings paid 15 and 10 percent respectively. The selling agent made 40 percent of the buyer side commission. There were variations of this, but the range of pay between companies was relatively narrow.

If looked at in terms of sales volume per agent, or GCI (gross commission income) if you will, the BC model requires significantly fewer agents than the Agent-Centric model requires. Adjusted for inflation, agents made more in terms of dollars than they do today at double or more the commission splits. For example, in a five year period from 1965 through 1969, just 25 to 30 full timers and eight to 12 part timers closed over 1,000 sides a year, every single year. I saw the last three in person, from the inside. The average full timer in that firm made more than twice the median household income. Twice.

Click here to continue reading this editorial at The American Genius

Comments are closed on the original editorial, but we welcome reinvigorated debate below and around the web – do you agree with Brown or is have things changed in the last year 17 months?

The American Genius' real estate section is honest, up to the minute real estate industry news crafted for industry practitioners - we cut through the pay-to-play news fluff to bring you what's happening behind closed doors, what's meaningful to your practice, and what to expect in the future. Consider us your competitive advantage.

Advertisement

The Daily Intel
in your inbox

Subscribe and get news and EXCLUSIVE content to your email inbox.

Advertisement

KEEP READING!

Real Estate Marketing

Failed transactions can be a tremendous source of learning for any level of real estate professional, so they know what not to do next...

Professionalism

Meeting weekly is rarely something a team looks forward to, but there are ways for brokers to improve attendance easily.

Real Estate Brokerage

Your real estate practice can be overly consuming if you let it. With discipline, you can have a good work/life balance.

Real Estate Brokerage

(EDITORIAL) Discounting real estate services is a consideration on some practitioners' minds, but there's a simple alternative to diminishing commissions

The American Genius' real estate section is honest, up to the minute real estate industry news crafted for industry practitioners - we cut through the pay-to-play news fluff to bring you what's happening behind closed doors, what's meaningful to your practice, and what to expect in the future. We're your competitive advantage. The American Genius, LLC Copyright © 2005-2022