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Who Needs a Broker?

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You do probably..

In an arena that is mainly agent centric, let me take an unpopular position – most real estate agents actually benefit from the presence and symbiosis of the agent broker relationship.  Too often the relationship is typified as parasitic rather than symbiotic, but the stereotypes seem to be generated without regard to the reality.

The stereotype of a broker who does nothing while the poor agent does all of the work is perpetuated by agents whose perspective is limited by their experience, and by brokerage models fueled by compensation driven recruiting programs that discourage the salesperson from recognizing any contribution to their success or financial well being at their current brokerage firm.

The Myth of the RE Agent as an Self-Contained Business

About 30 years ago business models were created that were based upon recruiting agents rather then selling property. The incentive for the broker in these business models was no longer based on the agent’s success, but on the number of agents recruited by the brokerage to pay desk fees. Though the business, like any other was centered around the benefit to the owner (broker) of the business, the purpose of the business operation shifted from selling real estate to recruiting agents. In fact, the most successful national example of this business model directed all of their advertising dollars at the industry rather than the consumer.

Now please, don’t mis-read what I just wrote. I didn’t say that the agents recruited by these companies didn’t sell a lot of real estate, I said that the business made its money from recruiting agents, not from the sales made by those agents.  To further that need for recruiting, the advertising and recruiting campaigns were aimed at creating a vision of the real estate agent as a self-contained business. This made it easier for the brokers in those firms to establish a point of difference for their firms, and appeal to the egos of the real estate agents so that they might be recruited.  Expert at recruiting, this business model positioned the agent as the center of the real estate business, positing that the professional agent was the source of all of their business, needed no supervision, and was actually being held back in their professional development by the relationship with the traditional broker.

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Over the past 30 years, in my marketplace at least, this business model has not been successful. Calm down- I ‘m not saying that there aren’t successful agents or companies from this franchise, just that the original business model hasn’t proved viable(at least in our marketplace). In fact, to my knowledge, there is not one franchise of that model in our marketplace that is completely a 100% commission operation- perhaps because that model just doesn’t work for every agent.

Now let’s get off the topic of business models (because that really wasn’t what I wanted to talk about here anyway) because that could be the topic of another post, and frankly my opinion of someone else’s choices really shouldn’t matter to anyone except me. As long as you’re doing business in an honest and ethical manner I wish you the best of luck whatever your business model.

So What’s the Point?

Asa result of this franchise’s very effective recruiting and marketing techniques, a number of imitators developed, and with pressure on the more traditional business models, there were more and more conversations about the agent as the source of business, and as a self-contained business. And this led to agents questioning the role of the broker in their companies.

But I don’t think that’s as valid a position as many agents think. In fact, I find it ironic that many of the agents that complain about their brokers often go out and open  their own firms and after the economic realities of our business push many of their businesses into paths that have already been trod by others (witness the evolution of the franchise I mention above)  they become the brokers that their agents complain about.

I believe that there are good brokers and bad brokers, and every shade in between, though the generalities never allow for a spectrum of competency. But let us assume for the moment that the ratio of competent to incompetent brokers and the ratio of competent to incompetent agents are roughly equal (which I think might be valid since one group begets the other).  Would it not be reasonable to assume that there may be some prejudgement by the agent (who has never been a broker) about the risks the broker takes, the services they provide, and the return they are entitled to for operating their business?

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Does a Broker Need an Agent?

Many brokers were active salespeople with large referral bases and a slew of experience. In many cases, they could operate a really small office with a really small staff and make a living without supervision of anyone else. But that’s not why we go into business. We go into business to create something that is greater than our individual efforts. Something that has a life of its own, and can operate when we are not present.

We open a business to grow something that will generate profit from more than our individual efforts. And that requires leveraging our firm to make desk rentals, or to retain some percentages of the fees charged, or to generate business for peripheral companies that we own. All of which requires more than a staff of one or two. Business wants to utilize the economies of scale, and leverage the efforts of a larger group so that insurance is more affordable, and the risk of operation is curtailed by operating policies and procedures.

Even with all of that, ineffective agents don’t make a company profitable. For every good agent, there are a few mediocre or ineffective agents, and they don’t do any good for the firm they work for, or for their broker. As brokers, it is necessary to identify these folks and help them find other jobs where they can make a contribution.

But it would seem that the answer is “yes” – for most companies to be effective and profitable, it is desirable to have competent agents working for the broker.

And Does an Agent Need a Broker?

There are lots of great agents that generate much of their own business, but that doesn’t mean that there is no purpose for the broker. As a broker, I cannot count the number of times I have saved experienced and competent agents from litigation that would have crippled them, either because of policies and safeguards I had put in place, or from handling situations that needed a third party to diffuse them. And, in my business model, our firm provides substantial services for our agent population, including lead generation and management.  I am (by necessity) prejudiced towards my position, but that doesn’t make it less true.

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Agents benefit from the company’s training efforts, recognition of the importance of Professional Standards training and knowledge of the arbitration and ethics procedures. And they benefit from mentoring and counseling from the firm’s management team. From a simple ‘kick in the pants’ or an ‘attaboy’ when its deserved, to the more complex goal setting and business planning available in some firms, a management team can make any agent more effective (if the agent wants then to). And it is here when many brokerages have trouble meeting the challenge – and when they do their agents leave.

Finally, there is an espirit de corps in many firms, small and large which is fostered by the culture in the firm, often a result of the broker’s personality, and the people that are attracted by that personality. And that can provide incentive for success that the individual might not find on their own.

Again however, I need to point out that an ineffective or absentee broker may not be the source of good things for his or her agents, and when that’s the case, they may try to find somewhere that they can get the help they lack.

So Do We Need Each Other?

I guess we don’t – unless we want to have greater success than we can achieve on our own – and then I think we do need each other – but symbiotically, not parasitically. When we each contribute to the other, like a good marriage, we end up creating more together than we could ever achieve apart. But like a marriage, the symbiosis works best when there is mutual respect, an understanding that the other person has value, and deserves to reap benefits from the relationship

Image courtesy of creativecommons.org

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Written By

Bill is an unusual blend of Old & New - The CEO Century 21 Advantage Gold (Philadelphia's Largest Century 21 company and BuzzBuilderz (a Social Media Marketing Company), He is a Ninja CEO, blending the Web 1 and 2.0 world together in a fashion that stretches the fabric of the universe. You can follow him on twitter @Billlublin or Facebook or LinkedIn.

18 Comments

18 Comments

  1. Russell Shaw

    June 3, 2009 at 10:58 pm

    GREAT post, Bill Just great!

  2. Joe Loomer

    June 4, 2009 at 6:48 am

    Ditto what Russell said, Bill.

    I think (correct me if I’m wrong), that you’re tying “broker” and “operating principal” into the same entity here. In some cases the two are not the same individual – and the personality of the broker AND the operating principal can contribute to (or detract from) the success of the outfit.

    I was at a small traditional firm – albeit a franchise – and we where sold to a larger traditional firm at the end of 2007. My broker (also the OP) brought my wife and I (the top team in the company) to interview with the firm that bought us, and we sat down with that broker and his son (also a broker, both OPs). The personality clash and unwillingness to bend on commission splits led us to make another choice about what direction to go. Ego maybe got in the way, but we still didn’t match well.

    We landed on our feet with KW – in what I have found to be the perfect “symbiotic” relationship with both our new broker and our OPs. The culture fits me like my favorite shirt. The definition of that relationship is something I’ve tried myself to put on paper. You’ve done it perfectly here in your examples of why we (agents and brokers) need each other.

    Navy Chief, Navy Pride

  3. Missy Caulk

    June 4, 2009 at 6:51 am

    I’ve been at a large franchise where my Broker was out selling and could never be found. I’m now at one where my team leader is present, texts back asap, and does everything to help me grow my business.

    I prefer it that way. Not that I need him much but if I do he is there.

    Recently Remax opened back up in Ann Arbor and of course the recruiting emails have began. Let’s have coffee, blah, blah, blah.

    In the middle of the email I received last night is a paragraph against the company I am with KW.

    Not a great way to get me to sit down and have coffee.

    Build your own company but don’t cut down mine in the process.

  4. Joe Loomer

    June 4, 2009 at 7:11 am

    Oh Missy – you hit the nail right on the head! That gets my goat more than anything.

  5. Matt Thomson

    June 4, 2009 at 9:06 am

    Thanks for writing this, Bill. I’ve commented on just about every “anti-broker” post written on here and AR, stating that one of the reasons I love my company is my broker. At KW, we have a broker and a team leader, both serving different purposes that are extremely valuable to me. Although I have my broker’s license and am an Assoc Broker, my designated broker has saved me numerous times…mostly by policies and checklists put in place to prevent me from making mistakes in the first place.
    Our TL is an invaluable coach and mentor. I understand that our model isn’t for everyone, but I wouldn’t succeed at my current level if I were going this alone.

  6. teresa boardman

    June 4, 2009 at 9:46 am

    I am going to agree with your opening sentence. “most real estate agents actually benefit from the presence and symbiosis of the agent broker relationship.” very true. It has taken me 8 years to find a broker that I could have such a relationship with. They don’t all hang out in one company and it isn’t as much about the business model as it is the person who it the broker. KW did not work for me for many reasons but I will suggest that it was because of the people who own and operate the franchise more than it was the business model. . . also it doesn’t matter if I believe I run my own business or no . . the truth is I do run my own business.

    If you opened a brokerage here I would be the first to sign up no matter what business model you worked under.

  7. Ruthmarie Hicks

    June 4, 2009 at 5:00 pm

    I think the confusion lies within the gray area between symbiosis and parasitic. Many brokerages are parasitic and drain agents of their resources while offering practically nothing in return. I experienced a brokerage like that and for a new (as I was at the time) it was nearly a fatal mistake. I like my present brokerage a great deal. And I will agree with Teresa that it is often the individual franchise owners have a great deal to do with it. Also – a model that works for one agent won’t necessarily work for another. One agents parasitic nightmare might be another agents symbiotic dream brokerage. It is dangerous to generalize too much.

    Personally, I think the days of the large brokerage with massive office facilities and 50% splits + franchise fees are nearly done. That worked in a time when the brokerage could provide new agents with leads and advertising support. Around here, those relics of the past claim they offer the agent “more” than the other models. But they don’t. To me – they are not practical…for a newer agent they are simply a pyramid scheme that lops off the lions share of commission and gives all the benefits to those who pay the least. The high splits make it nearly impossible for the newer agents to get enough money together to finance their own marketing plans. This is at the heart of a great deal of the animosity. Some models have outlived their practical lives and are running around desperately trying to justify their cost to the agent by using straw man arguments.

  8. Matt Stigliano

    June 7, 2009 at 7:41 am

    Bill – I read this the day you put it up and have been trying to get back to comment ever since. Excellent post. Agents and consumers alike have been trained to look at the name on the door (franchise) and not put enough thought behind who’s running the show. RE/Max, KW, Exit, Century 21, Coldwell Banker – does it really matter what franchise it is if the broker is an idiot? We have a large brokerage here in town that I thought about working with at one point, since I knew a few agents there before I got my license. One of the things I took into consideration was the sheer size of them. Would I be able to call my broker night and day with a question? I didn’t think I would, so I never even visited them (there were other reasons as well).

    When I was still taking my licensing classes, every day a new broker would come in and bring us lunch and tell us why we should join them. I never heard much about how they would help me be a great agent all I could hear was how much money they would ask for in return for their “services” and how great they were. Needless to say I didn’t interview any of them. I looked for a broker who would put their faith behind me and be there for me when I had a question, not just someone who told me how low their fees were.

    A broker isn’t just the guy who gets in trouble when an agent screws up. They should be the guy (or gal, sorry ladies) that is there to answer your questions to keep you from screwing up. They should be willing to watch you stumble and struggle a bit in the beginning, but know how to encourage you. My broker and I don’t see eye to eye on some things, but he does know how to say things to me in a way that gets me motivated. He answers my calls and loves to help me out when I’m stuck. He praises me when I’ve done it right and shows me where I went wrong when I veer of course.

    If a broker is willing to help nurture a new agent and push them to exceed their goals, they will reap the rewards. If they just fill the office and see what sticks, they will spend all of their time chasing the agents and not enough time building better ones. We could be a world full of agents who know what they’re doing and have the confidence to do it, but the warm body mentality will never allow that to happen. When those agents eventually leave that broker they will go to the next office that is looking for a butt to fill a seat. Passed around from broker to broker and the agent still knows only as much as they did the day they took their test.

    (Alright, this is completely off topic, but a spider just jumped past me and as I went to shoo him away – he jumped into the CD drive on my laptop. That was incredible…and a little gross. At the moment there is a spider living in my computer.)

    My words to brokers – nurture me and help me become the agent I want to be and I will generate more business. More business means more in your pocket and a happy agent who doesn’t feel the need to try “somewhere new.”

  9. Michael J. Stefonick

    June 10, 2009 at 3:03 pm

    Dear Mr. Bill;-)
    How has my old friend been:-)
    Read your thoughts and guess what? I do agree with you.
    Business models come and go but great agents would be great agents anywhere they have a responsive Broker who gets it.

    Most brokers, from my humble experience, were good sales people but weak in the business building aspect of owning an office or a franchise. No franchise ever made a known jerk successful.
    You know I know!

    Given the state of failed franchisor/franchisee relationships, private branding is becoming ever more popular. For good reason. The Squeeze being put on Franchisee’s is braking the back/bank.

    Selling another same brand franchise two blocks away does nobody any good. Look what happened to my Starbucks! I say mine because I own their stock and work out of Starbucks all over the country. They are my offices.

    In closing this response to your statements I am seeing a continued demise of Real Estate Franchising. With technology as plentiful and inexpensive who needs a real estate satellite TV station when Apple has the iPhone.
    I recently got a call from a women who once owned the home I have in Lehigh county. She said Mike I see your house is for sale. I said it was not and where did she see it. She saw it on an iphone under the Zillow site. I looked at it and thought wow, how cool is that. My home and it’s was still standing. Who really needs an office, an MLS, but a Broker YES!

    Stay well!
    Mike

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