My last post was all about brokers – Help-U-Sell Brokers in particular. This one is different not just because it’s about agents, but because it’s about ALL real estate agents.
Real estate agents are . . . what? En Mass, they are overpaid, unproductive, ineffective and blah blah blah. But that’s not the whole story. The good ones are really good. They are worth their weight in real estate paperwork. In fact, good real estate agents are heroes. Trouble is, there’s just not that many of them out there. Most are mediocre at best, hoping to make quick and easy money selling a very expensive commodity.
So how do you tell if your agent is good or mediocre? Start with production. The average agent in America today does about 7 deals a year. That’s hideous. Not just for the agent, who on average will make about $34,000 on that kind of production, but also for the consumer who gets stuck with an agent who does so little he/she can’t possibly be as sharp or up to date on the business – and particularly on how to solve transaction problems – as someone doing, say, twice as many deals. So ask your potential agent: ‘How many deals did you do last year?’ You should hear something in double digits and ideally, the first one should probably be a 2 or better. But don’t fool yourself into thinking the one with the largest number of deals done in the previous year must be the best agent. Not always true. In fact, not usually true. You’re looking for the one who not only has decent production, but has clients raving about their buying or selling experience. Ask to see testimonial letters – the good guys have tons of them – or do what you’d do if your were hiring an unfamiliar babysitter: ask for references . . . and then call them.
Ordinary real estate agents make money by securing clients – either buyers or sellers – and working with them to affect transactions. Agents work on behalf of Brokers. In most cases Agents can’t do anything without their Broker’s supervision and approval. When you list your home for sale, you may think you’re listing with Sally Agent, but you’re really listing with Bill Broker. Sally is just there on behalf of Bill. Commissions are paid to the Broker, who then splits the commission with the agent (there are exceptions to this compensation scheme, but they are rare).
Ok, so there are three paragraphs of consumer education about real estate agents. Now let’s get on to the mistakes agents make.
#1 – Thinking that their commission split is the most important factor in their decision to affiliate with one broker over another. You know those ‘average’ agents doing 7 deals a year? In many markets around the country they can command 70% of the commission dollars coming into the broker. Sometimes even more. Many agents simply shop and negotiate with brokers until they find one who will pay them the highest split . . . so they can make the most money on the 7 transactions they will do each year. It’s as if the high commission split affirms them as successful and desirable as real estate agents, somehow blotting out the fact they they do only 7 deals a year. What they don’t seem to understand is that a broker who will pay them big splits on lousy production will probably bring NOTHING to the table to help them build and develop their businesses. A broker who gives 7 out of every 10 dollars away before he/she even begins to pay the bills isn’t going to have money for marketing, for support staff, for lead generation . . . for anything except the legal ‘blessing’ of the agent’s transactions.
It doesn’t have to be that way. In truth, the relationship between broker and agent can be very powerful. If the broker is really IN the real estate business, s/he attacks the local market strategically. S/he studies it daily, schemes and plots, builds and pays for a comprehensive marketing program that produces leads, leads, leads. The broker builds an operation so powerful that s/he needs help to handle all of the business it has created! That’s where agents come in. They are the ‘help,’ the ones who take all of the business the broker has created and turn it into sales. Wonderful! But, a broker who is taking responsibility for marketing, for generating leads, for expansion and business development cannot afford to pay huge splits even to good agents. And S/he can’t afford to keep the 7 deal a year crowd around either: they blow many more leads than they close! So the agent who works for such a broker probably has a lower split: 50% – 60%, but has the benefit of a steady stream of business created by the broker. That’s a value for value relationship; everyone wins. The broker keeps enough commission on each deal to make a profit and the agent does far more production and makes much more money, too!
Look. My dad got licensed to sell real estate in 1967. He went to work for Ted Tamminga, a local broker who had placed an ad for ‘Help’ in the newspaper. Ted had been in business for 30 years and was a fixture in the community. His connections and his marketing produced dozens of leads every week, leads he was too busy to handle. He was missing opportunities because he was maxed out. So, my dad went to work for him to handle the overflow. Ted threw him the crumbs, the buyers with problems, the sellers with unrealistic expectations; and he paid my dad 50%. Dad worked for Ted for 4 years, I think; and by that time he had his own client base (all of those leads Ted had fed him), and he opened his own shop. Ted was delighted with the help and wished him well . . . and placed another ad in the newspaper.
Now THAT’s a broker/agent relationship that makes sense, don’t you think? A little like the master/apprentice relationship in the olde days. My dad built a client base on Ted’s lead generation effectiveness and had the benefit of 30 years of experience as he learned how to run a successful real estate company. That’s worth far more than the measly 20 percentage points more he might have made in commission split paid by a broker on life-support in 2013!
Agents, when you shop companies, it’s not about split. Split is almost irrelevant. It’s about the Broker: what business is s/he in? Is s/he in the recruiting business? Constantly chasing and hiring ever more agents (and watching the failures sulk out the back door)? Is s/he in the training business, spending most of his/her time working with the non-productive agents on staff in hopes of magically making them into super stars (and ignoring the truly productive people)? You want a broker in the real estate business, one driven to achieve ever increasing market share in a clearly defined target market (that coincides with your own). One who masters in marketing, studies it, tracks it, plans it, executes it and tweaks it. One who believes job one is lead generation. (Why lead generation? Because it is leads that will serve his listed sellers the best).
If you can find one of those, you don’t even have to ask what the split is. It doesn’t matter. You’re going to make more, do more transactions, and have a heck of a lot of fun in the process!
#2 – Getting caught up in the real estate ‘cycle.’ Many agents wake up and realize they have no business; so they do what they should: prospect, prospect prospect . . . which leads to a few listings . . . which take time energy and effort, especially when the offers come in. The prospecting stops because the agent is too busy with listings and offers. And then s/he is too busy processing the ensuing transactions to prospect for new business, until all the transactions close and then . . . YIKES! they have to start all over. Their production (and their income) looks like a mountain range: peak – valley – peak – valley. The answer is systems. Prospecting is neither mysterious nor magical. It’s just an activity, a routine, repeatable process. It can become a system that runs almost on auto pilot, but for that happen it must be given sacred space: time that is scheduled, set aside and inviolable on the daily calendar. It must continue even when all hell is breaking lose in other aspects of the business. Taking care of listings, presenting offers and shepherding transactions to closing must also continue every day no matter what. And, hopefully, you’re seeing the impossibility of all this ‘continuing.’ Unless the agent is willing to hire and develop help to get it all done, to take on servicing, buyers, transaction processing, etc., s/he will be limited in the number of transactions s/he can do.
But, once again: it doesn’t have to be that way.
There are rare brokers who take the burden of lead generation off the agent’s shoulders, who do the prospecting for listings and who have systems in place for servicing and transaction processing. Agents in these special offices simply take the buyer leads the office has generated and turn them into pending sales – which are handed off to the processing entity. The lucky agent then goes back and gets another office generated buyer lead and repeats the process. It’s a heavenly, non-cyclical real estate existence!
#3 – Believing their office is one big happy family. Uh-huh. In ordinary real estate offices, it’s every man (and/or woman) for himself. With leads in short supply, and everyone competing for the same customer . . . well, don’t leave your new buyer’s phone number laying around on your desk, ok? Let’s reality test that ‘one big happy family’ idea. How many licensed agents are in your local Board of REALTORS? Got the number? Great. Now, how many transactions were done in your local Board/MLS last year? Got it? Ok. Now, divide the number of transactions by the number of licensees. You’ll probably get a number like 5 or 6. That’s how many transactions each agent would do if the leads were distributed equally. WAKE UP! There is not enough business to support all the people trying to make a living in real estate, not in your Board, not in your MLS, and not in your office! Your ‘happy family’ is probably more like ‘Cutthroat Island’ (by the way: that’s a great movie!). Only in offices where the broker takes responsibility for generating the leads and then takes ownership of them (assigning them to capable agents and holding those agents accountable) can this kind of gunslinger ethic be avoided.
#4 – Thinking that if they just keep doing what they did last year and the year before, they’ll do better this year. That’s the definition of insanity, remember? Doing the same thing and expecting a different result! The problem is most agents are stuck in a dead and/or false paradigm. The picture of what their career should look like is in stark contradiction to reality. The only way out is to adopt a new paradigm . . . which is very hard for anyone to do in even the most favorable circumstances. Until the agent is willing to question every assumption they’ve made about their career: the function and value of a Broker, their own value in a transaction, what needs to be done to sell a listing and so on, only then can the old paradigm begin to crumble. And truth is: few are willing to be so bold, so brave.
It almost goes without saying (I mean: consider the source, right?), but the solution to all of this agent angst is Help-U-Sell. That idealized broker referred to above actually exists. S/he runs a Help-U-Sell office. S/he understands that job one is to generate leads, which are assigned to agents. Agents whose job description is focused and manageable. If you’re wondering why your real estate career sucks, why you never can seem to get ahead, why not do something different? Question your own attitudes about commission splits and lead generation and then go see a Help-U-Sell broker. It could be one of those life changing events.