I met you at REBarCampLA this week, but (unfortunately) missed your presentation.

I totally agree with you about the long term direction of the real estate industry. The big brokers move too slowly to have leading edge technology – by the time they have tested and approved it, the more nimble independents have implemented and capitalized on it. The best future for large brokerages is to create high quality training that few independents have time to do right. They should probably charge tuition to the new agents who could be trained and supervised by experienced brokers, and generate lowish commissions to pay their overhead. (This could be modeled after some of the beauty colleges where you can get your hair cut, colored, etc for a low price while the trainees gain experience.)

The old justification for the big brokers was providing a known reputation (branding that supposedly stood for something), office space & equipment, and lead generation created by company signs, direct mail and print ads. These benefits are no longer out of reach for the small brokers as prices for equipment have fallen to the point that economies of scale no longer apply, and lead generation is done more effectively through individual marketing using online sources, word-of-mouth, and hyper-local visibility.

I met you at REBarCampLA this week, but (unfortunately) missed your presentation.

I totally agree with you about the long term direction of the real estate industry. The big brokers move too slowly to have leading edge technology – by the time they have tested and approved it, the more nimble independents have implemented and capitalized on it. The best future for large brokerages is to create high quality training that few independents have time to do right. They should probably charge tuition to the new agents who could be trained and supervised by experienced brokers, and generate lowish commissions to pay their overhead. (This could be modeled after some of the beauty colleges where you can get your hair cut, colored, etc for a low price while the trainees gain experience.)

The old justification for the big brokers was providing a known reputation (branding that supposedly stood for something), office space & equipment, and lead generation created by company signs, direct mail and print ads. These benefits are no longer out of reach for the small brokers as prices for equipment have fallen to the point that economies of scale no longer apply, and lead generation is done more effectively through individual marketing using online sources, word-of-mouth, and hyper-local visibility.

I do know they are all about selling franchises. It’s very obvious they are out talking to every independent broker right now and feeding them information that their fees will be more than made up by all the extra business you’ll get. And that’s smart for them! As revenues from franchisees are down, how do you make more money? Go get up front franchise fees and have more companies paying fees. It’s a great time to prey on them as well since many brokers I’ve talked to are willing to do anything they possibly can to get more business.

You also bring up an excellent point about how companies hire anyone. I just did a presentation at REBarCamp LA this weekend on that topic. One of the biggest issues is that one bad apple can easily ruin the whole bunch. “I know an xyz agent, they were terrible. I’m not using your company.”

Or what we see a lot is “don’t you charge a fee for me to work with you? Why should I pay that if no one else charges it?”

Now onto your main point, I guess I wasn’t super clear with what our message is. I agree with you that the indy broker is ready for a huge increase. The brokers can offer amazing tools and resources (like the products we offer at Tribus) are going to be successful no matter the market. They are the ones that keep costs under control. It’s just so shocking to us that the big companies provide so little or nothing and that independent brokers with budgets that are 0.00001% of what the big companies have are blowing them away. There will be numerous failures however. Because brokers see these shiny items and say ok let me get that and my agents will sell more. But it’s not just about the tech. It’s about better agents with better training who are dedicated to their jobs.
(See a great post by Rob Hahn here on this topic: http://notorious-rob.com/2009/03/30/it-aint-the-technology/ )

Too many brokers with little knowledge of the products they offer buy something and then don’t know how to train their agents. That’s why at Tribus we are so passionate about the hands on training and constant refresher courses we provide as well as monitoring agents usage of the products to ensure high acceptance rates.

As far as healthy splits go, to be honest I think you’ll see all agents go to huge splits (90%) on any deals they procure themselves (this will come as brokerages go from 100+sqft per agent to 10 as the agents have no office to go to, just a place where licenses are held.) If they want company leads, then those are at a much different split. There will however be NUMEROUS business models to choose from. The starting agent will probably go to a salary based company. After some point they’ll move to an entity that offers them to be an independent contractor and they will build their own book of business. At that point they’ll start their own company or need a Re/Max style split system.

However, I think you will see plenty of brokers go out on their own as just one or two man shops. We’re seeing it in our hometown. Big name agents are saying I don’t need the brand anymore I do enough business by just waking up in the morning. I think you’ll see plenty of big name agents do the same. Consider that if they run it out of their home, their expenses are low. The barrier to entry of the business is very very low. Consider that with implementing something like what our company offers they can be up and running by just paying us a portion of their closed business, buying some signs, a cell phone, printer, lockboxes, and E&O insurance…. For plenty of big name agents they will see that they are the brand and with their experience they can do it entirely on their own.

But this is not an overnight process. And no one knows for sure what will happen. The exciting part is that change is in the air. It’s sorely needed.

Congratulations on your new agent!

I do know they are all about selling franchises. It’s very obvious they are out talking to every independent broker right now and feeding them information that their fees will be more than made up by all the extra business you’ll get. And that’s smart for them! As revenues from franchisees are down, how do you make more money? Go get up front franchise fees and have more companies paying fees. It’s a great time to prey on them as well since many brokers I’ve talked to are willing to do anything they possibly can to get more business.

You also bring up an excellent point about how companies hire anyone. I just did a presentation at REBarCamp LA this weekend on that topic. One of the biggest issues is that one bad apple can easily ruin the whole bunch. “I know an xyz agent, they were terrible. I’m not using your company.”

Or what we see a lot is “don’t you charge a fee for me to work with you? Why should I pay that if no one else charges it?”

Now onto your main point, I guess I wasn’t super clear with what our message is. I agree with you that the indy broker is ready for a huge increase. The brokers can offer amazing tools and resources (like the products we offer at Tribus) are going to be successful no matter the market. They are the ones that keep costs under control. It’s just so shocking to us that the big companies provide so little or nothing and that independent brokers with budgets that are 0.00001% of what the big companies have are blowing them away. There will be numerous failures however. Because brokers see these shiny items and say ok let me get that and my agents will sell more. But it’s not just about the tech. It’s about better agents with better training who are dedicated to their jobs.
(See a great post by Rob Hahn here on this topic: http://notorious-rob.com/2009/03/30/it-aint-the-technology/ )

Too many brokers with little knowledge of the products they offer buy something and then don’t know how to train their agents. That’s why at Tribus we are so passionate about the hands on training and constant refresher courses we provide as well as monitoring agents usage of the products to ensure high acceptance rates.

As far as healthy splits go, to be honest I think you’ll see all agents go to huge splits (90%) on any deals they procure themselves (this will come as brokerages go from 100+sqft per agent to 10 as the agents have no office to go to, just a place where licenses are held.) If they want company leads, then those are at a much different split. There will however be NUMEROUS business models to choose from. The starting agent will probably go to a salary based company. After some point they’ll move to an entity that offers them to be an independent contractor and they will build their own book of business. At that point they’ll start their own company or need a Re/Max style split system.

However, I think you will see plenty of brokers go out on their own as just one or two man shops. We’re seeing it in our hometown. Big name agents are saying I don’t need the brand anymore I do enough business by just waking up in the morning. I think you’ll see plenty of big name agents do the same. Consider that if they run it out of their home, their expenses are low. The barrier to entry of the business is very very low. Consider that with implementing something like what our company offers they can be up and running by just paying us a portion of their closed business, buying some signs, a cell phone, printer, lockboxes, and E&O insurance…. For plenty of big name agents they will see that they are the brand and with their experience they can do it entirely on their own.

But this is not an overnight process. And no one knows for sure what will happen. The exciting part is that change is in the air. It’s sorely needed.

Congratulations on your new agent!

To state your point, I was with a big brand for 10 years and left a year ago to launch my own independent brokerage because for the money I was paying in terms of splits and fees, I was getting absolutely NOTHING in return. They began to nickel and dime me offering nothing for it except for the “privilege” of working for their brand. Funny, that although I was paying for the privilege of using their name, that very name began hurting my personal reputation. Because the objective of the company was ‘recruiting’, the criteria and standards for hiring was “having a license and a pulse”. I found my reputation was hurt as a result of being lumped in with hundreds of incompetent agents working under the same brand name.

Now where I disagree with you is with the assessment that the Independent Agent being the future of Real Estate. I would argue that the future rests, not with the Independent Agent, but with the Independent Brokerages –that are web-based, tech-savvy. Watch out for these Independent brokerages –they are beginning take territory from the big guns in own their local markets as they scale their businesses by adopting, adapting and using the latest social media and other technologies for the sake of generating, tracking and converting loads of leads, servicing the consumers well by using powerful communication tools and high standards of rapid response and with high knowledge and value. The next generation of web-based high-tech savvy Independent Brokerages will build cultures that attract the best agents who want to take advantage of an abundance of leads, cool technologies and a fun cutting-edge and passionate environment delivered to them from the Broker! And, by the way – they ARE willing to pay healthy splits for access to leads, technology, support, culture and leadership.

The Independent Agent – well, unless they can turn themselves into a business (called a brokerage) with other agents, savvy support, and leading-edge technologies, they just won’t have enough capacity to earn the income necessary to make enough money to make it worth it. Or, they will live a life without any reasonable balance with possible burn-out as they will be required to work 24/7 in order to just keep up. Agents need help more than ever – the question is – where do they turn to get it? Certainly not the big brands!

The big brands? Unless they quickly invest in technology and deploy it to their agents, they will have little value to offer their agents and will continue to lose market share to the web-based, tech-savvy, locally-branded Independents. Good for me–Today, another top producing agent is joining me from THE big brand in town.

Krisstina Wise
The GoodLife Team
Austin, TX
http://www.goodlifeteam.com