Future of Real Estate Brokerage: Part 3 – Rise Of The Independents
by
on Mar 31, 2009
Listed in News

One of the biggest trends we’ve seen nationwide over the past 5 years in real estate is the albeit slow, but very sure dwindling of market share from the nationwide companies.

Why is this?  A decrease in brand awareness of the companies, an increase in brand awareness of the individual agents, and an increase in the utilization of tech to level the playing fields by the independent Realtors.

The successful agents are out there everyday branding and marketing themselves.  They produce killer websites that answer the three questions buyers care most about: How’s the market?  What’s my home worth? And what homes are for sale?  They are keen on what to do without their broker telling them.  They are out farming, niching, and just getting business to come to them in general.  They are building the brand of “me.”

As more and more agents have done this over the past 10 years, the brand of the

 

big brokerage has been diminished so far that the average consumer can’t even remember for which company their last agent worked.   These buyers have no brand loyalty and are heading to websites like Trulia and Zillow to get information on listings instead of a brokerage.

Agents are also realizing that clients don’t need to be shown an office anymore.  In fact Gen X and Y buyers want to get things done right there on the spot without wasting time.  If they don’t have to go into an office, they don’t want to.

Learn About Our Custom Real Estate Brokerage Platform

As this occurs more and more agents will begin to realize that the 25-50% or more splits they give to their broker are wasted.  These agents will go to work for brokers that pay much higher percentages with no fees that don’t tell them how to operate.

Let’s look at other items that have popped up causing backlashes by agents against big companies:

  • Lack of true support
  • No commission flexibility
  • Few high tech tools introduced (Tools seem to be well behind the “cutting edge”)
  • Transaction / Broker Admin Fees ($225 or more fees for each closing)
  • Trend to start charging agents 6% franchise fees
  • Increased Errors and Omissions Insurance rates (Anecdotal evidence of $100 or more raises in fees this year)

The independent Realtor is actually the first phase to the coming change in real estate.  Take a look in your markets, do you not see big name brokers leaving their companies to form their own enterprises?  Why wouldn’t they?  They can do business their way, make their own decisions and keep a larger piece of the pie.  Even small agents can leave to create their own entities.  They don’t need a big name, just a plan of attack to get business other than waiting for the phone to ring.

Think about the past 10 years, technology has gotten better and cheaper for agents.  Websites that used to cost $10s of thousands of dollars now cost a fraction.  A smartphone can keep them in front of their email at all times.  CRM systems can be used to keep databases of prospects and clients and predictively market to them thus yielding more transactions.   Tribus affiliates all have access to these resources, do you see nationwide brokerages with transaction management systems?  CRMs? Websites for all agents with IDX?

Learn About Our Custom Real Estate Brokerage Platform

Ironically who do you see with the best technology?  In many cases the tech savvy independents!  Why?  They don’t have a bureaucratic structure to go through when launching a new product.  Using freelancers or working with companies like ours they can take a concept to reality in days and weeks instead of years.

As an example, we’ve been told that a large broker spent $10m or more developing a product to hand leads off to agents nationwide.  A very similar system was developed by Tribus at the same time, at a cost of less than 0.001% of that and can easily scale to add 100s of thousands of agents nationwide.  Technology has turned into the great equalizer.  It’s really depleted the last items that the big brands had going for them, and they have let most of it slip away.  With their massive budgets why weren’t they creating iPhone applications (instead of iPhone websites)?  CRM systems using SalesForce?  Drip Email Campaigns using MadMimi?

While Tribus is working to roll out the next big change to real estate (we’ll be announcing it soon), they are still worried about a communications system that does more than just email.  We offer for only a small fee, more technology, resources, and support than any big broker.  An agent can start their own company and keep all their commission, concentrate on selling and recruiting and not need to worry about anything else.

So what does a big broker provide to an independent contractor agent that an independent can’t?
And assuming the above is true, that buyers don’t care about brand just about finding a house, and sellers don’t care about brand, they just want to receive the best support in marketing the property, how does a big brand stay relevant?

The way we see that happening is through extreme training, web leads, and salary based agents.

As a side note, we’d like to point out that big brands can still exist well with independents.  Look at the financial services industry.  There are big name players like Goldman, and then there is the independent guy down the street.  What we see is agents starting at the big brands in a salary based job, and after a period of time going out on their own to form their own enterprise.  But it’s going to take a push by the big brands to move to a W2 based system with accountability.

With more than 17 years experience in the real estate industry, including being a Realtor and Broker / Owner, Stegemann brings a wealth of knowledge to this job as CEO of TRIBUS. He focuses his time on helping brokers enhance and expand their business and working with the TRIBUS labs team to consider what's next in real estate.
  • Pingback: Future of Real Estate Brokerage: Part 3 - Rise Of The Independents …()

  • Eric-

    So completely right on in your thinking – right up till the end part there.

    The big brokerages are still up in the castle, planning, thinking, trying to figure it out while their best agents head out the back gate – and meanwhile those of us that are the independent agents and teams are down in the valleys below, taking territory and roaming the country side. What the big brokers haven’t figured out is that the castle won’t protect them from what is coming (really, it’s already here). The incentives are high for talented agents and teams, and the value of the castle they provide is very low, and at worst purely psychological.

    So I’m with you, right till that bit about salaried agents – where I have to do a double take – I don’t know of any successful agent that wants to be salaried. Also, I believe it fails to address the needs of the market for a high quality agent – the guys that sell you a washing machine at Sears are salaried (no offense guys), and I don’ think that is what our customers at the GoodLife team are asking for. Plus – this is a sales business, with a sizable transaction on the line – what industry model puts salaried customer service reps in front of the customer for that and wins awards for service, quality, and experience? Or takes a lot of market share?

    Further thoughts: If Salaried agents is the way, then big brokerage is triply troubled (they now must be able to figure out: their value to agents; their value to the consumer; and now how to *manage* their agents?), and in a really sticky situation. In my experience consulting and working with brokerages, they aren’t resourced appropriately to even begin to manage a sales staff, and they lack the culture you would need (you really need a sales team, not a big brokerage) to manage agents more actively, and they have agents right now that don’t particularly want to be managed.

    I’m interested in what our leadership at GoodLife Team has to say in the matter – Krisstina, you want to comment on this?

    Jack

  • Eric-

    So completely right on in your thinking – right up till the end part there.

    The big brokerages are still up in the castle, planning, thinking, trying to figure it out while their best agents head out the back gate – and meanwhile those of us that are the independent agents and teams are down in the valleys below, taking territory and roaming the country side. What the big brokers haven’t figured out is that the castle won’t protect them from what is coming (really, it’s already here). The incentives are high for talented agents and teams, and the value of the castle they provide is very low, and at worst purely psychological.

    So I’m with you, right till that bit about salaried agents – where I have to do a double take – I don’t know of any successful agent that wants to be salaried. Also, I believe it fails to address the needs of the market for a high quality agent – the guys that sell you a washing machine at Sears are salaried (no offense guys), and I don’ think that is what our customers at the GoodLife team are asking for. Plus – this is a sales business, with a sizable transaction on the line – what industry model puts salaried customer service reps in front of the customer for that and wins awards for service, quality, and experience? Or takes a lot of market share?

    Further thoughts: If Salaried agents is the way, then big brokerage is triply troubled (they now must be able to figure out: their value to agents; their value to the consumer; and now how to *manage* their agents?), and in a really sticky situation. In my experience consulting and working with brokerages, they aren’t resourced appropriately to even begin to manage a sales staff, and they lack the culture you would need (you really need a sales team, not a big brokerage) to manage agents more actively, and they have agents right now that don’t particularly want to be managed.

    I’m interested in what our leadership at GoodLife Team has to say in the matter – Krisstina, you want to comment on this?

    Jack

  • When a huge company goes through and goes to salary, they aren’t going to keep their big name agents. They are going to suggest them to move over to a different brand. The salaried people won’t be the top sellers now. Because in a salaried environment the best agents will be the ones that don’t beat to their own drum. They are the ones that are happy following orders and getting their paycheck at the end of the month. They are the ones that are best at being given leads and tracking them down. They are not the big name agents that get their own business.

    I have no evidence on this fact, but I’d be willing to bet that “the big guys” have a grading system right now on their lead system. The agents that are yielding the best conversion rates, making notes, etc are the ones that will be offered the salaries. Becuase remember in salary companies, the individual’s brand will be nothing, it’s the brand of the big company that will have value.

    As we said in this post: https://www.tribusgroup.com/future-of-real-estate-brokerage-part-2-the-salary-based-realtor/

    it’s the Goldman model. No one calls to talk to a specific person at the company, they call to get the power of Goldman. They will extremely highly trained, very knowledgable, etc, because they can be held accountable. If they don’t, they lose their paycheck.

    The move to salary is not an easy over night change, but as profitability is probably going to end up negative this year for most major companies, and even in a good year is just about 3%, they need to do what they can to increase respectability and profitability.

    As we state, this is not the way forward for all, but it should be ffor some. And, the reduction of the large companies paves the way for indepdents to dominate.

  • When a huge company goes through and goes to salary, they aren’t going to keep their big name agents. They are going to suggest them to move over to a different brand. The salaried people won’t be the top sellers now. Because in a salaried environment the best agents will be the ones that don’t beat to their own drum. They are the ones that are happy following orders and getting their paycheck at the end of the month. They are the ones that are best at being given leads and tracking them down. They are not the big name agents that get their own business.

    I have no evidence on this fact, but I’d be willing to bet that “the big guys” have a grading system right now on their lead system. The agents that are yielding the best conversion rates, making notes, etc are the ones that will be offered the salaries. Becuase remember in salary companies, the individual’s brand will be nothing, it’s the brand of the big company that will have value.

    As we said in this post: https://www.tribusgroup.com/future-of-real-estate-brokerage-part-2-the-salary-based-realtor/

    it’s the Goldman model. No one calls to talk to a specific person at the company, they call to get the power of Goldman. They will extremely highly trained, very knowledgable, etc, because they can be held accountable. If they don’t, they lose their paycheck.

    The move to salary is not an easy over night change, but as profitability is probably going to end up negative this year for most major companies, and even in a good year is just about 3%, they need to do what they can to increase respectability and profitability.

    As we state, this is not the way forward for all, but it should be ffor some. And, the reduction of the large companies paves the way for indepdents to dominate.

  • Eric, thank you for sharing this thinking! I agree with your observation that the big brands are suffering due to dwindling market share and loss of quality agents. In fact, I’ve written a blog article about it. I say that the big brands are completely lost and can’t figure out how to offer ‘value’ in this new emerging social media culture of a real estate marketplace. Just listen to the messages of the leaders of these companies (up in their “castles”, as Jack Miller puts it!) and it is obvious they have no plan for the future. Dave is focused on REO as the value to their agents (Hmm, pretty short-term if you ask me. What to do after the REO leads dry up?). Gary says, “get back to the basics” (That has been his message for the last 10 years – the question is HOW in today’s Gen Y nation and global marketplace). The other big brands – What is their message and vision? I don’t think they have one other than ‘sell more worthless franchises’.

    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

  • Eric, thank you for sharing this thinking! I agree with your observation that the big brands are suffering due to dwindling market share and loss of quality agents. In fact, I’ve written a blog article about it. I say that the big brands are completely lost and can’t figure out how to offer ‘value’ in this new emerging social media culture of a real estate marketplace. Just listen to the messages of the leaders of these companies (up in their “castles”, as Jack Miller puts it!) and it is obvious they have no plan for the future. Dave is focused on REO as the value to their agents (Hmm, pretty short-term if you ask me. What to do after the REO leads dry up?). Gary says, “get back to the basics” (That has been his message for the last 10 years – the question is HOW in today’s Gen Y nation and global marketplace). The other big brands – What is their message and vision? I don’t think they have one other than ‘sell more worthless franchises’.

    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

  • Krisstina,

    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!

  • Krisstina,

    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!

  • Hi Eric –

    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.

  • Hi Eric –

    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.

  • A fantastic read….very literate and informative. Many thanks….where is your RSS button ?

  • A fantastic read….very literate and informative. Many thanks….where is your RSS button ?

  • While the big brokerages are still all about “biggest is best”, those of us who have actually chosen real estate as a career know better. We are sick and tired of being associated with the “pulse and license” agents they recruit and yearn to work with a small, highly talented group of people. I have pondered the salary scenario for years and I do think it can work.

  • While the big brokerages are still all about “biggest is best”, those of us who have actually chosen real estate as a career know better. We are sick and tired of being associated with the “pulse and license” agents they recruit and yearn to work with a small, highly talented group of people. I have pondered the salary scenario for years and I do think it can work.

  • While the big brokerages are still all about “biggest is best”, those of us who have actually chosen real estate as a career know better. We are sick and tired of being associated with the “pulse and license” agents they recruit and yearn to work with a small, highly talented group of people. I have pondered the salary scenario for years and I do think it can work.

Request a Personalized Demo
First Name *
Last Name *
Phone *
How Large is Your Team? *
Company *
What Can We Assist You With? *
SEND
X