Where's Real Estate Going?

The traditional business model may be going by the wayside. New model brokerages are popping up where the agent pays the broker $350 a month or less and they get 100% of the brokerage commission. The company I'm with, Coral Shores Realty of Ft. Lauderdale (and Jacksonville) gives a lot of support for the money, has a mail list where all the agents can contribute through the fully distributed email list.

The old model, such as RE/MAX, where they charge $1200 per month desk fee plus a percentage of sales, plus extra charges for additional advertising, office supplies, etc, seems to be of the old model, where brokers usually get their agents for free...let alone charge them desk fees.

The old model where brokers can pick up agents at no cost has caused a very bad situation over the years. Brokers know that every new agent has two or three sales in them so the brokers business model is to recruit as many agents as possible and pick up those two or three sales....it's pure profit.

Imagine owning a business where everyone that works for you is considered an independent contractor. Tell them when to come to work. Tell them how to do their jobs. Tell them when to be on the "floor" to answer the telephone. Have them adapt to your paper requirements, keep you informed of the progress on their sales....AND THEY ARE INDEPENDENT CONTRACTORS!

Brokers don't pay salaries to agents. Agents only make money if they sell something....and if they do, the broker gets a fat cut. Need to "hire" more sales people? Get some independent contractors and don't pay 'em a salary! Now, THAT's a great deal! There is virtually no cost except for the advertising . The brokers don't even have to train them.

No where in U.S. small business, can you get away with calling these people independent contractors. Oh...don't get me wrong...this whole scenario has been tested in court over and over but the National Association of Realtors always wins. It's a great deal for the brokers and a crappy deal for the agents.

This is the model I'm talking about. The brokers are always open to getting newbie agents because they will get the two or three easy deals that the newbies bring to the broker. Keep hiring new agents, just out of school. The more you "hire", the more money you as a broker, will make.

This causes the market to be oversaturated with inexperienced agents. Inexperienced agents are a dime a dozen. There's lots of them. Inexperience oozes out of the cracks, cornices and pores of this business. It's the inexperienced agents that give the industry a bad name AND that is the very reason so many homeowners try selling their houses without an agent otherwise known as FSBO (for sale by owner). Sellers don't think that the agents earn their commission.

Funny! Sellers want to sell their own properties themselves to save the 3 to 6% commissions. Many FSBOs have told me that they think the agents don't earn the money. They take a listing, put a sign in the yard and go back to the office....to wait....wait for another agent to bring them a buyer. The inexperienced agent drops the ball on follow-up. They get the paperwork wrong. They put the wrong prices on the listings. Then, they earn a 3% commission which is split in some manner with the broker.

No wonder the general public thinks real estate agents aren't worth it!

That leads me to the new model. A new approach to real estate sales that will create a small but competent cadre of sales associates. Agents who know that they're doing and how to make their client's money first then, thake their commission. Brokers need to see the writing on the wall. Things are going to change. We need to clean up the industry and earn a good reputation for earning our commissions.