It’s seems like every time I open up my email I see another real estate brokerage that has lowered their fees, again, in an effort to attract agents to their firm.
This has been a consistent trend for the last 10 years. To keep and attract agents, brokerages in every market have been in a good old-fashioned price war.
On the surface this may look like a good thing for agents – they now have lower cost options to choose from when deciding where to hang their licenses.
The epic problem being ignored, however, is how this race-to-the-bottom trend is killing the very industry on which these agents rely.
Let’s break this down into simple facts.
QUESTION: How do brokerages afford to lower their fee structure?
ANSWER: They have two main options.
1. By cutting back their expenses, as in cutting support staff, training, tools and resources, work space, business development programs, etc.
2. By increasing their agent count, which forces them to focus on quantity over quality. It’s a numbers game.
QUESTION: What is the number one danger impacting the future of real estate agents?
ANSWER: According to the Realtor organization’s own commission study, called the “Danger Report,” the leading threat to our industry is: “Masses of Marginal Agents Destroy Reputation.”
It’s true. And every active agent I know is experiencing this problem firsthand.
There is a massive wave of untrained and unsupervised agents out there, charging the same rates as competent, experienced agents, but doing a lousy job for their clients, often creating more problems for their clients then solving them.
This phenomenon continues to cause serious damage to the overall consumer opinion of the value of a Realtor. If left unchecked, this will ultimately lead consumers to look for other solutions, just like how TurboTax disrupted the accounting world.
THE SIZE OF THE PROBLEM
In almost every market, over 50% of agents do less than 2 real estate transactions per year.
On the surface this may not seem like a big deal, but when you factor in how many real estate agents are operating in a market, the problem becomes clearer to see.
In the Boise market there are around 6,000 active real estate agents operating. If 3,000 of those agents do just 1-2 deals a year, that equals around 5,000 home sales a year. In Ada county, in a good year there maybe 12,000 total homes sold, so that means almost 50% of total home sales had an agent involved in the transaction who is only doing a couple of transactions a year.
To put that in perspective, imagine getting your next mortgage loan from a lender who just does 1-2 loans a year, who doesn’t have much supervision, help, support, or access to quality training. The chances are very low that it will be a positive experience.
The same thing is happening with consumers nearly 50% of the time when they hire a real estate agent. Hence, this problem has blossomed into the #1 threat impacting our industry.
REAL ESTATE BROKERS ARE THE
PROBLEM AND THE SOLUTION
As mentioned earlier, this negative trend in our industry started as a positive, giving agents low-cost alternatives for broker/agent splits, forcing brokerages to compete to get and keep the best agents.
But large low-cost brokerages that don’t train, supervise, mentor, and enforce professional standards will ultimately erode and kill the reputation of our industry if we don’t do something about it. That is just a fact.
Unfortunately, even brokerages offering training, and who have professional and ethical standards, often don’t enforce them.
What can be done?
Brokers who truly believe in upholding ethical and professional standards understand that reputation is far more valuable than agent counts. They focus on the agent/brokerage partnership so that both can be successful and more profitable. They commit to delivering the highest level of value and ROI to their agents and customers. They give back to the community they serve to make them stronger.
We need more brokers to lead in this way. We need more successful agents to recognize the importance of brokerages that are focused on reputation and delivering the best ROI for their business.
I’ve spent nearly 10 years building a brokerage that leads by example, that focuses on reputation, and quality over quantity.
I’m extremely proud of what we’ve built at Front Street Brokers. We are a small firm with just 20 agents, but our reputation in our industry and our community is that of a giant firm.
But we are 20 agents out of 6,000.
It’s not enough to change the tide.
Which is why I’ve decided to join forces with another brokerage that is making huge strides in elevating professionalism, agent mentoring, and strengthening the community.
Nick Schlekeway, owner of Amherst Madison, and I have been comparing notes for a long time. We’ve both made massive investments in creating brokerages that truly aim to be the exception, that demand higher levels of ethical and professional practices across all levels of the brokerage.
You know the saying… Be the change you wish to see. I want to be the change I wish to see in both my community and my industry.
TWO TOP BOISE BROKERAGES JOIN FORCES
Now, the great work we’ve accomplished at Front Street Brokers can be amplified by joining our leadership with Amherst Madison.
Together, we have the ability to create the most robust and most effective business development program available for agents.
Through our combined philanthropic efforts we can give back to our community on a level that fosters real change.
By joining our amazing broker teams, we’ll have an incredible support system to back up our agents.
Together we believe we can change the tide. We can better navigate, and even thrive, through the big changes coming to our industry, and there is no doubt that big changes are coming.
The merging of Front Street Brokers and Amherst Madison has already begun. More details coming soon. If you’re curious about what we have up our sleeves with this merger, reach out. I’m happy to share.
Have a great week,