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KenFisherRealtors.com

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Real Estate, the Business

In the real estate business, it is often said that about 85% of the business is done by 15% of the agents in the business.   Conversely, about 85% of the agents in the business are splitting up about 15% of the business.  This is a part of the reason that the business is shifting to a higher percentage of part time agents, people who call themselves agents, unlicensed agent assistants of unscrupulous licensed agents, spouses or friends of licensed agents and real estate company secretaries.

Real Estate companies have shifted to a ‘pay us to work for us’ basis.  They offer differing commission splits in exchange for rather expensive monthly fees for desk rent, office rent, office equipment rent and secretary rent, as well as fees for advertising, forms, signs, company mandated direct mail, phone calls, coffee and even stamps.  It may be hard to believe, but some companies even charge for management support.  These companies make money whether you make money or not (and that it a rather large NOT)!  Some of these companies are waiving their typical fees for up to 6 months to STEAL agents from other companies.

Will the Amway concept work in Real Estate?  It looks good, it generates a lot of 'suds', but it probably probably will not succeed in the long run!  It is well known that a pyramid operating system or scheme establishes levels of operands.  Most state real estate commissions have two levels, the Broker and the Sales Associate, some add the Broker Associate as a third level.  Some pyramid companies have a Broker, sub-Brokers, Agents, sub-Agents, Assistants, Secretaries, Janitors and who knows what else.  Do you really want to deal with this kind of a company with questionable practices?

Franchising works extremely well for ice cream stores, hamburger restaurants, clothing lines and the like where the franchisor dictates to the franchisee the ice cream or the hamburger or the clothing or the other product that the franchisee may use.  Real estate franchisors can only franchise the name, the philosophy and the operating instructions, not the people.  That is a very important consideration that most consumers just ignore.  People are people.  There are great people, good people, mediocre people and bad people.  The franchisor has little control over this factor.  And, it is obvious that the franchisee has little control likewise.  But, in  the eyes of the consumer BIG is ALWAYS BETTER, until they suffer the consequences of a foggy decision or an over-priced deal.

As an industry, it is known that every new agent will generate an average of 2.3 sales before they decide to stay in the business or leave the business.  This initial business success usually comes from friends, relatives and previous business associates.  These companies know that approximately 80% of the new agents will not survive 12 months (often a result of poor or no training and no management guidance or supervision).  Of the 20% who do survive the first 12 months, less than half will survive the following 12 months.   The real estate company’s overhead will be more than covered by the monthly fees and any commission splits will be pure profit.  You should be wary of companies that promote the fact that they recruit many new people each month but always have the same year end total staffing level.

Recruiting new agents is quite profitable to the real estate company whether the agent lists or sells any property or not.  Typically, companies will hire ‘anything that breathes’.  The first two qualifications to become a real estate agent are:  (#1)  Can you find the office for the interview and (#2)  Can you pass the mirror test?  These companies are sometimes referred to as ‘body shops’.  These companies offer training programs to teach the new agents how to do business.  Many of them use the You're in the OK Corral ‘herd’ concept; training large numbers of new agents at one time (classes move at the speed of the slowest new agent).  Some use ‘mentoring’ where an experienced (commission based) agent allows the new agent to follow them around (sort of like a puppy!) usually for a fee.  Some have so many agents working in an office that management cannot begin to provide guidance or supervise the new agents and review and approve their work In progress.  Real Estate is a numbers game.  A few agents are quite successful, most are not.  These fast track companies only talk about the successful agents!  This is another part of the reason that the business is shifting to a high percentage of part time agents and people who call themselves agents and unlicensed agent assistants and real estate company secretaries.  A question, if a company hires 25 new agents every month and ends the year with the same number of agents they started with, what happened to 300 agents?

Training for new agents as well as continued training for existing agents often fails.  Sarah Ellison, 2004 President of the Indiana Association of Realtors, said, in the November, 2004, issue of Indiana Realtor "Historically, the biggest consumer gripe against real estate agents has been that you never know what you are going to get.  When you leave a message for an agent, you may or may not get a call back; the agent may or may not be on time to an appointment, may or may not provide the services they promised."  Sarah continues on by reminding that "some agents have become sloppy about getting to appointments on time, returning phone calls and e-mails" and adding "making proper disclosures or even working hard to make sure loose ends are wrapped up by closing. In some cases, the prevailing attitude is "Why be accommodating, or even cordial?  If you don't buy it, someone else will".  Consequently, more consumer complaints are coming into local Boards of Realtors".  This attitude is changing as the market flattens.

As a new agent, selecting a company with which to become associated is difficult to say the least.  A long term track record should receive your utmost attention.  Experience and longevity definitely count!  A medium to small company should be your best bet.  Some folks select an agent based upon their 'looks', their car or their ability to  tell the folks 'exactly what they want to hear'.  The ‘new kid’ company on the block with 'gee whiz" untried practices and procedures should definitely be avoided.  Some of these companies are in violation of the Indiana Real Estate Commission Laws.  Many companies are not willing to discuss true expenses of sale and their impacts on commission or flat fee splits.  Management support may be minimal or non-existent and this fact will typically not be disclosed to you … you will learn this fact when it is too late to do anything about it.  Your contract remains binding under the law whether you receive the promised training or management support or not.  It is imperative that you interview at least 3 companies before making this very important career beginning or career ending decision!  Keep in mind that Smoke and Mirrors are just that!

Once you are in the business, your office manager will probably recommend that you purchase a number of rather expensive sales aids and attend a number of real estate training programs where the featured speaker sells more sales aids.  These aids are great ... they are a fantastic profit for the sales speaker/ trainer.  There is often more money to be made talking about the real estate business than actually doing it.  Phone number capture programs, methods of contacting potential buyers and sellers through their employment offices, special computer programs for tracking and soliciting prospects, post card campaigns, drip systems, marketing systems, repetition marketing,  legally (illegal and unethical)  soliciting listings before they have expired, for sale by owner contact systems and on and on and on.  Your office manager may also recommend that you secure a new vehicle to chauffer your buyers around town.  These activities will accomplish one thing,  you are in debt up to your ears and should find it very necessary to work your tail off to just break even!  You may need to get a part-time job as a greeter at Wal-Mart just to pay for all of the expenses.  As is often the case, there is a better way.  Check out http://www.KenFisherRealtors.com/Career.html.

Best wishes in your new career!