Today, more than ever, buying or selling real estate is like trying to win a football game. To win the game, every player involved must do their part. There is the offense to move the ball toward accomplishing the goal of scoring. There is the defense whose job it is to keep the game going toward our goal, not the opponents! Then, often overlooked, there are the special teams. Designed to provide strategic positioning on the field these are specialists whose job is to do one thing extremely well.

Change is inevitable, except from a vending machine! The Real Estate industry is changing rapidly and dramatically. Tech companies are invading the space and capturing the supply of buyers. Now they are working hard on capturing the supply of Sellers. What’s next, go after commissions as well?

Whats happening now

That’s exactly what is now happening! There are as many as 9 major law firms in the US that have joined in a lawsuit challenging our system of commissions. They have sued the major MLS systems, NAR as the Mothership, and all the major Franchise firms as co-conspirators. Those firms believe that a firm, the MLS, or the Mothership requiring a listing agent to “offer” cooperative compensation is anti-competitive and artificially increases the cost of selling a home. To help with their claim, they note that this system “prevents” Buyers from negotiating with their agents for the services they provide.

The Dept of Justice is now looking into MLS data to determine how many agent searches begin with or include cooperation commissions. This is to determine how anti-competitive cooperative commissions really are. Results could be that sellers save the cost of paying commissions to the buyer’s agent and leave the Buyer to negotiate what his/her agent will be paid. That becomes an additional cost for the Buyer that would need to be built into the loan system or will increase out-of-pocket cash costs to the Buyer.

Here’s how it could change…

Do you know a few buyers who won’t seek an agent’s help if they have to pay cash for services? I certainly do! More importantly, what amount will Buyer’s be willing to pay for the services we can provide?? How many will willingly pay $6,000 for your services to purchase a $200,000 home? Unless I miss my guess, and I haven’t missed many, how Buyers agents get paid IS going to change, and probably dramatically. The very least of changes will be total full disclosure from the agent to the Buyer of how much the agent is being compensated. This will be only if there is some sort of Seller participation. If not, you will have to negotiate your compensation with your Buyer before beginning your representation. Are you confidant enough in what expertise you bring to a transaction to set across the table from a first time home buyer and tell them they will be responsible for paying you 3% of the cost of whatever they purchase?

Many firms have tried to avoid these pitfalls by having their agents negotiate with their buyers at the beginning of representation and complete a Buyer’s Representation Agreement. That is a significant step but how many of you have managed to get a buyer to sign a Buyers Representation Agreement only by telling them they don’t have to worry because the Seller will pay it? I’ll bet many of you have even told Buyer’s that if you collect less than what you agreed to on the Buyer’s Representation Agreement you will settle for whatever the Seller paid!

Conclusion

The results of these lawsuits are going to at the very least require significant disclosures of what you get paid to represent the buyer (no more cloak of invisibility because the Seller paid it) and more likely will require both front end negotiation and full disclosure. If you are primarily representing Buyers, ask yourself if you would willingly pay for the services you provide to a buyer what you want them to pay. Should you answer yes, get what you provide down on paper so you can build upon that with other buyers. If you wouldn’t pay for your services, you need to re-think how you represent buyers and discover what you would want to make it valuable enough, then implement it! Don’t make it about what you get paid, make it about what your buyer needs and wants!   

After 34 years of operating in and around real estate, I believe the future of real estate is bright in spite of the coming changes to real estate! The housing market is such an economic driver that many will try to disrupt and change, but no one will defeat it.

Right now, the primary change in the market is toward consumer choice. It will start with compensation. The broker co-operation model as we know it will disappear in the next 3-5 years. No longer will Sellers dictate what Buyers agents will be paid. Buyers agents will have to negotiate with their Buyers for what they get compensated and what services they provide.

Consumer focused:

Other coming changes to real estate are that consumers will want all services coordinated in a cohesive single environment including contracting, title, escrow, mortgage, and inspection. These services will need to be digital, accessible, and coordinated. This requires fewer people and thus less cost as the industry moves forward.

The Industry will evolve to a single nationwide (worldwide?) database that will replace local MLS’s. That provides greater access to knowledgeable brokers/agents and will erode the “local knowledge” advantage currently enjoyed.

As all of this comes into play, it will hasten the entry into the industry directly of at least one of the mega players; Amazon, Google, or Facebook. Not as on-demand or iBuyers but as full-fledged integrated real estate services companies.

Last, but far from least, the Independent Contractor model that we are familiar with is going to be replaced with an employee/employer model. That’s right, the one with withholding, job descriptions and requirements, and social security!

Are you ready:

All of this bodes well for those agents who have exceptional knowledge, refined negotiating skills, and understand the true nature of customer service. They will have access to the nationwide MLS and be able to coordinate the process from scheduling showings, writing contracts, and obtaining mortgages to closing the transaction digitally! They will need to be exceptional at creating, building, and maintaining relationships with consumers.

New mortgage advances, more employment, and greater opportunity are going to make home ownership more accessible to more people. More customers and a reduction in the number of agents competing for their business, what could make the market any better? The future of real estate really is bright if you are ready, willing, and able!!

 This is the time of year that we first start looking to see where we stand on our production goals. Statistics show that we should have closed or have in the pipeline as much as 40% of our entire year. Many of us suddenly have to wonder why we aren’t on pace to reach our goals. Others will say they are on track if they can simply continue as they have. For both, the determining factor is really the same, can we make the decisions to take the necessary action to pick up the pace and finish out the year strong. What actions are you willing to do to finish the year strong. Will you take the time to do those calls? How about getting out to do a pop-by to those important contacts? This time of the year sees many agents taking it back a notch because it is the beginning of summer, graduations are near, and summer vacations are at hand. While few are out there in our space, the time is ripe to make noise and make up ground. However, the point is if you aren’t prepared to take action, you won’t make up any ground and hit your goal. If you are still waiting to get it just right or still trying to figure out what you should do, don’t wait any longer. Make the decision to take action, move forward and find food. That’s right, it is a conscious decision that only you are in control of. If you don’t finish the year the way you wanted to and you didn’t take action each and every day, you have no one to blame but you. Remember, the legs feed the wolf and like the wolf you only eat if you run towards the prey. It is even better when there are fewer wolves to compete with.

The Claims

I love getting new real estate recruiting ads. I continue to see claims of providing 1 to 1 support and a whole laundry list of support services while paying out something near 100%. When I look to find out how many ” employees” these companies have to provide the services they claim to their real estate agents, I find the number to generally be 1 or 2 support personnel. Really?

The reality

That number of support personnel works if there is less than 10 agents. Otherwise, they must be super talented employees, have many years of experience in real estate and thus must get paid well. If that’s the case and you receive 100% of your commissions, how is this payroll covered? As a matter of fact, how is the rent, internet, copier, and utilities paid? Now ask how many real estate transactions the broker does in a year? That governs how much time he or she has available for thee. Without a reasonable split from the real estate agents, related service providers from which they profit, or a large number of agents the math simply doesn’t work. If you have a large number of real estate agents and a fixed fee, how many “people” are there for you to ask real estate questions of and get specific real estate advice from? You can’t expect specific advice from a video and you can’t get specific advice from an out-of-state “broker” as they have no knowledge of local laws and forms.

Fuzzy math?


You get what you pay for, regardless of how much business you do. Nothing more, nothing less, even though they will tell you they can give you more for less. One model even claims no franchise or tech fees of any kind. So, am I to believe the real estate Franchise company gave the right to use their name and resources to a real estate broker that gives all his real estate agents 100 % of their commissions for no compensation? Either capitalism or math has dramatically changed. In my 34 plus years as a real estate agent, broker, lender, and developer, I have met few real estate brokers that will take on liability for no return and even fewer real estate franchisors that provide name recognition and services without charging a fee. There is always a “but” in these arrangements. Don’t let the “butt” be you! Ask questions. Get fully informed. If we as agents made these representations in selling a property, we would violating the rules in most all states, yet they just keep recruiting with the same old promises.

One of the greatest lessons I learned at an early age was “fishing” was not as simple as throwing out “bait” and waiting for the fish to find it. I hiked in a full day to a beautiful lake in the Sierra Mountains where “golden Trout” were said to be abundant. Stayed a cold night waiting for dawn to get my chance to catch these gorgeous fish. As dawn came, I was out at the water’s edge, baited my hook, slip weighted the line to get the bait to the bottom where I believed the biggest fish were hanging out and tossed my line in. After some time and no real activity I figured I was fishing in the wrong spot. Moved to another promising spot and tried again. Still nothing. Did I have the right bait? Changed bait and moved again but to no avail! This went on all morning. With nothing to show for the morning’s push, I decided to try the top of the lake and began using top water lure’s hoping that the big ones would be coming to the top to get food and I would attract them with my lure. Still nothing. By now I am getting nervous as what I was to eat for dinner was to be what I caught. Then a fellow fisherman passed by with a stringer full of beautiful Golden Trout. I asked where he caught them and he said “in this lake in doesn’t really matter where you fish”. I told him of my poor results and explained all I had done. His response is one I will never forget. He asked me if I had tried using a bobber and fishing the middle water? Puzzled, I said no and asked if that’s how he got his catch. The answer, “yes!”, he said “In every body of water there are fish. You just have to try different depths and different baits until you get it right and right today may not be right tomorrow as fish, like people, have different experiences every day.”

The lesson here is that to keep consistently helping people buy or sell homes, we have to “acquire” them in different ways with different tactics. There is not one way, one bait, one place, or one depth that universally works. Pay attention to the other fishermen, particularly those who have had success, and learn from them. Then, remember, tomorrow is another day and what worked well today might not be right tomorrow. That’s why fishermen take tackle boxes and different types of bait and lures. You just never know what works on any given day in any given environment. Be prepared to try and adapt- success will come. Yes, I ate well that night because I expanded my knowledge and tried something new, will you??

I have been in the Real Estate industry for 32 years. During that time, I have consistently heard from Agents that their brokers simply take too much of their commissions. Over the past three decades, many changes in Brokerage models have come about. In almost every instance, it has been disguised as a benefit to consumers as it will reduce the cost of the transaction. That assumes that if the agent receives more they will pass that savings on to the consumer. Nothing is further from reality. By making it about the dollars the agents can earn, it harms the consumer because agents simply facilitate transactions in the simplest way to “get the transaction closed” so that they can get paid. Simply reducing the cost of the transaction is NOT the key to benefiting the consumer. The key is to greatly improve the professionalism of the agents representing consumers. This will never be done by providing agents more commissions without requiring that they improve their professionalism. Are they going to use the additional dollars received to educate and train themselves to be better at representing properly their clients or customers interest? Does the broker really care if its only about the number of transactions done? The whole real estate distinction between a “client” and a “customer” demonstrates the inability of the industry to understand their responsibilities to their principal in a transaction.

What agents should be looking for is a brokerage where education and doing things right is a focus. One who knows the clients interest are first. It should have qualified staff people who can assist in every element of a real estate representation. It should have systems in place to facilitate the review of transaction documents on a timely basis to ensure accuracy and obtain digital signatures. The brokerage should be monitoring the changes in laws, delivery systems, and the practical barriers to properly completing transactions and protecting the client’s interests. The pressure from consumers to reduce commissions is due to their belief we are nothing more than a scribe writing out a transaction on a prescribed pre-printed form. Sound familiar? How many of you if you were legally wronged would search out the cheapest attorney you could find versus the best available? If they were the least expensive, would you complain when that attorney didn’t get the result you hoped? What would you expect from your client?

We need to be creating brokerage models that enable Brokers to increase professionalism and value to the public, not models that claim to benefit the consumers by reducing transaction costs. Providing ongoing education and individualized quality representation is going to be necessary to avoid being priced out of the market by a faceless technology company. Let’s analyze what we pay our brokers by what we receive from them and how that benefits our clients by helping us provide professional representation!

Just a thought!