There is an interesting little dichotomy in the results of the survey that Inman ran recently, and published as a Special Report: “To Be A Broker: Charting a Course for Recovery“. It’ll cost ya some money, unless you’re an Inman Premium subscriber, but I think Inman did a great job here in putting the information together. If you care about the industry, brokerage models, and the like, you’re going to want to check out this report. So go buy one, or subscribe. (Disclosure: I am a columnist for Inman.com… so uh, if you subscribe and such, I think I benefit through that. Plus, you can see my archives on Inman.com, which might be entertaining later.)
My first thought upon reading the Report was that the sample might be skewed — after all, presumably Inman contacted brokers in its database of subscriber or some such. They have to be among the tech elites, these brokers, to be subscribers of Inman. Then my second thought was, that real estate brokers, more than perhaps any other group of business owners in America, need a remedial class on business strategy. My third thought was, hey, this might be a good blogpost!
Said blogpost follows.
What Brokers Said…
Let us first turn to what the brokers actually said in this report. They spoke about government programs, HVCC, dual agency, about MLS and Associations, about first time homebuyers, about tech spending, recruiting, and then this gem:
When it comes to competing for buyers and listings, having experienced, trained agents trumps the size of a company or its brand, real estate brokers surveyed by Inman News say.
Carving out a niche market or area of specialization was also seen as a less important competitive advantage than staying abreast of technology and conducting online marketing.
Fair enough. The report goes on:
Similarly, experienced agents were considered a “highly important” competitive advantage by 69 percent of brokers, but only 37 percent rated having a specialization or niche as “highly important” and 24 percent viewed the size of a company as “highly important.”
…When it comes to keeping agents happy, real estate brokers again emphasized training over their brand ap- peal, or even a company’s ability to provide leads and listings.
Brokers think the most important service they perform for agents is advice and training, including the mentoring market expertise they can provide, and the ability to answer questions and resolve issues with contracts, transactions and legal issues.
Interesting. So I ran a wee little survey (highly skewed, not at all scientific, and completely unreliable) on my Posterous site earlier this evening. With all of 20 results in (!) despite 360 views, which implies significant voter apathy, 40% of respondents (whole eight people) said Training and mentorship were the most important service their broker gave them.
So far so good.
But just a few pages above, here’s what brokers had to say about what government is doing wrong:
When asked what government law or regulation is needed to benefit the real estate industry, 22 percent of 133 brokers responding to that question wanted to see tougher licensing and education requirements for agents and brokers to raise the bar for entry into the business.
“Brokers ‘wholesale’ recruit, train lightly, (and) supervise even more lightly,” said a Lincoln-based broker who advocates a tiered licensing structure.
When new agents take on business they are not comfortable or competent to execute, the broker said, “the client feels the value received was out of balance, and all Realtors are branded with blame for the newbie’s performance.”
“Real estate is too complicated for many agents,” said the Pennsylvania broker who liked the state’s seller disclosures. “The bar should be raised in order to weed out part-time agents and … those who are incapable of representing their clients professionally.
“Make the admissions test harder. Raise the membership fees. Increase the number of (continuing education hours). Consumers and agents will benefit alike.”
To quote The Captain, what we’ve got here is a failure to communicate.
Making Sense, Out of Nothing At All
So on the one hand, we have brokers saying that brokers don’t train their agents much at all, and therefore, the industry, the people, nay the great nation of the United States of America, needs higher standards to have the privilege of being a licensed real estate agent.
And on the other hand, we have some 69% of brokers saying that having experienced agents is a “highly important” competitive advantage. Far more than lead generation, far more than brand of the brokerage, far more than any other factor.
Then in the same breath, we hear that training and education are the most important services that a broker performs for the agent.
Am I the only person experiencing total eclipse of logic?
Turn around, bright eyes.
A threshold question is, “Does training equal experience?”
If a broker ran training classes non-stop, every single day, for four hours a day, after two years of that training, would that agent be considered “experienced”? Or like any other industry, training is training, and wonderful in its own right, but not a substitute for experience? If you need a heart transplant, do you go with the surgeon who’s gone to Harvard Medical School, interned at the best hospital in the world with the best doctors, but had never actually done a heart transplant? Or do you go with the guy for whom this ain’t his first time in the operating room?
Presumably, the experienced agents who are such an important competitive advantage don’t particularly need the training or the mentorship. Seems to me, these experienced agents might not agree with the broker who says “my knowledge of the industry and my ability to help (agents) through their problematic transactions” is the most important service the broker offers them.
So even if we agree that training is the most important service of a broker, that only applies to the inexperienced agent who is learning the ropes.
So uh… why are brokers agitating for higher standards for licensing? Aren’t they training these agents? These newbies? Isn’t that where their value is? Who cares what the licensing standards are, since the most important value of a broker is in training these baby licensees into becoming superstar experienced Realtors, no?
Seeing as how training is the most important service, according to both brokers and agents, it would be a simple matter to look at what percentage of the total cost of operations goes into training and education. Last time I checked (with the 2007 RealTrends report, that is sadly no longer published), most brokerages were spending less than 0.5% of total GCI on training. They were spending more on office supplies.
Wow, must be some important service there, that training piece. Whew!
Have things changed? Really? I know @Properties in Chicago employs two full-time performance coaches for their agents. How many brokerages have full-time training or performance coach staff on payroll?
So let’s try to make sense out of what those in the To Be A Broker is saying. A broker’s most important service is training, which is valuable only to the agents who provide no real competitive advantage at all, which is why brokers want the government to do much of the training for them, so that they can provide even less of a service to those who provide no real benefit to the brokerage. o.O That’s making money, out of nothing at all.
May I, a humble observer of the industry and consultant who has never sold real estate or operated a brokerage, make a suggestion to brokers everywhere? Spend time and money on the things that give you competitive advantage — try that for a change. If that’s recruiting harder, better, stronger, faster agents, well.. do more of that. If that’s providing technology, then do more of that. Whatever it is that gets you competitive advantage, try doing more of that, and less of the other stuff. What do you think?
Competitive Advantage
It’s too bad that my column for Inman didn’t go up today, as it was supposed to. But I think it might be worth talking more about competitive advantage, what it is, how you get it, how you sustain it, in real estate. Those of you who are familiar with the works of Michael Porter already know the basics.
Competitive advantage can only be gained through one of four ways: Cost Leadership (you can provide the service at the lowest cost), Differentiation (you can provide a unique value that no one else can), Cost Focus (lowest cost to a segment of the market) or Differentiation Focus (unique value to a segment of the market). Note the emphasis: lowest, not low, and unique, not sings of different colors. And we measure competitive advantage by profits, not by market share, not by revenues, not by awards won at national conventions, but by profits.
Having experienced agents is not a competitive advantage in and of itself; you might be losing money hand over fist with a stable full of experienced agents who are on 95/5 splits and demand the world and a bag of chips from you to have the privilege of having them grace your brokerage with their presence. Having a great website is not a competitive advantage in and of itself.
Everything you do, taken together, that lets you earn higher profits than your competitors is.
So… (a) are you earning higher profits? and (b) what are you doing to earn said higher profits? Think on those; therein lies the real course to recovery, through the fire and flames of the Hope and Change economy.
-rsh
EDIT: I edited this to clarify that my criticism was meant for some of the brokers and their response, not for Inman who did the report. Heck, if anything, I think Inman did a grand old job of creating valuable information that fuels debate, and I rather think it’d be a nice if more people read reports like this one.
13 thoughts on “A Musical Review of Inman's "To Be A Broker" Study”
Rob, At the end of the day the Broker that wins is the one that has the most productive agents and largest market share. That does not always mean the most professional or highly trained, but those agents that go out day after day and make deals. The ones that have that “magic” touch that makes it all come together.
Always an interesting topic(s).
Training takes many forms; formal. informal, misunderstood and unrecognized. Perhaps training is the word used to describe what's valuable, but I think the word “leadership” would be more accurate. Relevant training is part of the equation, but I think more importantly, it's all the other leadership qualities that attract, retain and develop talent. Training is visible tip of the iceberg.
I like the idea of #RTB, but for me, the #RTB challenge is an everyday, what are we (me) doing to make ourselves more valuable and attractive to our clients and prospects. Raising the educational standards doesn't do anything to impact value and attraction, it simply raises the barrier to entry, not performance or execution.
You've shared four ways to grow a Competitive Advantage – Cost Leadership, Cost Focus, Differentiation and Differentiation Focus. Fair enough, especially for conventional type business. The business of real estate is different in this way. The truth is, it's possible to sorta suck at what you do, but if you hustle harder (show up), create more engagement and in-person and on-purpose contact, an agent can create a competitive advantage over less aggressive (fewer engagements) but more skilled, experienced competitors.
What I mean is, I think leadership (including training) is key. Profit generating leaders lead thier people to effectively out engage the competition. Servicing a client at a high level is a challenge, but there are lots of people qualified and committed enough to do a good job (as defined by the client), the real world challenge for agents and brokerages, is finding or attracting a steady stream of people to help. To succeed you have to your agents more actively go out and discover them, preferably way upstream from their decision to buy or sell – filling the needs as they grow from dreams to the reality of moving.
Lastly, I agree, the measure is profit, not all that other smoke and mirror stuff. But, man-o-man, it's hard not to focus on our industries obsession with market share, volume, agent count, etc. I get caught up in it all the time. You can brag and boast about share and volume, nobody talks about profit. Agent culture is not keen on their brokers boasting about all the money they are making (assuming they are), what comes next is, “Give me more, I created it.”.
kb
Well said. As a broker out here struggling to make it. I have received a lot of food for thought from your answers. I have not found a lot to disagree with on how real estate companies have to change. Out of all the confussion I am just trying to figure out how to servive while a transition can be made.Keep pushing our industry.
What I'll be working towards for a while is destroying this pernicious idea that “he with most productive agents and largest market share wins”. It's sort of tautological, because it assumes that win = highest production. I don't define win = highest production. I define it as “better profits and profitability”. If your competitor is taking home more money than you, and makes more per transaction dollar than you, then how are you the winner except in ego games?
We'll be talking about this more, I suspect. 🙂 It's a great topic, and one worth exploring.
-rsh
Thanks Ken –
I had the exact same problem you did in looking at this industry:
The truth is, it's possible to sorta suck at what you do, but if you hustle harder (show up), create more engagement and in-person and on-purpose contact, an agent can create a competitive advantage over less aggressive (fewer engagements) but more skilled, experienced competitors.
Shift the thinking. The buyer/seller is not the broker's customer; the agent is. That one shift in perspective changes everything analytically. 🙂
-rsh
I half agree with notion that the agent is the broker's customer. It has certainly been that way in the past and even today, mostly. Today's perceived brokerage leaders were built on that model. I say perceived because using “profit” as the bench mark, I believe the franchisor may be profitable, but the franchisee/individual broker most likely is not.
There are many currently, so called, successful models built on the “Agent Is The Customer”, subscription model. I'm talking mostly about the it's ok to work out of the trunk of your car, sell a house or two or year, don't break the law – but it's ok to deliver any level of service and charge what ever you want – or nothing – all I ask is that you pay this franchise fee, marketing fee, administrative fee, network fee, fee+fees. Doesn't matter if you ever sell a house or satisfy a client, just pay your fees please, oh, and invite your friends too-doesn't matter if they're any good, it only matters if they can pay the subscription fees.
I don't think this approach will last over time, I could be wrong. Consumerism, technology and search will change things, when I don't know. Anyway, focusing primarily on the agent will lead to unsuccess in the future. MHU.
I believe the key to profitability is and will be both. Basically, a broker has to establish their consumer brand identity/aspiration and provide the tools, leadership, support and accountability to equip their agents to find, attract, engage and deliver on the promises that attracted them to the brokerage brand philosophy. This approach will attract, serve and loyalize compatible agents and consumers. Theoretically, sustainable profits follow (Alice In Wonderland opens this weekend).
Nirvana, if it exists (hope springs eternal), is attracting, cultivating and retaining agents who are career minded, service oriented and led to aggressively out hustle, out deliver and out engage the skilled but slow and the aggressive but unskilled/lazy/opportunist. I understand that profits are possible (and the market is broad) by delivering stupid stuff to stupid people, but that's not my idea of fun.
One of biggest obstacles to all this (my) speculation is the number of true leaders/visionaries and the polluted by the past mind set of the majority of the agents. If you've been a business a while, you begin to believe that it is all about you, and your freedom to do what you want, how you want, when you want. Plus, the industry (I'm guilty too) has lovingly water-boarded agents to focus on production and volume and units and egoism as THE way to demonstrate greatness. Then as Sales Managers, leaders and brokers we wonder why agents aren't more bottom-line (profit), business oriented and consumer centric. Virtually every reward is skewed.
My conclusion, the future belongs to leaders who concentrate on a consumer focused brand and provide their agents with what's needed, including accountability, to deliver.
This is harder to do if you have to make this happen with a legacy structure and polluted (not fault of theirs, they've been playing the game by the old rules) mind sets. It's easier to do when you start from scratch, ala Redfin (Well, it's easier in some ways, but maybe not so profitable for a long, long time.)
Thanks.
Rob, Please don't get me wrong, while I truly hate what I stated above, I believe it is the sad sad reality of our industry.
And yes, the whole business is based on the ego train, praise for the “Top Broker”, for the “Top Agent”, “Best Company, top listings, top sales, etc.
Ken Brand just said it so much better than I….
“The truth is, it's possible to sorta suck at what you do, but if you hustle harder (show up), create more engagement and in-person and on-purpose contact, an agent can create a competitive advantage over less aggressive (fewer engagements) but more skilled, experienced competitors.”
He is someone that is in the business day to day and realizes many of the lofty ideals that you would like to see are not always the reality of the business. Just like in most other industries it is not always the best, brightest, or most ethical that win or that the public seeks out.
I have the highest respect for Ken Brand, who I have never meet in person but I know he is a man that understands and lives our business. And yet I have almost unsubscribed to his streams as it contains “Top Agents, Most Sales, Top Company, Etc. Then I remember the reality of the system and what powers the locomotive and look at his beautiful writing style and give him the benefit of the doubt. He knows the cold hard “reality” of the industry and what it takes to be a success.
Selling real estate is a hard business with lots of rejection. Most ultra-successful agents have to develop a larger than life ego to survive and many are motivated not by money, but by recognition and awards.
So Rob, while I have the highest hopes that you'll be able to destroy “this pernicious idea”, sadly the reality in the trenches continues to show otherwise. Good luck my friend your going to need it. 🙂
Agreed — I think that's my passion: educating more broker/owners about strategic fundamentals so that they can make better decisions and make more money and stay in business 🙂
-rsh
Rob, be prepared for lots of sleepless nights. It is not that the Brokers don't get it, its changing the fundamental underpinnings of the industry at a time when it's all coming apart – it's the wild wild west in many ways.
Change I believe will come from outside the industry when the consumer demands it. The industry is way to inefficient and way to many players or “want to be” players.
Someone has to come up with an improved more efficient system – the consumer is desperate for it!
Hehe, well… I guess I'm less convinced that the industry can't fix itself (it will; every industry does). I'm also not convinced that the consumers are desperate for anything of the sort. They simply don't deal with real estate often enough to be desperate about it. I rather think it's more accurate to say that consumers don't much care, but will take goodies when provided them.
It's a complex problem, but at its heart is the brokerage firm (in whatever shape/form) and how it does things.
-rsh
Rob, Did the travel industry fix itself?
Consumers are frustrated with the system and the expense. Its more about perception than reality.
You and I have been around and around re the brokerage model and we both know it's not working in it current configuration. While there are many Brokers trying to make changes agents are leaving in droves from “greener pastures” – and you know what they say about those….
The simple problem is the agents that are most productive and on the highest splits are not making enough profit for the Brokerages. The Brokers which relied on a constant stream of “newbies” who would sell and home to a few family members and friends would pick up the slack at a 50% split.
In order to change a Broker will somehow have to convince the producing agent their value proposition, and reducing the amount of commission or charging “admin fees” is not going to do it – they will leave for the “greener pastures” or strike out with boutique brokerages. Not until then will they realize the true cost of doing business, but alas its too late for the Broker that lost the rain maker.
We both agree, it's a complexed problem.
Rob – I am the Lincoln broker who you mentioned from the Inman “To Be a Broker” Study. I hope you (and Inman) give further examination and discussion about some of the topics identified in the study.
As a professional industry, we are one of the few which is challenged to set the bar of entry at the proper height to best serve the public and our collective interests. As a result we have an over-supply of practitioners, short term presence / high turnover, and marginal performers.
I believe that all of these avoidable factors diminish our perceived value to our client publics, and also needlessly negatively impacts our businesses, regardless of business model or brand identity.
For most of us, our utlimate brand is “Realtor”, and while most people don't recognize this as a trade name associated with a code of ethics and other professional standards indicia, we are mostly judged at this aggregatre level – with our professional vulnerabilities getting more public attention than our strengths.
Let's get some serious light and discussion on where and how to set the bar to get the best results for our consumers and for our industry.
Rob – I am the Lincoln broker who you mentioned from the Inman “To Be a Broker” Study. I hope you (and Inman) give further examination and discussion about some of the topics identified in the study.
As a professional industry, we are one of the few which is challenged to set the bar of entry at the proper height to best serve the public and our collective interests. As a result we have an over-supply of practitioners, short term presence / high turnover, and marginal performers.
I believe that all of these avoidable factors diminish our perceived value to our client publics, and also needlessly negatively impacts our businesses, regardless of business model or brand identity.
For most of us, our utlimate brand is “Realtor”, and while most people don't recognize this as a trade name associated with a code of ethics and other professional standards indicia, we are mostly judged at this aggregatre level – with our professional vulnerabilities getting more public attention than our strengths.
Let's get some serious light and discussion on where and how to set the bar to get the best results for our consumers and for our industry.
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