The Real Estate office was once the key to an agent’s success. Traditionally, a real estate salesperson joined a brokerage for its name recognition, office environment and the company marketing. Agents would go to the office to work and meet clients. To be able to provide the office, staff and marketing as well as make a profit, a real estate brokerage had to take a large part of each agent’s commission. To make matters worse for agents, franchises got into the real estate business and now the franchise and Brokerage Company each took part of an agent’s commission.
Two things that changed the Traditional brokerage model
The first occurred when Brokerages began entering markets that paid higher splits to agents. These brokerage models offered less services or agents paid part of the expenses. Being forced by these companies paying higher commissions, the traditional real estate companies responded by raising their agent commission rates to prevent departures. With higher commission splits to agents, brokerages could only survive by cutting expenses or increasing sales.
Technology was the second change. When it first entered the picture it made the office more important. Fax machines, pagers and other new technology was a big boost for real estate companies. For example, if an agent had a client come by the office the salesperson would get a page from office staff. The agent could find a phone, call the office and discover a client waiting for them. The benefits of this new technology made the office very important, but trouble for the company was on the horizon.
As we all know, technology continued to advance with the addition of computers, email, cell phones and a host of other new things. Most noticeable, social media was creating a new way for a real estate agents to conduct business. Agents no longer needed resources like office staff, phones, floor duty and newspaper ads that were provided by the office.
And Higher Commissions have made TRADITIONAL REAL ESTATE BROKERAGE OBSOLETE
Just like when the higher commission brokerages came on the scene, technology has forced traditional real estate companies to respond by raising their agent commission rates to prevent departures. With higher commissions being paid, the margins of gross income and profitability continues to drop for the typical real estate brokerage. This has occurred because agents realize they no longer need Traditional Real Estate Brokerage.
Agents have basically become their own company.
With this new technology, agents became more independent, but it was coming at a cost to them as they were now buying computers, cell phones and paying for their own advertising. Realizing they were the ones spending the money, agents began wanting even higher commissions to offset their costs.
New Brokerages emerged offering 100% commission. While it sounds impossible for a company to pay its agents 100% and stay in business, many have figured out a way to make it work. These 100% companies are making it harder than ever for traditional companies to compete. Agents are attracted to these companies because they can use the extra money and market themselves rather than give it to a traditional company to use as it wishes.
Salespeople now pay their own technology, marketing and assistants. They do not need help from the traditional brokerage. Agents see no value in paying high commission fees to a traditional real estate brokerage or franchise fees to a national brand. What agents want is the maximum amount of commissions so they can spend the money as they decide because they are basically their own company.
In an effort to retain agents, traditional brokerages promise to provide ‘TRAINING” and TECHNOLOGY’. Again, because of technology, the companies paying higher commissions could also provide Training and Technology so no competitive edge exists for the traditional real estate company.
As time goes on, more and more agents will understand what so many agents have already figured out.