The New Real Estate Model – Part 3.1: The Solution

by Sean Purcell

Real Estate Renaissance Man

Author website

This final post (Part 3) grew rather lengthy.  Considering the fact this has already stretched into a three-part series, I chose to extend the series to five rather than attempt a conclusion of  somnolent proportions.  If brevity is the soul of wit, creating a new model for real estate is witless.  So grab a cup of coffee or your favorite bagel and settle in.  Fairly warned be thee, says I…

The Preamble
In Part 1: Disbrokeration, I looked at the problems that exist within the current, brokerage-based real estate model.  The shift to a 2.0 world is making the traditional position of broker obsolete.  The tax advantaged laws that helped create this model now create a drain on the industry and the level of professionalism is widely perceived to be at an all time low.  This is a topic of some concern, as the most popular response to the current state of affairs is more legislation, more licensing and more efforts to validate capability through pernicious membership rather than actual results.  As Big Al said: “We cannot solve our problems with the same thinking we used when we created them.”

In Part 2: Super Teams, I looked at a natural progression that is already occurring in our industry: Real Estate Teams.  I took that notion further and looked at how a Super Team might be constructed.  There was also a link to some great writing on the concept by Mike Farmer.  There are some problems with the Super Teams though.  They do not go far enough in dealing with issues of independent contractor status, education, professionalism and image.  Their success depends upon either a self-less communal work effort or a strong, unique figurehead to hold all the pieces together.  The former is not realistic across an entire industry and the latter is too uncommon.

The Outline
It is time to outline a new model for the real estate industry.  I believe the following to be a reasonable list of minimum expectations:

• The new model should account for the natural desire in many people to achieve.  It might even embrace the concept that a great many people enter the sales profession because of the unlimited income potential.
• The model should recognize and reward agents who generate leads.  No matter how well a firm may treat their clients, in order to survive as a firm they must first have clients.  Our new model must center around these rain makers or RMs.
• While imparting no barrier for entry into the industry, the model should not indulge what I call the water cooler whiners either.  It should not accommodate, never mind encourage, part-timers as the current system does.  Serious professions deserving of respect are not, by and large, part-time.
• As a byproduct of its very design, the new model should encourage education, training, dedication and professionalism.
• In the interest of self-preservation, the new model should not rely on industry advantaged tax laws, specious employment relationships and Rotarian Socialism for its existence.  The idea of a churning work force must be the antithesis of our new model.
• Finally, and most important to universal portability, let’s create a model utilizing our existing skill set.  By which I mean it should be achievable relatively quickly; perhaps even a paradigm from another industry that already enjoys success and simply needs to be lifted, tweaked and laid in place.

The Solution
Working the list backwards, is there an existing industry made up of skilled professionals acting independently within the framework of a large firm?  Is there a model that possesses the benefits Mike Farmer talked about in his Team concept while adhering to our outline above?  And if so, is the model successful and easily copied?  The answer to all three questions is yes: the law firm.

Law firms provide a model that the real estate industry should adapt and copy.  Within that model are quite a few options, as not all law firms are organized the same way.  But that is a good thing.  If I were to add one thing to the outline of requirements listed above, it would be this: our model should allow for agents to work with as much free choice as possible.  They should be able to work completely alone if they choose, or within small boutiques or as part of a large firm.  I am not advocating a mandate, but rather suggesting a model to improve the industry as a whole, all the while based on a structure that can be widely accepted.  Now it is true that lawyers as individuals have been the butt of jokes going back at least five hundred years, but law firms themselves often command a great deal of respect.  So let’s take a closer look at the benefits.

The Benefits
By using the legal profession model as our model, we import some added benefits beyond ease of imitation and number of options.  The structure, which I will lay out more specifically in the next post, by its very nature creates a need for professionalism.  The reputation, and by extension success, of the firm is based on how it treats its clients.  Professional behavior, knowledgeable agents and ethics that are beyond reproach become paramount.

Within the firm there can be areas of specialty, the firm itself may specialize or the firm might be a “general practitioner”.   Whichever the case, the sum is greater than the whole of its parts and the best aspects of the Super Team are borne out minus the pitfalls of our current brokerage system.  The personalities of the firms differ and this creates diversity for agents and clients.  Accountability is clarified… and this may be one of the most important long term benefits of them all.  Dual agency is an embarrassment to our industry.  Can you imagine the same lawyer representing the plaintiff and the defendant!  A law firm very, very rarely represents opposing sides in the same case, even if different individual lawyers are doing the work.

Adopting the law firm model adds a competitive edge in client relations as well as hiring and that hones the skills of the entire industry.  It abandons the independent contractor model and requires no tax loopholes for its success.  Because salary comes into play now instead of pure commission, this model also creates some stability in an industry notorious for its roller coaster nature.

In the next section, posting later today, I will discuss how such a firm may be organized and clarify the specific positions which will lend support to the benefits I have outlined above.  This will be followed by the final section (I promise) where we look at some ideas on how to implement this plan.