Did I really just say that? Sorry but it’s high time to call a spade a spade.
I recently decided to cut the apron strings so-to-speak with my old broker and go “indie”. After paying in about $200K in exchange for about $12K worth of business over a five year period, I had to evaluate whether the relationship with my broker was anything other than terribly one-sided. Since about Year 1.5 when I began working full-time from home, I’d managed to become pretty independent in terms of how I operated and procured business. I finally saw I wasn’t getting much of anything in return for those hefty commission splits and transactions (not counting the occasional pep talk, although at times it was much appreciated.) So I left at the start of the New Year. Since making the split official, I’ve had a chance to evaluate the cost of every aspect of my business compared to what it used to be. Not surprisingly, I’ve found that my overall costs are much lower. More surprisingly, however, I also discovered:
1. business cards were a profit center for the broker
2. sign installations were a profit center
3. color copies were a profit center
4. template sites (complete with crappy framed in MLS data) were a profit center that did not even generate leads
5. advertising was a profit center
6. leasing back office space to agents was a profit center
7. accounting services were a profit center (in the form of huge transaction fees)
8. sending closings through the broker’s joint venture with a local title company was a profit center
9. home warranty applications were a profit center (by skimming off the top of agents’ referral checks)
10. 100% tax deductible sales meetings were a profit center – vendors paid the broker to have their mediocre template sites etc shamelessly endorsed & pushed on agents
But wait, you may be thinking. Surely there were other ways your broker was adding value? Sadly, not really. Training beyond the basics was almost non-existent. Occasionally something would be offered gratis, eg a bank talking about changing lending standards, thus hoping to get some loan business. Or “training” that mostly served the company’s own purposes (e.g. how clients should use their website). Real estate applications were outdated and kludgy. The company’s website was buggy and badly coded. MLS search tools were so poorly designed and implemented that they resulted in virtually no leads for agents. I even subsidized my broker’s advertising and marketing budgets by purchasing business cards with the broker’s website address printed on the reverse side (this was the company’s template so we had no choice).
Let’s face it. The future of real estate is in advanced search technology, web-savvy agents, and superior relationship building skills, not brick & mortar offices, big overhead, and big billboards. Although I don’t rule out the possibility that there may be exceptions, for the most part big box brokers artificially jack up agents’ costs and don’t add a lot of value. Worse yet, many agents seem to be in the dark about what they’re paying their brokers. As independent contractors it’s important to understand your operating costs and loss/return on investment. Realtors do not make salaries, nor do we get benefits or retirement plans. We are completely dependent upon ourselves to make investment decisions that will generate profits that will enable us to pay the mortgage, feed and clothe our families, buy life insurance, buy health insurance, invest in our retirement, fund future business activities, etc. Small business owners – even Realtors – have to carefully evaluate the return on investment associated with being affiliated with a big box broker. And if all the money is going in one direction, it may be time to re-organize your business structure.
If your investment is greater than the return on it and you a.) have a little imagination (to develop a corporate identity and branding strategy), b.) have an interest or background in technology (or a willingness to learn), and c.) have a little self-discipline and drive (or at least an ability to seek out help when your motivation falters), you may want to seriously evaluate whether going solo is right for you. It’s the quickest way to lower your monthly operating costs while boosting every commission check instantaneously. And it’s virtually risk-free – if being an independent broker isn’t for you, just walk into any real estate broker’s office and, provided you don’t have horns, you’ll get hired on the spot. We all know that.
If you’d like to know whether you’ve got the stuff to make it as an independent broker, contact me. I’ll help you assess whether you’re a good candidate for freeing yourself from the chains of your big box broker. And if you’re an Indie broker looking to collaborate and support other like-minded Indie brokers, please get in touch. I’d love to hear from you!
Cheryl Johnson says:
Hi Jolenta, Welcome to Bloodhound..
Speaking as the broker-owner of a small indie office that has recently added several experienced real estate veterans to our stable …. all I can say is DAMN!!
Am I an idiot, or what??!! Look at all those ways to make money I am missing out on…. !!!
Oh, well, I think I will leave my set-up the way it is, since the bookkeeping required to keep track of surcharges on sign installations, and copies, and cards, and everything else must be an absolute nightmare. 🙂
>>>And if you’re an Indie broker
Consider yourself in touch.
April 17, 2009 — 8:18 am
Brian Brady says:
What a great observation, Jolenta. What I found to be most interesting, when I moved to San Diego, is that “big box brokers” ruled the marketplace (2003). In Phoenix, the best models were the 100% shops. All that has changed.
The only value I can see to work with a big box broker is business generation via REOs. Alas, the little shops outhustled the big boxes and are ruling that marketplace, here in SoCal.
The exact opposite is happening in mortgage origination. Not too long ago, everyone wanted to be an indie. Today, with increased regulation and a need for guvvie programs, an originator has to be with a big box. Watch originators gravitate towards federally-chartered banks with mortgage brokerage capabilities.
April 17, 2009 — 8:23 am
Eric Blackwell says:
Great first post Jolenta.
The brokerage where I work operates nothing like the brokerage that you describe, so I am not sure that I agree with the assessment in general.
That having been said, I am a huge fan of excellence and doing things right. There IS a way to do a big brokerage right. (I think our brokerage does it.) The fact that they have a “me” on staff and available for agents alone would mean that your brokers business model blows in comparison to ours.(Your broker doesn’t sound like he was in that league at all..)
There are people walking our hallways whose ENTIRE expenses have been covered by the leads provided by our brokerage website and the leads from REMAX.com (referral fee free). And for that cost of $0, they get great support, training, and a kick butt office as well. That is a model that is hard to beat. Very hard.
Here’s what I TOTALLY agree with. I love the concept of indie brokering in general because it promotes excellence. I have watched many friends on this blog and others truly succeed at it. (At first is always a struggle.)
I celebrate folks going out and making a go of it. I think MOST brokers give less value than they should, shortchanging their agents.
Here’s to mediocrity sinking to its level(and from what it sounds like, joining your former broker.), and excellence rising to its level (you), whatever the business model.
Best;
Eric
April 17, 2009 — 8:36 am
Gary Frimann says:
Excellent post! You’ve uncovered the biggest secret in real estate brokerage. I started out working for a franchised broker, and learned real fast- I was gone fater 18 months…
People, franchised real estate is not to sell houses, but to recruit agents, get fresh meat, and promise training, although the training they provide is less than adequate in most cases. That’s why Indies outsell franchised agents on a one to one basis. Don’t you want to work for clients, rather than shareholders?
Ask yourself: Who is getting the leads in your office? If it isn’t you, then is somebody getting favored status? Who are you going to sell a house to in your office anyway? The only candidate would be the receptionist.
As real estate changes, say goodbye to brick and mortar, mega-office license mills, and negative, disillusioned agents.
Good luck on your new venture. Remember, you only need two things to be successful: The guts to try something, and the talent to pull it off.
We’ve got a strong network of Independent Brokers in my area, all coming from franchised real estate. We all agree that the franchise model works best for fast food and convenience stores.
BTW, I took a peek at your website-Fantastic!
April 17, 2009 — 8:43 am
Dave says:
Yawn…
Jolenta wrote:
Let’s face it. The future of real estate is in advanced search technology, web-savvy agents, and superior relationship building skills, not brick & mortar offices, big overhead, and big billboards.
The future of real estate is fee-for-service agents.
“Web-savvy” is very 2003. I wouldn’t rely on that as a differentiator.
April 17, 2009 — 8:45 am
Tony Sena says:
Jolenta, great post.
Eric,
I think every area is different because what she described is definitely the way big brokerages have operated in Las Vegas over the last several years. I used to hang my license at one of the big name franchises, Century 21 and our office was the #1 office in the world for Century 21 in terms of closings and gross commissions for 3 straight years. What they didn’t have was a local Internet presence and I tried to get them to realize this back in 2004 but they didn’t listen.
What did they have to offer beside a brand name? They offered some classes and you could do floor time and get leads from those that called the office but with an office of over 400 agents, it wasn’t easy to get a scheduled time.
On the flip side what did the brokerage receive from the agents? Everyone was on a split except for a handful of people, you had to pay a 6% franchise fee, monthly license hanging fee and at the end of the day your costs just didn’t make sense for what you, the agent were receiving.
I have seen as of late a renewed business plan from some of the local big franchise companies. They are downsizing their offices, for obvious reasons and are pouring money into the Internet as a source of business for their agents. The good news for me anyways, they aren’t doing a very good job of building a local web presence but it’s definitely something I am paying close attention to.
So like Jolenta stated in her post, big box brokers suck.
April 17, 2009 — 10:07 am
Joshua Dorkin @ BiggerPockets.com says:
As agents realize that the big box brokerages are in business for their own profits through posts like this one and other discussions, I’m sure we’ll see folks start moving towards smaller, more dynamic and inexpensive firms. Thanks for sharing this – I think you’re going to help a LOT of people who will realize they are getting slighted out of money they could be putting in their own pockets.
April 17, 2009 — 10:17 am
Eric Blackwell says:
Tony-
I would not disagree with your assessment either. Here’s a look at marketing channels from both of our sides of the elephant: Century 21 vs RE/MAX: $50MM in TV ads last year for RE/MAX and a similar commitment this year. C21- Pulled 2009 TV Ads in favor of competing with ummm…you (grin) on the Internet.
We chose to pick a complimentary strategy where RE/MAX does the national print, TV and Radio ads…and we dominate the local internet…leads from BOTH go to our agents.
I’d agree with Gary Frimann as well about favoritism in leads. Our broker does not sell. Leads in our office are distributed on a pro rata basis. We are the ONLY office in our area (that I am aware of) that both has a non competing broker and distributes leads fairly.
So I guess what I am saying is MOST big box brokers take and don’t give. Oops, I said that up above as well. 😉
QUOTE:
“I think MOST brokers give less value than they should, shortchanging their agents.”
I DO agree that a Navy Seal team is better than a standing army for most situations these days. (Especially after last weeks’ shooting!). There are precious few who can TRULY teach the elephant (brokerage) to dance.
My only concern with Jolenta’s statement was that we simply need to throw in the words “most” and avoid the generalization of “all”.
The rest of her points (and yours), I am in agreement with.
Best;
Eric
April 17, 2009 — 10:40 am
Shane Pollock says:
I think a lot of agents who have worked for different “Big Box Brokers” can relate to some of the points, if not all of them. One of the really great things about being on your own is the undivded ROI on everything you do. Any work you put into your RE business YOU see the return.
Great post Jolenta, I look forward to your next.
April 17, 2009 — 10:49 am
Brad Coy says:
HI, I’m Brad and I’m Indie too 🙂
I could list 10 more reasons in a heartbeat, but let’s not get into that right now. For me it’s as much about business as it is about culture and personality. When I talk to my colleagues about their experiences with working for a big brokerage, I can’t even wrap my head around the idea. Not one “top producer” worth their salt that I know of, cares as much about what the brand of their brokerage can do for them as much as their hard work and freedom.
Wonderful first post, Jolenta. Welcome to BloodhoundBlog!
April 17, 2009 — 11:40 am
Jeff Brown says:
Having been ‘Indie’ since 1977, AND having worked a few years for a big box franchise, I can tell you the difference almost isn’t measurable.
Ironically, big boxes can’t think in terms of what we’d describe as ‘out of the box’. An aircraft carrier can make a U-turn in the blink of an eye compared to the big boxes’ ability to adapt in real time.
I wonder how many of ’em will adopt Eric’s company’s template?
April 17, 2009 — 12:12 pm
Sean Purcell says:
Hi Jolenta,
Great first post. I agree with you that the big boxes almost (there you go Eric 🙂 ) never offer a good return on investment. But I do believe there is a future for brick and mortar offices. “Indie” should always be popular (at least I hope so) but I doubt it can compete with a large, well run team. Eric’s brokerage beats most and they’re a brokerage (which I usually break down into its two natural components: broke and rage as in working there, you’ll go broke and end filled with rage).
Imagine a better design where all participants share profits and utilize specific talents to create a one-stop answer for better real estate. The well designed team (or, for those who’ve read my stuff: the well designed firm) is going to beat the indies and dominate in the coming years.
April 17, 2009 — 1:18 pm
Claudia Efthimos says:
Great Post! I totally agree.
Gary you hit the nail on the head.
I would much rather put my time & energy into my client
vs “The Profit Center”
And from the caliber of many Agents I have dealt with, it solidifies my decision.
My Brokers priorities are Education & Customer Service not Brokerage Profit.
April 17, 2009 — 1:32 pm
Teri Lussier says:
As an agent who was worked with both an independent and big box brokerage, but never owned either, I understand what you are saying, however, my limited experience is that it all depends on the agent, the broker, and the franchise- pros and cons to every choice.
Having said that, Jolenta, my goal is be in a position to go independent if I ever want to do that, so please keep sharing your experiences and insights!
And by the way, at the risk of sounding like a ditto head, Great First Post!!! 😀
April 18, 2009 — 4:28 am
Barry Bevis says:
Having started my own little baby brokerage in December I totally agree with you. I’ll take it a bit further.
Working for another independent brokerage has its ups and downs also- I came from one. You always have to look at your rate of return.
Five months into my experiment I’m the #20 agent by sales volume in my market of 1060 agents. No doubt that the freedom and flexibility of owning my own office has helped me get there. I still have fat to trim from my budget and streamlining before I take on another agent. When I do they will get their money’s worth!
April 18, 2009 — 5:39 am
Jim Rake says:
Jolenta,
What a first post! From our conversation yesterday, looks like you’re certainly on your way.
Agree with much of what you mentioned, but would agree with Eric on the “absolutes”.
Most of those “legacy” systems aren’t very flexible, and, don’t quite appreciate the paradigm shift from sign/hard copy/the “book” (listings)to an open source, 2.0 business.
Do they see the ground shifting? Of course they do.
But their transformation to this new reality is, by definition, incremental at best. Sometimes the view from corporate clouds the needs assessment step. In other words, its not getting agents in the seats that’ll generate revenue, instead, as we know, its having the proper seats for them to sit in. Seats that use the new platforms and technology, capitalizing on and leveraging web 2.0 and the internet for lead generation and transaction resources.
Does it take more than being “web savvy”? Sure, but, Gary hit the nail on the head when it comes to success in this biz or anything else:
“Remember, you only need two things to be successful: The guts to try something, and the talent to pull it off.”
And, as far as I’m concerned, talent is 80% hard work!
Lastly, we’d all love to see a big box broker like Eric’s. The luxury they have is, when they stray from the mission’s focus….they’ve got Eric to pull them back in!
And, Jolenta, your Ten, are some of the reasons, we decided to pull the trigger on REW yesterday.
April 18, 2009 — 5:45 am
Jolenta Averill says:
@Cheryl Johnson: Thanks for the Welcome and great to be in touch with a fellow Indie broker! You’re right to leave your set-up the way it is, although I’ve no doubt that if you were charging the kind of transaction fees my ex-broker was charging, a single agent would more than cover all the expenses associated with the bookkeeping required to keep track of surcharges on signs, copies, cards, etc. My transaction charges alone (we’re not talking commission splits, just transaction fees) totaled more than $15K last year!
@Brian Brady: Thanks for sharing your observations about where different models have worked and when and current trends in mortgage origination. That’s very interesting…in light of all the abuses that took place I tend to think the increased regulation is badly needed.
@Eric Blackwell: Eric, great to hear from you and thanks for your encouragement and unique perspective. It sounds like although you’re with a traditional big box your business model is so different it doesn’t fit the definition at all. I’d be curious to know if all RE/Max offices nationwide have a “you” on staff or whether your office is involved in testing out this particular business model? Also, thanks for pointing out that I should have used the word “most” rather than “all”. I think your post(s) illustrate that extremely well.
@Gary Frimann: Thanks for commenting on my post! I think you’re a fast learner and a bold person for making the decision to leave your franchise after just 18 months. I’m also psyched to hear you have a strong network of Indies in your area and would like to know how I might tap into that at some point. I also love your analogy – franchises are best left to fast food and convenience stores! ~lol
@Dave: Sorry I made you yawn when I was actually trying to wake you up! I’m not sure why you think the future of real estate is “fee-for-service” but those who intend to run with that business model had better be web-savvy, too. Oh and by the way, in my opinion there is nothing “2003” about the way real estate is being done on the web these days. Back in late 2003 Century 21 didn’t even respond to the form I filled out on their website saying I was interested in relocating from London to Madison and then becoming a Realtor. It was the main reason I decided to go to work for a local broker.
@Tony Sena: Great overview of your experiences at Century 21. Glad they didn’t reply to my email back in 2003 or I might have wound up there! At least you got floor calls. I was on call for more than two years and my phone never rang once. Really makes you wonder if the calls were even being forwarded but I swear I was on the schedule!
@Joshua Dorkin: Thanks for joining the discussion! I’m glad you feel this is a trend because I am absolutely convinced we’re at the beginning of a small movement that will eventually transform the real estate industry…if and when agents en masse allow themselves to be open to the idea of disassociating themselves with name brand brokers. I wonder if the media isn’t sensing this trend too? I got a call from a lender last night all excited because he saw my yard sign broadcast on the local news – he said the camera was clearly on it for quite a long time as they talked about the local housing market.
@Shane Pollock: Thanks for your feedback on the first version of this post (I had taken a far more negative tack and it was really caustic in retrospect!). Going forward, here’s to having the courage to make critical assessments yet stay positive! P.S. I am still jazzed about having been able to refer a buyer to you earlier this week by mere virtue of a passing Tweet. If I had any doubts about the power of social networking before, they’ve now melted away! Good luck with it and please let me know how it’s going.
@Brad Coy: Thanks for the Welcome, fellow Indie! I originally had 15 points in my list but decided to keep my first post more focused and to the point. I look forward to hopefully collaborating with you to elaborate on some of the other more blatant abuses and rip-off schemes of most brokers going forward.
@Jeff Brown: Thanks for another great analogy! You are obviously one sharp Indie. I bet if the big boys are smart, they’ll all adopt Eric’s template! Fortunately for the rest of us, I doubt they have the vision to carry it out.
@Sean Purcell: Love the “broke” “rage” comment! Big franchises may dominate in terms of volumes but that will not stop the Indie wave from growing in numbers and importance. Again, I don’t suspect many other RE/Max offices operate like Eric’s and I don’t suspect many other big franchises will get adopt all the right practices anytime soon. That leaves a lot of room for more nimble players to compete. I look forward to reading more of “your stuff!” 😀
@Claudia Efthimos: Thanks for weighing in on this discussion. I now know that my former broker’s priorities were clearly profit-oriented to the exclusion of education and customer-service. As I tried to point out there needs to be a lot more value-added on the part of managing brokers.
April 18, 2009 — 6:24 am
Jolenta Averill says:
@Jim Rake: Thanks for your comments. How fantastic that you decided to pull the trigger on an LEC! I really enjoyed chatting with you and your wife Elsa. I think I was candid about the commitments involved but that didn’t seem to scare either of you off. Good luck – I’ll think you’ll go far!
April 18, 2009 — 6:28 am
Jolenta Averill says:
@Teri Lussier: You’ll never be a ditto-head! Thanks for your comments – I hope to be a source of support to you if you ever decide to go Indie.
April 18, 2009 — 6:33 am
Eric Blackwell says:
@ Jolenta – There are precious few brokerages in RE/MAX or out who do it the way that we do. It is LESS profitable. We (errr…our broker) takes risks for our agents and often get shafted in the process. What we do isn’t easy and it often isn’t fun for him. We simply have to enjoy the satisfaction that it is the BEST that we can provide for our agents and help them to see that and to attract the BEST agents in Louisville to our team. They are the only ones who will appreciate or value what our broker provides because they are the ones that can turn that advantage into commission.
It boils down to a broker who oftentimes puts the “mission” ahead of themselves (profit)and a team that he builds that is dedicated to that same mission. Our broker does that.
Upcoming post on the subject who I think will survive all this fun and why ;-).
@Jim Rake – I appreciate your analysis and insight. You are one of the funnest, most interesting and enlightening conversations that I had at BHB Orlando. Godspeed, sir.
April 18, 2009 — 6:51 am
Jim Rake says:
Eric – Re Orlando…the pleasure was all mine…now, that Brian Brady…he’s another story 🙂
“It boils down to a broker who oftentimes puts the “mission” ahead of themselves (profit)and a team that he builds that is dedicated to that same mission.”…
If I’m not mistaken, think that’s still called LEADERSHIP.
April 18, 2009 — 8:45 am
Sean Purcell says:
Jolenta,
Big franchises may dominate in terms of volumes but that will not stop the Indie wave from growing in numbers and importance
Your comment got me thinking we need some new terms. I didn’t mean to imply “big franchises” when I said brick and mortar offices. I believe the big franchises and indeed the brokerage system as a whole are dinosaurs slowly going extinct. I guess I think of “indie” as individuals and small, agile groups as teams (or firms). In any case, I get the feeling we’re both seeing the same thing when we look at the broker-based system and I couldn’t agree with you more.
April 18, 2009 — 9:59 am
Chuck Marunde says:
Jolenta, welcome to the new world. When I realized the franchise broker I was working for was not doing anything for me, literally, and he was still taking 40% of my commissions (even though I had almost 30 years in real estate), and when he wouldn’t listen to any new ideas or technology, I knew I had to open my own brokerage. Since I did, I get 100% of my commissions with the lowest overhead I’ve ever had, and that means immediately doubling my commissions or even tripling in some cases because of the overhead he used to take.
The vast majority of brokers are running their own little profit center, as you point out, and the client is not at the center of the universe, but guess what? Neither are the agents.
As my own broker my clients are the center of my business model, and guess who is included as my clients? My own agents. What a different world it is from this new perspective. Happier, more profitable, and the clients really know we are their advocates.
April 18, 2009 — 6:53 pm
Tina Fountain says:
Hi Jolenta, great first post, I look forward to many more. Two years ago I made the move and went out on my own, best move I ever made and I have not looked back.
April 19, 2009 — 7:33 pm