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The real estate broker model is broken

By January 19, 2015 One Comment

Ladies and gentlemen, the broker model is broken.

The brokers’ view of their value to their agents and the value that agents see in their brokers have grown so far apart that a radical change is needed.

Brokers look at their businesses as though agents are working for them. Most even say it out loud, in words, in corporate culture and in their state of mind. But this is not how agents see (or wish to see) their own business.

The vast majority of agents are independent contractors. An agent runs a personal business under the umbrella of another business owner — the broker. In theory, the interests of these two business owners should be aligned, potentially leading to a collaborative formula where one plus one equals three. In reality, for most agents, one plus one equals 1.5 (broker) and 0.5 (agent).

Naturally, brokers will not step forward and say there is something broken in this model. They would be shooting themselves in the feet. It is up to agents to raise the flag and create a broad, deep dialogue about how to rebalance the agent-broker relationship.

But agents are not in a position to step forward. They are busy maintaining and nurturing their own businesses, they are obliged by regulations to work in a certain frame, and they are afraid of annoying the broker — the one who controls their commissions. Many are struggling to make it through the month, and painfully so. They are too used to working according to the same model that the industry has dictated for too long. They simply know no other way.

It takes a great deal of frustration and even anger to try to change an unfair reality that on one hand is harsh at times — and on the other hand brings food to your table.

Let’s talk about the real role of the broker: empowerment. It’s a wonderful word with a meaning that spreads far beyond specific action or tools, a word that symbolizes a business philosophy.

Besides the obvious duty of the broker in providing a layer of inspection and protection for the agents and their clients (a role that should not be undermined), a truly valuable broker is one who grasps the meaning of empowering agents.

Times have changed, and the truly valuable brokers are those who push their agents forward — who motivate them, train them, educate them, make them more responsive and assist them in becoming more effective.

Valuable brokers are those who provide the tools to help agents become more professional, the ones who create a sense of community amongst their agents where one can impact others and benefit from the input of the whole group. These brokers put their agents’ business ahead of their own business.

All these lofty words can be broken down to the specific daily actions, technology tools, leads, app features, web exposure, means of communication, interactions with clients, ways information is displayed and better agent business terms that brokers provide. Brokers simply cannot compete with their agents; there is an inherent discrepancy in an office where the owner competes with the people he is supposed to be assisting and who are generating his own business). We need a new balance in our industry.

Agents need to ask themselves these simple questions:

  • “Am I happy?”
  • “Am I paying too much to my broker?”
  • “Am I getting what I deserve?”
  • “Am I controlling my professional destiny?”
  • “Am I a part of something significant?”
  • “Do I have a competitive edge?”
  • “Will my business survive and prosper as technology advances?”
  • “Do I need a change?”

We would be naïve to expect the people who benefit from this status quo, the brokers, to lead the change. They are well off as it is. The change must come from the ground up, from agents who realize that there is a different way, that they have the power to change their own destiny, and that it is up to them to redefine the balance between commission splits and broker resources.

Tamir Poleg is the founder and CEO of Real, an innovative technology powered brokerage.

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