Today’s post comes from Ted Mucellin, the COO at Houwzer. Click here for his bio.
Once upon a time, brokerages were the main lead producers in real estate. A long-time career manager once told me he remembered a time 30 years ago where he handed out 90% or more of the leads that his highly producing office closed. Times have changed. Over the years, real estate agents, through their “sphere of influence,” including contacts, friends, family past clients and referrals, have grown to the be true business generators. Generally speaking, in today’s market one finds an agent, not a broker. Home buyers/sellers seeking agent representation don’t call “1-800-Brokerage” or walk into a brokerage front door like they might have 20 or 30 years ago. They go online and/or reach out to their network and find an agent they feel comfortable with or that someone else vouches for. Often they aren’t even very aware of what brokerage the agent is with and don’t really care that much either.
Real estate has become an industry where the agents are the real producers and “units” of business. As far as brokerage ownership and management, it’s become a “tail wagging the dog” situation. Agents transfer between old and new companies, and then back again, seeking better deals, better splits, better coffee machines. The result is that brokerage models are being pushed to the lowest common denominator (in terms of cost to an agent). Which brokerage will charge the agent the least? Which brokerage will do the most to grow the agent’s personal business or give them the most in their package, at the minimum price, in exchange for staying with that company with their business?
Currently, statistics show that regularly over 70% of newly licensed agents fail industry-wide in their first 12 months. In my experience working with hundreds of agents, a good number of which ended up in that 70%, either those agents did not have the ability to self generate leads or they were unwilling to do the amount of sometimes intense and often expensive activities that created leads. Yet at the same time, many newer brokerage models, driven to keep the agents (who did succeed and then squeezed the brokerage profits down) from leaving, are not able to bear the costs to help agents lead generate other then coaching them to do it on their own. What’s lost is the idea that, when it comes to marketing, “the whole is greater than the sum of its parts” effect, where a brokerage could pool resources and advertise for their entire agent roster in ways that no agent could do on their own.
And believe it or not, brokerages are hurting. The average real estate office nationwide makes only 2.5% profit annually. Because of this, brokers are either adopting new models or trying to tweak the old ones. I worked for a company that tried to very clearly spell out the minimum it did, for the lowest cost possible, and what a realtor had to pay for on their own or develop on their own – and then they taught that model and the agents sunk or swam on their own. I worked for another company that tried to not be the cheapest on the block, and instead, used that revenue from agents to do group marketing that sometimes led to good leads and sometimes didn’t – all depending on how the agent used what they got. These models worked great for a few agents, but none of them have it all figured out.
I came to Houwzer because I was blown away with their new approach. Technology – both for communication and for disseminating information about properties – has completely changed the game. Because of this, the relative cost in both time and money to handle a listing is significantly different than working with a buyer. A good agent guiding sellers, aided by a great admin and marketing team can handle – capably and professionally – a large roster of listings. Look at any company’s training and they will extol the virtues of getting listings, and this low time cost is one of the main reasons why.
Because of these truths about technology and working with sellers, Houwzer represents sellers for 0% – and just a small transaction fee if/when the sale closes. Doing so has created a good number of listings – even in slower seasonal markets – and led to tons of buyer leads from them. Internet buyer leads. Open house buyer leads. Phone call leads. You name it.
Our agents all average at least one transaction a month, including our two newest hires who have combined done more than 10 transactions (closed or pending) in their first 4 months. At my previous brokerages, the production of these agents today alone would put them atop the “rookie of the year” standings – and they still have 8 months left.
I have never worked at a brokerage like this – where the number one challenge of the day seems to be how to deal with all the brokerage-generated leads. And the effect on the Broker-Agent-Customer relationship is astounding. Houwzer is able to have a different kind of relationship with its agents. They are salaried with a bonus structure. They get health care. They are given leads by the company – in fact the company cares more about the agents working its leads then it does about agents making it on their own by developing their own leads (which, again, 70% or more fail to do industry-wide).
Having worked at multiple brokerages, and helping those businesses, as well as countless agents, teams, and mega-teams, work to grow and prosper in the market – I am truly excited to help this new idea spread.
It seems far fetched at first, but when you think about, this basic idea – 0% listings to create buyer leads – drives successful agents with full rosters and health care, a chance for a real profit, and a great consumer experience by trained, full-time employed real estate agents and a professional, highly efficient team.
Disruptive? Sure. The future of brokerage? Absolutely. By the way, we’re hiring.