The Missing Ingredient

 

We have all heard the old saying; be careful what you wish for because you might actually receive it.

Unfortunately for many realtors, they did get what they wished for

That is, they have joined a brokerage with a so-called 100% split and they have lived happily ever after… right?  Now they truly are making as much money as possible and they are in total control of their own destiny… right?

If that is true, then let’s ask ourselves a few more questions:

Why is the median income for realtors today less than it was ten years ago?

Why do agents, on average, close fewer deals at the 100% shops than they do at the standard full service brokerages?

Is a high commission split really the most important ingredient in building a financially rewarding and personally satisfying career?  If not, then what is?

Something for nothing?

Real estate industry veterans say the 100% model only works with a high volume of agents and that agents at these firms score fewer listings.

Recently, one brokerage phased out 100 percent splits within a year after offering agents the option. The broker of this company said, the high-split model amounted to “smoke and mirrors.” With less technology and marketing support, the agents getting 100 percent commission had fewer listings. “It’s an illusion for most people to think they’ll get something for nothing,” he said.

Another broker said he and his partners wanted their firm to reward agents for bringing in deals. But the company scaled back to a 70 percent split within its first year of operation. He said the 100 percent commission model worked better for part-time agents.

Bernice Ross, a National Speaker and trainer in real estate has this to say about selecting a brokerage,

“While it may be tempting to affiliate with the company that pays the highest commission split, what you are really looking for is where you will earn the most income.

For example, 80 or 90 percent of two deals is much less than 50 percent of 10 deals”.

It is all too common for agents that are determined to make the most money and who opt for the 100% option to find that they are making less actual “net” income. These brokerages must recruit a significant number of agents to make any profit at all and the more agents they recruit, the more the brokerage must scale back on personalized support to the agents which means less opportunity for every agent.

Looking closer at the real numbers we find that one of the largest 100% shops in the Southwest Region, with thousands of agents, shows average sides closed annually per agent at about half the National average.  Clearly, not what these agents had wished for.

What is the missing ingredient?

As it turns out, there appear to be many factors that can lead to greater success at a brokerage including the quality of training, lead generation, marketing support, technology and many other important intangibles. But, in many brokerages that offer some combination of those services, productivity is not always at acceptable levels. What then is the difference maker and what is it that produces the best results for agents and the brokerage alike?

The highly successful brokerages that offer the necessary support and one other key ingredient seem to have hit on the right formula. This combination of services and culture that propels mutual success is probably best described as “Community”.

Community

Community is that powerful intangible that offers agents an opportunity to become part of something bigger than themselves where the support goes beyond just tools, technology, training, and lead generation. Agents need deeper business training and they need a community of peers that share in the mutual experience of a collaborative culture.

Peter Block, the author of the acclaimed book Community, The Structure of Belonging has this to say,

“The essential challenge is to transform the isolation and self-interest within our companies into connectedness and caring for the whole”.

It is very difficult for a brokerage that gives up almost 100% of a commission to actually have any profit left to invest in the infrastructure, tools, training and culture that help make a realtor truly successful. When an agency must have hundreds of agents on board to make ends meet, the result is that culture takes a back seat and isolation sets in. We truly need something bigger than ourselves to succeed.

Bernice Ross also points out that affiliating with a “dead office” means you will have to work that much harder to succeed. Search for the best combination of commission split with the most robust offering of tools, training and one-on-one assistance.

To make a more informed decision about a prospective brokerage an agent should focus on determining the level of culture and community that has been developed, as well as the training, services, and support that is offered, and not primarily on the commission split.