I mentioned this in another thread and would like to hear your input.... (lets not get too ugly, passion is good to a point)

We know that the tradition office model has faced challenges over the last 20-30 years. We have seen the Fee for service, flat fee, internet only, and variations on the MLM setup come in and fizzle. I think the last big shake-up was the introduction of the 100% office 30 years ago, and that model has had its challenges lately.

So what would it look like? I have thought that the ideal model probably would turn the "Broker" into the lead prospector, but than I have visions of a scene from "Glengarry Glen Ross" .

I see the broker providing a proven prospecting system, and the technology to back it up, but agent splits going down. That's kind of what I did when I had my team, but I was not a broker.

This business is all about consistent effort to produce consistent results, but with independent contractor's you can not require the effort, just ask the Zip people. so the traditional broker can't justify the added expense.

So no judging, no bashing, lets just try to crowd-source an ideal business model, bring up an idea, well shoot some holes in it and lets see what we come up with.

Wow. I'm surprised there hasn't been any responses to this yet. Well I think the ideal model is the model that you feel passionate about. The problem with the broker generating the leads and then taking a higher split is that eventually the agent wants more and knows how to do it now and will go off on their own and you have to constantly hire and train new people.

In my mind, the ideal is to have buyer's agencies and seller's agencies. By specializing I think that the clients benefit from this laser like focus of the agents.

Guru, I agree with your statement about passion, that's one of the reasons I have been thinking about this. I enjoy this business and looking at the future will ensure that I can stay in it.

I also agree with the buyer/seller specialty, whether you worked it as two brokerages or designated agents. The specialist would benefit the consumer, which in return would benefit the brokerage. The downside I see would be that listings generate buyers, so if you worked it as two brokerages you would have to have a firm agreement for advertising between the two.

I see what you are saying about the commission splits, but this business is full of people that can't figure out how to generate there own business, would there be enough a benefit to do it for them and let them do what they do best... work with the people.(most of the folks on this forum are the ones creating their business, but we all know some of the others)

I think the topic is a little scary to a lot of us, we know the business is constantly changing but we really don't want to facilitate more change. We are the practitioners, we know much more about how this business works than the wall street types. If we don't look to the future, than they will and that won't be good for us or the consumer.

I believe Gary Keller nailed it on the head in the Millionaire Real Estate Agent. The more I've grown, the more I realize that he was right.

millionaire agent-by gary keller the 7th level..should be the goal

I tend to avoid real estate specific books, but I suppose I need to read this one.

I was thinking more along the lines of the ideal office model, and I think that the book would be more along the lines of the agent model.

Essentially the power agent, or team model has come out of the 100% office. And its a good flexible model for now, but like everything else in this business that will change. For a long time I have thought that this business is terribly inefficient. A few of us have learned how to prospect and market to generate our own business, but 70% have not. The medium gross income for an agent is somewhere around $35,000 which puts their net somewhere at a sub poverty level. As top level agents, we know that 25 sides a year is a minimum production level. In most markets that wont keep you fat and happy. Yet the best offices are averaging under 20 sides per agent. I think the Keller Williams numbers were around 9.6 per agent last year (I know, it was a bad year) and I think they are the second biggest franchise right now.

I think its safe to say that the future of this business is fewer agents doing more transaction sides. Now with that in mind, if you could build any kind of office structure what would it be to help generate more transactions per agent, and still make it worth while for the broker. I don't think its unrealistic to think that in the future we will consider 50 or 75 sides a minimum production level for an agent, there are agents on this forum thinking that way [u]now[/u]. At that production per agent the 100% and power broker models fall apart (they still will work for the agent, but not for the broker).

Really we can't see the future, but if we try we can continue to lead our industry.

A little more background, to understand why I am asking this...

I am returning to the business after many years in an unrelated industry. I was a RE/MAX agent for 12 years, I was never one of the big guys, but I had a very respectable business. I had a small team and made good money. While interviewing offices, it amazed me that nobody seems to have figured out a better way to approach this business. I know the basic tools I need, I have a pretty good prospecting system and I was really looking for an office that would support those. After meeting with the players in the local market I selected an office that provided some nice stuff, but would stay out of my way and let me do my business.

I think its just plain wrong that we are forced pay a brokerage a lot of money, and our expectation is that they stay out of our way. I would consider opening my own office, but I want to sell houses, not manage people. and I just haven't seen a model that works any better than whats out there.

The 'future' of that would be great, but it will never be unless licensing requirements are raised.

[quote=VABroker][quote=Dodger52]...I think its safe to say that the future of this business is fewer agents doing more transaction sides.[/quote]

The 'future' of that would be great, but it will never be unless licensing requirements are raised.

[/quote]

Some states have transaction requirements for brokers license, If we required that for sales people that would go a long way. Say 25 transactions in 24 months to move to a full agent license, and than a requirement to maintain 6 per year after that. but that would shake the industry up too much, plus limit the number of people NAR could collect from.

The ideal office model would have minimum transaction numbers, but I don't think you can do that with an independent contractor.

I would say the next level of the Millionaire Real Estate model would be an actual business, run like a business.

Have a call center of 8-12 full time prospectors who are focused on regional zone with a designated person for lead followup when you cant get a laydown appointment.

Designated Listing agents and Buyers agents (maybe they can be 1099, but not the listing agents).

Everyone W2.

Expand into other geographic areas/counties. and just expand the call center in a central location and get some small office space for the listing/buyer teams.

That would be the 7th, 8th, and 20th level.

Essentially a self owned systematic version of this...

http://www.youtube.com/watch?v=qqNAsko-se0

So at this point here is what we have...

a brokerage (office) filled with designated agents, listing only or selling only. I would probably set up teams, one listing agent to three selling agents with a pool of clients so that the buyer/seller wasn’t getting shuffled from person to person.

Initial prospecting is done by w-2 employees (cold calling, Internet SEO, CRM etc)(some licensing authorities do not allow non licensed people to prospect so you would have to cover that in some markets)
So the agent is free to only work with the actual buyers and sellers

Would have to have an admin staff, to handle all the day to day stuff and coordinate the marketing effort.

Would probably need to have a closing coordinator, paralegal type person to handle contract specific administration. And may consider having an onsite attorney to represent the clients or the transaction depending on local custom.

The agents have minimum production levels, which by today’s standards would be pretty high.

As an agent, with no prospecting expenses, no marketing expenses, and being spoon fed buyers or sellers. What do you need to be paid… you still have all the legal responsibilities of a licensed agent and the liability that comes with that. You still have to make sure to honor your agency obligations, and stay on top of current laws. You still need to maintain the relationships necessary to do this business. Figuring you will be responsible for a minimum of 50 transaction sides a year, what is fair compensation in your market.$50k or a $100k base and then some commission?

A previous poster mentioned that once an agent had gotten established they would want to leave and do these things for themselves. But if they could not duplicate all of the behind the scene work, (call centers, computer professionals, etc)would they still be likely to leave?

I did a business plan off this model for what I am planning to grow into:

A listing agent should get a 500-600 a week draw vs. commission $50 dollar bonus for getting the listing and 15-20% of the gross commission income when it sells on top of a quarterly 1-2% based on profitability (profit sharing). The point is that they should have 10-12 listing appointments a week.

Just make their schedule Monday - Wednesday, Thursday off, Friday on, and their choice of Saturday or Sunday off depending on their preference or religion.

Have the prospectors work Monday - Thursday 10am - 7:30pm and Friday 10am-2pm.

Have a meeting with everone at 1pm Friday to hand out awards, paychecks, and review the weekly numbers and pipeline / appointment / conversion chart.

I would think 2 prospectors to each listing agent would generate a ton of leads if you had a designated and organized follow up person.

In earlier versions of the office the main realtor would be the follow up person and he/she would do the cherry listings a few times a week to keep it house money.

With the buyers agents you would have to comp them higher percentage to deal with their lower conversion, like 50% with a draw and a bonus also if they hit target.

If you don't want them to get independent and leave you, make sure you have a iron clad do not compete with previous leads.

Also show them this on a regular basis and why they should stick with you making 80-100k a year with a schedule.

http://www.realtor.org/library/library/fg103

Median Gross Personal Income of REALTORS®

YEAR
2010 - Agents - $26,600
2010 - All Realtors - $36,700
2010 - Broker/Owners - $49,100

The draw against commission gets you into some labor and tax issues,and there have been some of those issues raised lately with brokerages. I think an actual base salary would eliminate those issues.

That being said if you are offering a base of say 30K would you attract the best of the best or do you really care?

That was my thought behind a higher base salary. An agent making $120k gross in the traditional setting would probably have to think pretty hard about turning down a guarantee of 75 or 80k with the potential of another 20-30k of commissions or profit sharing on top of that.Those are the agents with good conversion rates, and the potential to make money for the office. Of course you will have a line of interested agents that are struggling to weed through.

On the other side of the same argument you need to keep your team motivated, and paying too much base may restrict that.

I believe the broker/owner has been priced out of the market in our area. They can make money, but they need bigger offices since 100% is so popular around here. The broker/owner can provide value in two ways. Keep agents out of trouble or be the rainmaker. If you're the rainmaker, then you might as well be a small office and treat it like a team. If you're not the rainmaker, then your value is mostly as a landlord to agents. We've been trying to make the broker/owner model work for the last two years. Last week we decided to hell with it. You can't inspire lazy agents, and the good ones leave once they know the business. So we will just make it rain.