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2010-09-07 22:07:45

Old Brokerage Model = Underwood Typewriter - One and the Same

In this article I want to address the different business models in the Real Estate Industry today. Obviously I will have a biased opinion, but I promise to try my best to be opinion neutral.
 
Let’s start with the 100% model that came out 30+ years ago. They were a game-changer 30 years ago. They essentially sat the Real Estate Industry on its head. ow?I’ll never forget the first time they tried to recruit me. I was a hotshot young Realtor® in my 20’s living in Colorado. At the time I couldn’t wrap my head around their business model.  

That model has always delivered an exceptional product to their Realtors®. And by doing so they attracted the best of the best. 

What’s changed recently though is due to a “perfect storm” in our industry. This perfect storm is the economic crisis, the housing meltdown, and the rise of technology, which all came together at the same time. As a result, many of their agents are finding it harder and harder to pay out the top fees to associate with a Brick and Mortar office, and this business model was conceived around Brick and Mortar. This will have to change in the future for this model to hold onto their number one position in our industry.

Now let’s take a look at the fairly new Profit Sharing Companies. They took off quickly and built almost a cult following. Many of us have heard one off their agents say they bleed their colors.

Their problem once again is high Realtor® fees. The Profit Sharing agents must pay $18,000+ yearly before they get to keep 100% of their commission.  That just doesn’t work in today’s reality. As a result you see it in the numbers. They have lower production numbers than many of their competitors because the better Realtors® are going where they can keep 100% of their commissions from day one.
 
The more traditional model companies are facing some very difficult and trying times. Realtors® just are not willing to pay 20%, 30% or even 50% of their commissions any longer to a Broker. There is no reason to do that in today’s world. How these more traditional companies will survive is anyone’s guess. As I have stated many times -you can’t pay the Realtor® 100% and pay the rent. It just can’t be done.
 
All of these companies are run by the very best management in the industry. Some will make the changes that today’s reality requires and others won’t. Only time will tell.
 
Now we move on to today’s game changer, the VIRTUAL CULTURE. The VIRTUAL CULTURE wasn’t feasible just 5 years ago. Only through Internet technology has it become a feasible business model. In the VIRTUAL CULTURE, Realtors® work from their home, or use an executive suite, or even open their own office. In exchange they get to keep 100% of their commission for a small monthly fee. Because of technology, the VIRTUAL CULTURE can give the very same support as the more traditional models, only via the Internet.
 
But the VIRTUAL CULTURE also took into account the Broker in creating the model. The Broker in the VIRTUAL CULTURE has zero expenses and everything he or she makes is pure net profit.
 
It will be interesting to see how all these dynamics play out over the next five years.
 
 

James A. Crumbaugh III is CEO of Allison James Estates and Homes, a National Internet Based Real Estate Brokerage. You may reach Mr. Crumbaugh at jcrumbaugh@allisonjames.net

 

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