In Part 1 of this blog we discussed the current demise of the old school traditional brokerages and the rise of the 100% commission internet brokerages. In Part 2 here we will explain in detail exactly why the brick and mortar brokerages are collapsing. I am quoting below from the book: Death of the Big Box Realty.
The old—school big box realty franchises are dying. Agents don’t
want to work harder anymore; they want to work smarter. They
don’t need the corner offices and lukewarm leads; they can generate
leads themselves with the targeted social media outlets. advertising
opportunities such as Facebook or Realtor.com.
Even some non—franchised independent companies offer their
agents only 50-60% commission and some agents are comfortable
paying it. with the misconception of that being the only way to
“learn” the business. These generally are the five to ten broker—agent
shops with strong “hand—holding" or training from the brokers,
which prevents them from scaling up and growing due to the intense
time involved in nurturing their sales associates.
So why give up 15% ~ 50% of their hard—earned commission to their broker?
Although the 100% commission model might not be for all agents, I argue that
it should be due to the advancement of social media and technology that
allows every broker to achieve competitive pricing and service offer-
ings similar to the big box realty players.
Proponents of the big box, broker—centric models argue that the
100% commission firms offer no support or training, but there is
insufficient evidence to back up these assertions. Some propaganda
techniques I have seen include brainwashing the prospective real-
estate agent to “look out" for the 100% commission brokers trying to recruit
them, for their supposed lack of value—added propositions. l don't blame them
for trying. but it’s very difficult to compete against price.
The only thing the Big Box real estate companies have left is to try to
throw Product A “under the bus." This, unfortunately, is the last
resort for big box realties to stay alive, so they’re often quick to bad-
mouth the 100% commission broker model.
The marketplace is ﬁerce. Big box realties have it tough with
long franchise commitments, six to eight percent of every dollar
going off the top to someone else's brand, no individual autonomy,
and fierce competition. From 2010 to 2015, l recruited dozens of
large franchise agents. who repeatedly told me that they have to
pay enormous fees from their own transactions that they generated
themselves. Brokers pass along the six percent to their agents, then
allot their 70/30 or 80/20 split, and then they take their transaction
fee, then their monthly fee, and then their technology fee. At the end
of the day, the agent is left with, at most, 50% of their initial income.
The big box realty franchises, unfortunately, have to operate like
this because they are vested. How else could you justify 50% of net
to the agent and to the brokerage without the lavish office, lead gen-
eration, corporate trainings, and salaried employees? it's a “lose—lose"
scenario, which can often cause both the real—estate agent and the
broker/owner to hang up the shingle and call it quits.
Therefore, the only thing which these companies can do is
to sell the vision the old way using “smoke and mirrors.” which
includes dozens of pep rallies, guest speakers, hand—holding semi—
nars, networking shindigs, everything to keep the glue sticking to
both sides of the puzzle. Unfortunately, within the first year of their
employment, the rookie agents often get caught up in the hype,
or the “upsell,” but eventually seek alternative solutions, while the
100% brokers sit back and wait to