Mar 5, 2010
A Musical Review of Inman’s “To Be A Broker” Study
There is an interesting little dichotomy in the results of the survey that Inman ran recently, and published as a Special Report: “To Be A Broker: Charting a Course for Recovery“. It’ll cost ya some money, unless you’re an Inman Premium subscriber, but I think Inman did a great job here in putting the information together. If you care about the industry, brokerage models, and the like, you’re going to want to check out this report. So go buy one, or subscribe. (Disclosure: I am a columnist for Inman.com… so uh, if you subscribe and such, I think I benefit through that. Plus, you can see my archives on Inman.com, which might be entertaining later.)
My first thought upon reading the Report was that the sample might be skewed — after all, presumably Inman contacted brokers in its database of subscriber or some such. They have to be among the tech elites, these brokers, to be subscribers of Inman. Then my second thought was, that real estate brokers, more than perhaps any other group of business owners in America, need a remedial class on business strategy. My third thought was, hey, this might be a good blogpost!
Said blogpost follows.
What Brokers Said…
Let us first turn to what the brokers actually said in this report. They spoke about government programs, HVCC, dual agency, about MLS and Associations, about first time homebuyers, about tech spending, recruiting, and then this gem:
When it comes to competing for buyers and listings, having experienced, trained agents trumps the size of a company or its brand, real estate brokers surveyed by Inman News say.
Carving out a niche market or area of specialization was also seen as a less important competitive advantage than staying abreast of technology and conducting online marketing.
Fair enough. The report goes on:
Similarly, experienced agents were considered a “highly important” competitive advantage by 69 percent of brokers, but only 37 percent rated having a specialization or niche as “highly important” and 24 percent viewed the size of a company as “highly important.”
…When it comes to keeping agents happy, real estate brokers again emphasized training over their brand ap- peal, or even a company’s ability to provide leads and listings.
Brokers think the most important service they perform for agents is advice and training, including the mentoring market expertise they can provide, and the ability to answer questions and resolve issues with contracts, transactions and legal issues.
Interesting. So I ran a wee little survey (highly skewed, not at all scientific, and completely unreliable) on my Posterous site earlier this evening. With all of 20 results in (!) despite 360 views, which implies significant voter apathy, 40% of respondents (whole eight people) said Training and mentorship were the most important service their broker gave them.
So far so good.
But just a few pages above, here’s what brokers had to say about what government is doing wrong:
When asked what government law or regulation is needed to benefit the real estate industry, 22 percent of 133 brokers responding to that question wanted to see tougher licensing and education requirements for agents and brokers to raise the bar for entry into the business.
“Brokers ‘wholesale’ recruit, train lightly, (and) supervise even more lightly,” said a Lincoln-based broker who advocates a tiered licensing structure.
When new agents take on business they are not comfortable or competent to execute, the broker said, “the client feels the value received was out of balance, and all Realtors are branded with blame for the newbie’s performance.”
“Real estate is too complicated for many agents,” said the Pennsylvania broker who liked the state’s seller disclosures. “The bar should be raised in order to weed out part-time agents and … those who are incapable of representing their clients professionally.
“Make the admissions test harder. Raise the membership fees. Increase the number of (continuing education hours). Consumers and agents will benefit alike.”
To quote The Captain, what we’ve got here is a failure to communicate.
Making Sense, Out of Nothing At All
So on the one hand, we have brokers saying that brokers don’t train their agents much at all, and therefore, the industry, the people, nay the great nation of the United States of America, needs higher standards to have the privilege of being a licensed real estate agent.
And on the other hand, we have some 69% of brokers saying that having experienced agents is a “highly important” competitive advantage. Far more than lead generation, far more than brand of the brokerage, far more than any other factor.
Then in the same breath, we hear that training and education are the most important services that a broker performs for the agent.
Am I the only person experiencing total eclipse of logic?
Turn around, bright eyes.
A threshold question is, “Does training equal experience?”
If a broker ran training classes non-stop, every single day, for four hours a day, after two years of that training, would that agent be considered “experienced”? Or like any other industry, training is training, and wonderful in its own right, but not a substitute for experience? If you need a heart transplant, do you go with the surgeon who’s gone to Harvard Medical School, interned at the best hospital in the world with the best doctors, but had never actually done a heart transplant? Or do you go with the guy for whom this ain’t his first time in the operating room?
Presumably, the experienced agents who are such an important competitive advantage don’t particularly need the training or the mentorship. Seems to me, these experienced agents might not agree with the broker who says “my knowledge of the industry and my ability to help (agents) through their problematic transactions” is the most important service the broker offers them.
So even if we agree that training is the most important service of a broker, that only applies to the inexperienced agent who is learning the ropes.
So uh… why are brokers agitating for higher standards for licensing? Aren’t they training these agents? These newbies? Isn’t that where their value is? Who cares what the licensing standards are, since the most important value of a broker is in training these baby licensees into becoming superstar experienced Realtors, no?
Seeing as how training is the most important service, according to both brokers and agents, it would be a simple matter to look at what percentage of the total cost of operations goes into training and education. Last time I checked (with the 2007 RealTrends report, that is sadly no longer published), most brokerages were spending less than 0.5% of total GCI on training. They were spending more on office supplies.
Wow, must be some important service there, that training piece. Whew!
Have things changed? Really? I know @Properties in Chicago employs two full-time performance coaches for their agents. How many brokerages have full-time training or performance coach staff on payroll?
I know just how to whisper...
So let’s try to make sense out of what those in the To Be A Broker is saying. A broker’s most important service is training, which is valuable only to the agents who provide no real competitive advantage at all, which is why brokers want the government to do much of the training for them, so that they can provide even less of a service to those who provide no real benefit to the brokerage. o.O That’s making money, out of nothing at all.
May I, a humble observer of the industry and consultant who has never sold real estate or operated a brokerage, make a suggestion to brokers everywhere? Spend time and money on the things that give you competitive advantage — try that for a change. If that’s recruiting harder, better, stronger, faster agents, well.. do more of that. If that’s providing technology, then do more of that. Whatever it is that gets you competitive advantage, try doing more of that, and less of the other stuff. What do you think?
Competitive Advantage
It’s too bad that my column for Inman didn’t go up today, as it was supposed to. But I think it might be worth talking more about competitive advantage, what it is, how you get it, how you sustain it, in real estate. Those of you who are familiar with the works of Michael Porter already know the basics.
Competitive advantage can only be gained through one of four ways: Cost Leadership (you can provide the service at the lowest cost), Differentiation (you can provide a unique value that no one else can), Cost Focus (lowest cost to a segment of the market) or Differentiation Focus (unique value to a segment of the market). Note the emphasis: lowest, not low, and unique, not sings of different colors. And we measure competitive advantage by profits, not by market share, not by revenues, not by awards won at national conventions, but by profits.
Having experienced agents is not a competitive advantage in and of itself; you might be losing money hand over fist with a stable full of experienced agents who are on 95/5 splits and demand the world and a bag of chips from you to have the privilege of having them grace your brokerage with their presence. Having a great website is not a competitive advantage in and of itself.
Everything you do, taken together, that lets you earn higher profits than your competitors is.
So… (a) are you earning higher profits? and (b) what are you doing to earn said higher profits? Think on those; therein lies the real course to recovery, through the fire and flames of the Hope and Change economy.
-rsh
EDIT: I edited this to clarify that my criticism was meant for some of the brokers and their response, not for Inman who did the report. Heck, if anything, I think Inman did a grand old job of creating valuable information that fuels debate, and I rather think it’d be a nice if more people read reports like this one.
