A couple of weeks ago, I ran across an interesting little book review/think-piece on realtor.org, the official site of NAR, called Re-engineering The Real Estate Sales Process. I’ve been too busy to sit down and think about it, but have a bit of time this morning, so thought I’d get into it a bit.
This is a “big think” kind of a piece, so it will be of very little impact on your day to day hustle of trying to sell real estate.
For the TL;DR crowd, the bottomline:
- This kind of re-engineering, I think, is inevitable
- It’s already happening in some top agent teams
- It will mean the end of the independent contractor myth, which in turn means a sea change for what the real estate industry looks like
I’m likely to be wrong on at least 75% of these forward-looking deals, but… hey, it’s fun and it might get people thinking.
I Guess There’s a Book?
Like I said, the original article on Realtor.org is a book review. I haven’t read the book, called The Sales Development Playbook. So I’m just going by the brief description from the post, but I gather that the book isn’t intended for real estate companies. It’s intended for traditional companies with a traditional salesforce.
It appears that the main recommendation of the book is to specialize individuals into a “sales team”. This review on LinkedIn provides a bit more generalized insight into what the author, Trish Bertuzzi, is suggesting. I’m certain there are dozens or hundreds of additional insights, but we’re not here to talk about those. We’re here to look at application to real estate.
Doug Devitre, the writer of the book review/article, tries to adopt the recommendations to real estate:
The focus is here is on building a team to field the roles that make a transaction work. These include:
- The lead research role is responsible for streamlining the pre-call process.
- Sales development reps make introductions, set appointments, and create opportunities.
- Inbound sales reps are responsible for lead qualification.
- Account executives close the deals, drive revenue, and are the highest compensated out of the four.
At the traditional real estate brokerage, these roles are one [and] the same.
Devitre thinks that the better approach is what Bertuzzi recommends: creating a “sales team” with specialization-by-role within it. He then suggests that the way for real estate brokerages to “make the transition from the agent-centered model to the team model with the least disruption” is to do the following:
- Agree with specialization. Until you understand “the why,” you will never be able to delegate “the how.” Once the team has more than four members, then you can start to specialize.
- Attitude affects the role. Different people handle rejection and interruptions in different ways. Being able to bounce back from a failed listing appointment takes much more resilience than rebounding from a hang-up of an unqualified lead on the phone.
- The salesperson’s comfort level with the consumer shapes the role. It’s one thing to target your sphere of influence. It’s another to target a relocation portfolio of a Fortune 500 company.
- Messaging matters. An inbound sales rep asks, “How can I help you?” whereas the agent in the field helps the customer think differently about the value proposition.
Honestly, I’m not sure how these four apply to real estate directly, but… there it is.
On Specialization in Real Estate Sales Process
On the one hand, it is a fact that we are seeing increased specialization in the real estate sales process within agent teams and within some brokerages.
For example, the “inbound sales rep” role that Bertuzzi and Devitre talk about exists today in real estate, especially with teams and brokerages that do a lot of internet advertising. Brokerages with “e-Teams” that do nothing but screen internet leads to separate the wheat from the chaff are not uncommon. Certainly, the more successful agent teams implement various ways to screen leads.
Many of these “initial screening” or “lead incubation” people also do the “sales development rep” role. An email comes in inquiring about 123 Main Street. The e-lead coordinator responds, asks some basic questions, determines whether the buyer is serious or not, determines timelines, etc. etc. and then passes on the hot lead to an agent. They might even make appointments for the lead agent.
On the listing side, some of the more successful agent teams today actually employ salespeople whose job is to call homeowners to try to set listing appointments for the agents on the team. That’s basically the sales development rep role.
The “Account Executives” role, I suppose, is the actual listing or buyer agent on the team, who goes out, works with the client, and gets the deal signed and drive revenues.
I suppose the “lead research role” also exists in many brokerages and agent teams, although I don’t think I’ve ever seen it articulated like that, or separated out into a role. I mean, one could say that some of the “predictive analytics” companies out there are promising some variation on this, by suggesting to their client realtors that homeowner at XYZ might be ready to sell based on their algorithms and data deep dives and so on. But for the most part, “lead research” isn’t a big separate thing in real estate since what motivates people to get into the market is usually a major life event of some kind: marriage, divorce, birth of children, death of family members, new job, etc. etc.
As I see things, this kind of specialization is already happening, and is in fact inevitable. The days of the generalist solo practitioner who does everything are truly numbered, and I wonder if it ever existed. It’s not like title and escrow companies that did the bulk of the heavy lifting on the paperwork side didn’t exist prior to the Internet. It isn’t as if brokerages back in the newspaper advertising days didn’t have “desk time” for newer agents to work inbound leads.
Whatever the past may have been, consumer expectations and technology-powered competition almost demands some level of specialization for all but the most niche or part-time broker/agent.
Things to Consider: What Are You Selling?
The first thing that comes to my mind is how different real estate sales is from a traditional sales job. (Exception: new construction sales, as we’ll see shortly.)
The traditional sales job is trying to sell some product or service that is unique-ish to the company or organization. The employer either makes some kind of a product that it thinks customers would want, that it thinks is special or unique compared to competing products in the marketplace, or is cheaper or what-have-you. The sales job in that case is to find customers who would benefit from the product, get in touch with them somehow, and then communicate the value of that product in some effective way. The same goes for services, whether legal, medical, whatever.
Real estate sales, however, is inherently a middle-man service. Except for homebuilders doing new construction, brokers and agents have nothing to do with the houses that would provide value to the buyer. They didn’t build them, or remodel them, or even own them. The homeowner/seller owns the property; the agent’s job is to find a buyer for that property. (If representing the buyer, the agent’s job is to find a property that matches the buyer’s wants and needs and budget, then get the buyer into that property.)
The biggest barrier to proper analysis, I think, is that people inside and outside the industry think that a real estate agent’s job is “to sell houses”. That’s simply not true. The real estate agent’s job is to sell services.
This isn’t the place to get into the details of what those services are or ought to be. Generically, though, we can suggest that services must either (a) maximize value, or (b) minimize pain, or (c) both.
Things to Consider: Agent Teams Are Likely Employers in Labor Law
Over the past couple of years, I’ve gone pretty in-depth about what’s happening to the 1099 independent contractor status. You can just google or start here and here. I’m on record at this point as saying that something has to give on that front, and that I think the future of real estate is likely to be much more W-2 employee driven than it is today.
The recommendations from Bertuzzi’s book, which Devitre reviews favorably, and are in fact being implemented in some ways in real estate today, all more or less require that the people in those specialized roles be employees. One of the dangers that the super agent teams of today are courting, probably unaware of it, is that in all likelihood, a lot of the roles on their teams will fail any reasonable independent contractor test.
For example, take the “inside sales rep” position in which the job is to call on homeowners, expired listings, and FSBO’s to try and get a listing appointment. That position may require a real estate license, depending on what is discussed and local laws/regulations, and it could be a very powerful role in a successful team, but there is no way to argue that person is an independent contractor.
Same goes for the “Account Executive” role in the context of a team with a sophisticated process from start to finish. Within real estate, the fiction is that the “Account Executive” (i.e., the real estate agent) exercises independence, does the deal and services the client independently, and simply shares the commissions with the broker and/or team leader in exchange for the lead referral and/or support services. That fiction doesn’t work in a “sales team” type of environment where the agent is but one part of the overall sales team, and one important function within the overall sales process. Primary reason is that the Account Executive has to have limits placed on what she does, in order to make the rest of the team function: if someone else is doing the “lead research role” then the agent cannot, or the whole machinery falls apart.
Here’s what is so interesting about all of this. The Agent Team has emerged as the dominant force in the industry, primarily because they implement exactly the kind of specialization and job requirements that brokerages cannot, because the agent team controls the lead flow to the buyer agents and even listing agents on that team. Brokers thus far have avoided having their agents classified as employees, whether through technicalities in real estate licensing law or through out of court settlements. But the Agent Team is completely, 100% vulnerable to having its people sue for employee status, because it is not a brokerage and therefore outside the “protections” of real estate licensing law.
Consider, as an example, a typical setup between the team leader of an agent team and one of his buyer agents. The buyer agent is assigned buyers who flow from the team’s marketing efforts, whether they are internet leads from the team’s listings or sign calls or whatever. The buyer agent must use the team’s CRM system to report on progress, activities, etc. etc. She has to refer ancillary work — mortgage, title, escrow, etc. — to the team leader’s relationships and arrangements. She must follow the workflow process of the team, or the whole process gets disrupted which defeats the purpose of the team in the first place. She must uphold the team’s brand promise and image, or she will be dismissed. She must attend training or sales meetings of the team, or she’s dismissed. The buyer clients she works with aren’t even “her” clients; they are the team’s clients in the team’s database. That’s an employee by any definition of the term. And since the team leader and the buyer agent are both mere licensees underneath the same brokerage, the team leader enjoys no statutory exceptions/protections flowing from real estate license law.
Productivity and Efficiency Rule the Day
Thing is, at the end of the day, these specialized, optimized agent teams with good workflow and good process and good common systems and technology platforms are killing it. They’re simply more productive and more efficient than the loosely organized chaos that is the modern real estate brokerage. Being overly concerned about 1099 status and what you can and cannot tell agents to do sharply limits the effectiveness of that kind of operation, and the well-organized teams are taking market share and delivering smooth and seamless experiences that buyers and sellers want.
So that is the future of the business, as far as I’m concerned. Specialization in the sales process, which is already happening, is the future of the business. Sharply defined and limited roles that lead to greater productivity and efficiency as a team are the future of the business.
The upshot is that every broker, every team leader, every franchise leader must therefore have a strategy in place for the inevitable death of the independent contractor business model. As we have discussed time and again, and as others in the industry have talked about at length, the employee-model of real estate changes just about everything.
On the one hand, the employee-model allows for the kind of productivity and efficiency that will rule the day, because those deliver the kind of experiences consumers want, and the kind of financial performance that businesses seek. On the other hand, labor costs will become a real concern for real estate, and the various superstructures of the industry such as Association and MLS membership will all take a major hit.
Of course, those older and wiser than I am are free to dismiss this as just another rant or fantasy scenario. I’m quite used to it. 🙂 Because nothing changes in real estate. Until it does. And then the change happens overnight and there will be a sharp difference between those individuals and companies that have chosen to get ahead of the curve and those who chose to play catch-up.
The choice is yours.