#212 Mail-Right Show We Discuss How to Choose The Right Brokerage
There’s a lot of choices when it comes to brokerages from the national real estate franchises, to large regional privately owned and small boutique brokerages then we have small local power teams of four to five agents with a lead generating lead agent.
The landscape is really changing in the brokerage area with a lot more options for the agent which is great but also make choosing the right brokerages more confusing. In this episode of The Mail-Right Show, we try and give some clear advice on what might be the best option for you depends on where you are in your real estate career.
Jonathon: Welcome back folks to the Mail-Right Show. This is episode 212. I’ve got my great co-host Robert Newman with me. This is going to be an internal discussion show. We’re going to be discussing how you choose the right brokerage for you. The superhero real estate agent, so Robert, would you like to quickly introduce yourself to the new listeners and viewers?
Robert: I would love to; my name to those that are new to our audience is Robert Newman. I am an online marketer and I am very unusual in that I have been specializing in real estate, residential real estate for the last 12 years. I have blogged about my journey and a lot of things I’ve learned. I’ve blogged about a lot of real estate platforms that I’ve taken a look at. And you can find most of that information on my firstname.lastname@example.org.
I’ve also found my own real estate marketing company which is inboundREM.com inc. Please, not everybody be just astounded at my creativity. So I’m looking forward to getting into this discussion today. It’s going to be a one that we have literally never talked about. John and I have done close to God, 70 shows together now, so 80 shows or something like that, so it’s going to be cool.
Jonathon: Probably one of the longest relationships you’ve had Robert.
Robert: I’ve had longer relationships than that.
Jonathon: Rob I’m only kidding.
Robert: I’ve had relationships that have lasted 71 episodes.
Jonathon: There we go. Robert’s had a very busy morning so it’s great that you could join us. Rob, so on the subject, how do we start this conversation, Robert? What should, what I think is the kind of new agent, there’s the agent as a couple years in and then there is the agent has been in it maybe three to four years? And I think at those different stages you’re probably looking at different types of brokerage. First of all, would you agree with that?
Robert: I would agree with it. And so guys for all of those who are listeners, because there’s going to be a wide variety of skill and experience level and there is a lot of turmoil. The reason I wanted to talk about this topic today is that there’ is a huge amount of turmoil happening in the real estate world primarily because of Compass. And the reason that Compass is turning everything topsy-turvy is that Compass is making some incredibly aggressive offers to brokers.
So most likely most of you are agents and your boss or your team manager’s boss, your boss’s boss is getting incredible deals from Compass. And if everybody wants to know, I’ll pull the curtain back and I’ll tell you what the incredible deal is. They’re actually offering stock in the company, in the core company as part of compensation packages for top real estate brokers, which is why so many top flights, small and independent local brokers are actually moving their flag over to Compass.
Because why not have shares of a larger company publicly held company that’s doing apparently so, well as opposed to continuing to struggle along as an independent? Which then raises the question if you’re a small broker or if you’re an agent, how do you make those decisions?
So John and I are going to discuss the ins and outs and I think John, the place that we’ll start if you don’t mind, if you’re not going to push back on me, which you almost never do. Well not in a real way. We’re going to talk about; first, we’re going to list off the top six companies. And then when I suggest that we do is we talk about the differences between working for a major brand, which would be one of these top six or working as an independent from an agent perspective.
And then maybe we’ll have a small dialogue, if you’re okay with this also about what if you’re a broker. Then what are the pros and cons that you and I both know about in terms of these brands? So–
Jonathon: That sounds great, but also, I think there’s the kind of high bred where I see a lot by agents that have to be with a broker, but they evolve their kind of brokerage in a brokerage. If you understand they’re kind of, they have their own power team. They’re producing enough leads that they can’t kind of way themselves or they got coupled junior buyer agents or they might have a couple buyer agents and a seller agent underneath them. But they are handing out the leads because they are doing the online marketing. They kind of, like I can say they’re brokerage in a brokerage kind of set up.
Robert: Yes, Keller Williams is probably most infamous for doing that because they’ve really segmented their business in so many pieces. You’ve got managing directors, you’ve got team leaders, and they’ve got a lot of different titles for a lot of different roles.
Jonathon: They like their titles don’t they?
Robert: They really do. And all of these roles are base–
Jonathon: Do you feel that makes them super-efficient though Robert, having all these titles.
Robert: I don’t know that it makes them efficient, but I will say this, I think that the reason Keller Williams has gotten so big is. Because they have like each one of their regions has a group of Keller Williams like managing partners that get together and then they run the region by committee. It’s people that have boots on the ground.
So I love their structure, they have a lot of it, but it is what is a managed to make them one of the major, if not the biggest brokerage like they have more agents than anybody else now. So something’s working about it. So here’s the list of the top six real estate companies to work for and I’m pulling it straight off a website called fit small business. They are a competitor of mine, which makes us all funny because I’m now advertising them on my podcast, but we’ll let all that go.
So Keller Williams is number one, Re/Max is number two, Century 21 is number three, Coldwell Banker, Realty is number four. Sotheby’s international Realty is number five and Redfin is number six. So interestingly enough, two of those three brands are actually owned by I think it’s Realogy. So Century 21 and Coldwell Banker actually owned by the same corporate entity. Keller Williams is an independent stand up brokerage.
I’m not 100% sure about Re/Max or Sotheby’s. They’ve probably gotten bought up and are owned by somebody larger too. So each one of these individual brands purportedly, gets you access to different tools, technology, reputation, branding. Like I know a lot of my luxury clients kick the tires pretty heavily when they think about maybe partnering with the Sotheby’s. Because the thought is if somebody’s going to spend over five or $10 million on a property, they got to have a brand name behind the brokerage.
Like, it’s unlikely that an independent brokerage is going to get a sale that’s really that large. Then, of course, Redfin is actually not a traditional brokerage at all, but they are a brokerage and they are on this list and so and certainly worthy of discussion because they offer a very different internal structure than the rest of these companies.
Jonathon: I’m not going to share it in the first half, but in the second half at the beginning, I’ve got a prediction for Redfin.
Robert: Okay, all right. I hope the audience is, I’m fascinated and excited.
Jonathon: Thought that would keep you interested Robert.
Robert: I’m sure our, hold on, it’s keeping me so interested, I’m writing it down. Okay, so prediction, Redfin. All right, so here’s the first question that you have to ask yourself, whether you’re a broker or you’re an agent, the question is twofold. If you’re an independent broker, you’ve established yourself a team or you’ve built a team and now the question comes. Do you want to sell your brand or move your brand over to a major brokerage or somebody like Compass?
And then if you’re an agent, which is more where I was hoping to gear this conversation it’s how do you choose between a small independent broker and these other major national chains? For my money, the question needs to start off with where are you at in your career? Okay. If you’re a brand new agent like you have just gotten your license. I personally would probably not be considering anything other than a national brand that was able to prove to me, that they had a strong internal mentoring and training structure. The company that I know that does this the best because they’re in-taking more agents than most other brands is Keller Williams.
I’m not saying that they’re the only brand or that maybe there’s not Re-Max offices that don’t have like a rock-solid training program and aren’t going to put you under the wing of their top-flight sales executives, I don’t know. I just know that Keller Williams as a brand have training materials because I physically laid my eyes on them. I’ve seen them myself and they’re not the best, but they’re not the worst. And they usually have them on hand. So for my money, I would go with an established brand. John, what would you do?
Jonathon: Well, I can only tell the bit I know about Northern Nevada is that I would agree with you nationally. In Nova, Nevada we have independent, we have about four or five regional. They’re active [inaudible [00:10:54] Reno, Northern Nevada as like Wilshire Valley. We’ve got a company called Dixon that has a lot of agents. We’ve got a company called Marsha and I did try and persuade the principal to come on the show and I might have another go at that.
He’s a little bit controversial. I’m not going to go into that is but well I know he spends a lot of time. He’s gotten kind of real in a group power team and he likes to take on young blood and trying them personally. And I’ve seen or spoken to a couple of agents that worked with him and he does a really good job and he spends time and money on it.
The cut that he requires is linked to the amount of training he gives you, which I think a fair deal and they do. He uses a lot of radio advertising, billboards and does a lot of online advertising. So they do generate leads for agents. But when it comes to national I have to defer to your knowledge because I just don’t have the amount of knowledge that you do about that. But what I’ve seen is that the amount of agents have spoken to I would agree with you.
There are a few agents that are much more experienced that had joined [inaudible [00:12:29] and they bailed out because fundamentally they don’t like the cut, you know the commission structure, they just, and they do seem to have a lot of commission levels when is some way linked there internal structure, isn’t it Robert?
Robert: Yes, it is very much linked to their internal structure. Also, certainly one of those dialogues that you have as a professional, anything, especially where a broker is taking a piece of your available commission, it’s acknowledged right off the top. Your first six months to a year, you have probably been trained up about as much as you’re going to train up. Some new agents hit the ground running and sell 30 or 40 homes in their first year and they basically master the transaction.
Then they’ve got all of that stuff figured out and now they realize that since they’re spending their own money on leads and they no longer need to be trained, what is the broker really offering? But the broker accepted them in on whatever commission split that they did and now they have to pay attention to what the morale of the whole sales force is. So even if a top new rookie came up and tried to negotiate, it’s likely they wouldn’t get a very good deal or the most competitive split.
Whereas an independent broker, somebody who has a lot of flexibility with the way that their splits work might at that point be the right person for you to go to. Especially if you have provided your own training, you’re providing all of your own continued education, you’re really bringing a much like, more dynamic sales game to the brokerage that you’re working for. You’re basically doing better than most of what they’re doing.
Of course, you need, in my opinion, as a professional in all of those circumstances; you need to examine your option for making more of a split. It’s your money if you’re making it, the commission doesn’t exist unless you’re generating it. And if you’re out there generating a ton of it why wouldn’t you take a look at your options to see if you can get a better split?
The question becomes though, sometimes brand matters. In major metro markets, you have to have an independent that has a pretty strong reputation in order to compete against these national brands. If you’re in places like Beverly Hills, brand matters a lot. If you’re an independent brokerage in Beverly Hills, you’re kind of screwed. Like I know that market really well and you’re not going to get a $25 million home, because your transaction goes into an escrow account.
Sometimes the escrow account is managed by the brokerage. These people who are going to give you 25 or 30 or $40 million cash, they’re not giving it to an independent brokerage to hold onto for a few days. And that is not something that you want to deal with at that level, you just don’t. Like that the top agents that I know work for either Hilton Highland or Coldwell banker who is luxury agents in that particular market because like, people will give them $45 million cash.
Think about the sums of money that we’re talking about, that’s a lot of money. So brand can occasionally and does occasionally matter. But in my opinion, in most markets, for most of you listening to this show today, I don’t think it really is going to matter like that. So now it becomes if somebody’s offering you training or some kind of lead generation, some teams do, does that, Keller Williams, things like that.
Do you know anything about it? So what is your knowledge, John? What are the circumstances you’ve come across where you believe that people might be getting leads or some other external value from a brokerage brand?
Jonathon: Well that’s the problem because they’re all the ones, all the names that you’ve named. I don’t actually think they are doing too much when it comes to Northern Nevada. You know, Dickson’s, I know a couple of people in the senior and I pitch Mail-Right when it was in its early stages and they weren’t gracious enough to agree to a meeting. But I realize now they were looking at Mail-Right as a brokerage system and I never designed it for that. And they went for a company called Boston logic.
Robert: Yes, that’s the name.
Jonathon: But it’s very [00:17:21] and I think the problem I have with some of these, and you don’t have to tell me if you agree, that applies to some of these national chains. The problem I have with some of the major agencies in Nova, Nevada, the regional ones, and another one’s called Chase, Chase’ i pretty big as well. So Chase and Dickson are the two of the biggest in Northern Nevada. Chase is a luxury brand because it’s dealing with a lot of transactions in like Tai.
Jonathon: But it’s a very [inaudible [00:18:05] company in some ways. Is that some of these regional agencies that basically, I don’t know how to give it the title, but they deal with a lot of churn. They got a lot of agents that are doing like five to 10 transactions a year and they have a lot of those types of agents and they are highly profitable for the brokerage because of the split, they impose upon these types of agents. And they have a lot of agents like that.
But for somebody that wants a certain type of agent that is a great set up. I’m not diminishing it, but if you’re ever somebody, a young person that would really want to sell 40 to 80 houses. I don’t see that they’re offering a lot of mentorship and training to get you there if you understand. Is that making any sense, Robert?
Robert: Yes, it is and so for all of those people that are listening to the show, I’m going to lay on you some wisdom from 30 30 plus years of being in sales and running sales teams and having my history. So if you’re listening to the show, you probably fall into a couple of categories. You may be veteran salesperson, and please don’t take any of this personally because I don’t mean it personally. But the Pareto’s principle always holds true from like a sales leadership.
And what do I mean by pereto’s principle? It is very true that 80% of production comes from 20% of the salespeople. It’s just the way it works. It works everywhere. If you’ve ever held a single sales job anywhere, you already know where you fall in pereto principle. And if you fall on the top 80% I don’t care what anybody tells you, do not let them convince you that you are not worthy of breaking rules, making exceptions and all of those things, and that’s a little harder to do at larger brokerages.
Some people may be truly constrained by rules and if you’re going to be one of those top 80% people and you know you are, even if you don’t have a track record in real estate. Because guys, I’ve got to tell you, there is no secret sauce. It’s just the dude or gal that’s were willing to work a lot harder to study their scripts to get out early and often and go walk homes so that they have a complete understanding of all the inventory in their market. It’s not something they’ve seen online. They put their boots inside location.
Those are the people that are going to drive major commissions. Because I guarantee you if you’ve got a half-ass lead and you’ve already put all that work just into the sales prep process, you’re probably going to put in the extra work to go close the lead as well. Putting the extra phone calls, call the lead personally not let anybody else do it for you. If you’re one of those people, you carry a huge amount of negotiating power with you. Every real estate brokerage in the country, every sales organization that ever was is looking desperately for you.
Jonathon: Exactly, I think we’ll go for our break When we come back and we’ll [inaudible [00:21:25] my predictions. We’ll be back in a few moments’ folks.
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Jonathon: We’re coming back, Robert got bit elevated. At the end of the first half, he was slapping the desk. So Rob, do you want to hear about prediction Robert or do–?
Robert: I was in the middle of a rampant, but hit me with your prediction.
Jonathon: Well, I think in 2020 Redfin and Zillow are going o emerge.
Robert: Really? That’s a fascinating prediction.
Jonathon: I think there companies that in some ways are a little bit lost. I think the [inaudible [00:22:33] has its place but it won’t generate the new revenue levels that Zillow needs as a public company. It’s not a company that is short of money, but it’s a public company, so it’s required to make more money every year, isn’t it? Or the existing management gets kicked out and either they merge or either they increased the prices which they’ve tried and they’ve had resistance. They try something like I home which is okay but I think it’s a niche segment.
So where do they go? Well with Redfin is, like I said before it’s a great company. The people that use Redfin give it top marks with customer satisfaction, but its ability to grow and get market share the way they were hoping has happened and I think it’s definitely thin. So we have two companies that are looking for growth, looking for somehow to change the story to the market. I think Zillow I wouldn’t be surprised. I’ve heard absolutely nothing, but I would not be surprised in the first quarter of 2020 that we hear that they are proposing to merge together, Robert.
Robert: I find that to be a fascinating proposition. So, guys, we’ve talked a lot about some various things to consider. So where you are in your career, what if you’re not any of these things? What if you’re just a salesperson? Well, my advice to you is, find somebody that’s going to hold your hand, sacrifice your commission, and basically teach and drill yourself until you are one of the 20% as opposed to one of the 80.
Because honestly, you don’t carry much-negotiating power, John is absolutely right. The vast majority in real estate that is made by brokerages is actually not made for them by one of the people at the top of the pereto principle stack. Why? Because those people have already negotiated in much steeper revenue splits. They probably cover their own marketing. There are all sorts of things that brokerages have done, and they don’t have a lot of leverage.
If somebody is going to say, I can sell 60 homes in my market and can show that, what are you going to do as a broker? You’re going to, you need that, you want that, that’s a huge amount of revenue and you’re willing, absolutely willing to negotiate strongly and break your percentage down to the smallest possible bit. But you as an agent who sells five or six homes per year or seven, maybe you don’t have that negotiating power. Nobody’s making a deal with you.
And I don’t mean that poorly if you’re not bringing anything to the table. So in the light of that very true fact, what do you do? Most of the real estate agents I know are trying to get from being part-time to full time and so what they are looking to do is, when they start. They just want somebody showing them as much as possible so that they can climb that hill, get their referral base going. And sell more than six or seven homes because they would love to have enough money to do some marketing and some other things and have a shot at income increasingly growing their businesses.
Probably sounds like very familiar to a lot of you that are listening to the show. So if that’s where you’re at, what you should be doing in the interview process is talking a lot about the training materials and the training plans and what people are offering. You can negotiate.
Jonathon: So I just want to ask you a quick question because you got more a lot more knowledge about this than I have. Have you got a sense of what these major national brands, what bought their training materials and what they offer in general? Has it got a lot better in the past eighteen months or is the landscape the same basically?
Robert: Well to be honest, the landscape is kind of fucked. So here is what happened, so our Re-Max is a commission like is essentially, for the most part, it’s a franchise brand, all right. So as a franchise brand, somebody who is leasing the Re-Max name and what you have is somebody that used to be an independent broker. While Re-Max absolutely sends them a conceptual training program, whether or not that local holder of the brand title actually follows it is completely a mystery. And I can’t answer any questions because I don’t know what every individual Re-Max office is doing.
So they may not be upholding the franchise rules because I found a lot of Re-Max that don’t. So that’s tough about Re-Max. Keller-Williams is better because they’ve literally structured their brokerage better. They don’t really have franchises. They have local pieces of a larger company. And the reason that a lot of people jump ship and go over to Keller Williams is because it’s a much better run organization as in a totalitarian whole. I’ve been to like two or three Keller Williams meet-ups and, they’re behind in a number of categories. They’re behind in technology. And you’re not getting the two fastest newest startups listed on this list of six because EXP and Compass were not even mentioned. So Compass–
Jonathon: Probably Compass, you know, we had a guest on shows [inaudible [00:28:32] was Ed Carrie. Well basically I agree with what Ed said, I think compass in some ways is smoke and mirror.
Robert: I disagree.
Robert: I don’t think the compass is a smoke and mirrors, I think that they’re taking on. So one of their big backers is SoftBank and one of the decisions that they’ve made is they’re doing a high growth model that is just so well-capitalized and they’re not there. They’re making a lot of really aggressive promises to brokers and things like that. I’ve got in my list of clients, personal clients, John I’ve had three of my book brokers flip over to Compass.
So I’m really familiar with Compass and all three of the ones in question were strong independent brokers in top-flight markets, Denver, New York, and I forget the third. So these guys have all transferred over to them and what they’re getting is, they’re getting strong stock options. But see, here’s the thing, Compass as raised four or 5 billion, something ridiculous like two billions of that has come from SoftBank. They have a strong tech team and they’re getting a strong conversation nationwide about their technology.
They’re building some cool technology, there is a lot of buzz about their technology, but all they’ve done for themselves is creating an awesome story. They don’t have any of this technology.
Robert: Well, you seem to be in agreement with what Ed said. It seems to be a lot of promises, but they do have a ton of money behind them. So they’re influenced a little bit by the people that have lent them a lot of money.
Robert: Yes, and there is no ability to do decide whether or not. So here’s what I think, smoke and mirrors is kind of tough. They’ve got a big team with lots of really big names on it and somebody is doing something, they’re working hard at something. So that’s what I’m saying is not the smoke and mirrors part. They’re doing something whether or not they can deliver on the promise the story, that’s all hype and buzz. If it was me, I don’t think I would–.
Jonathon: Robert apart from the buzz, you know, every sas company that’s launched in the past two years, we’re going off a little bit topic, but let’s just finish on this. Almost every sas company has got another world which they do business in. Every sas company goes in talks about artificial intelligence and Ed Carrie when we had him on the show and hopefully, it will come back in the New Year. He talked about; he’s building a company that will have some degree of artificial intelligence.
So literally every sas company on the market, new ones [inaudible [00:31:37] has talk about artificial intelligence, right? So some of its true, some of it isn’t. I haven’t got the intellectual ability to make an assessment, right?
Jonathon: The [inaudible [00:31:52] there are only three ways, three platforms, well there are four ways to get leads. There is what is called the [inaudible [00:32:01] cheap build relationships do a lot of one to one body content get referrals, right?
Jonathon: There is organic, SEO Organic, which you specialize in, your company, specializes in and there is paid advertisement and there are two platforms that dominate it. There’s Google and there’s Facebook. So fundamentally, there are four freaking ways of getting their leads and they aren’t going to change for the foreseeable future. How the God is campus going to do anything when, I just don’t see it myself, but almost be typed the wrong.
Robert: Okay, well listen, there’s a lot that goes on here, it as a whole story. Compass was a real estate listing app that was launched in New York by two really deep-pocketed and deeply experienced real estate brokers. There was Redkin who worked for Goldman Sachs and there was somebody else whose name I forget and they raised 73 million. They put together a listing app that has started to dominate the New York market.
So they had this shine of these guys, really no technology. Then they attracted the attention of Son, the guy that runs the SoftBank fund, and then he started talking about putting hundreds of millions in. And it changed the fucking game for Compass because they weren’t initially a national brand. They hired 73 brokers in New York that was the story of their company in the first, so they’ve been around seven years.
The first couple of years it was just them becoming big in New York that was it, one market that was it. They changed that story when they got hundreds of millions of capital growth dollars. Now all of a sudden they’re this big national brand that’s causing all these problems, but that’s not what the company is founded on. It’s founded on this app, a real estate listing that was centered in New York. And why do I call this out?
So guys and brokers this part of the conversation is now focused on you, the brokers. I’m going to tell you that doing a national brand, versus a local brand is wildly different. They’ve got a really great story right now and national sounds intriguing. Maybe they’re going to give you a real estate listing app that’s for your marketplace and it’s going to be very exciting for you.
And I don’t just disagree with that concept, but they built an app using a couple of million dollars that was better than the other guys. And that’s what they’re focusing on; a national brokerage brand is this app. And so, as a piece of technology, I’m not saying that it’s not better or worse, but the rest of everything that we’re talking about is hype, that’s it tight.
So they don’t have a better website, they don’t have better knowledge of lead generation. There isn’t anything better that I know of that has to do with your boots on the ground business day to day as a broker. So what are you really getting? You’re probably getting the app and you’re getting a good story. There’s nothing wrong with either one of those things.
Jonathon: I’ll investigate then and thanks for that. I think we’re going to wrap it up, folks. I think it’s been an interesting show. I think we have to delve into this again when we have another internal show between me and Robert because there are areas that we haven’t discussed over the 70 shows that we’ve been together, Robert.
So we’ll be back next week. We’re going to have a guest next week. We have some great guests for October. Can’t believe, well September is gone, but the weeks just fly by and we’ll see you next week folks, where hopefully we’ll be providing advice and guess that will make you more successful and get the success that you’re looking for, not only for yourself but for your family. We will be back next week folks. Bye