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The Firm As Model Actually Happening?

February 5, 2009

In a time lost in memory, in a world far far away, I openly hypothesized that the future of real estate brokerage might look more like a law firm than brokers of today:

Everyone else is an employee. They get a salary, they get benefits, and if business is good, and they’re good, then they get a bonus. If they’re not, then they get fired. The firm is legally responsible for their actions in the course of work (respondeat superior) but in return, the firm clearly directs the how, when, what, and where of the employee’s activities. And the firm takes 100% of the revenues, with no splits, no commissions, and so on.

Junior agents in particular are valuable to the firm only insofar as revenues generated > money spent on that agent. What could a junior agent do to prove such value?

  1. They can do the actual work, freeing up the partners to go out and bring in business.
  2. They can bring in business.

It is a waste of the firm’s time to have a senior partner spend time showing houses; that’s for his associate, who may in fact be better at doing that. He might spend that time either calling on more potential sellers, or speaking at local Chamber of Commerce events, or writing blogs proving how much of an expert he is in investment real estate in the Modesto, CA market.

I went on to theorize further on a bunch of things, and have had some really interesting conversations with realestistas about whether this model was possible.

Now, I see this come across my RSS reader — Independent Contractor Model Outdated; Mimic Teams Instead:

If you could re-invent your company in any way possible, what would it look like?

We would begin with employee agents only, not the out-dated “independent contractor” model currently in place. The premise would be that these brokers can make more money per hour than under the current model, have more time off than current agents do, have more regular hours they could count on, have a team of specialists to assist them, in the form of transaction managers, marketing specialists, etc., leaving the agents free to do what they do the best, i.e., interface with willing buyers and sellers. In this model, employee agents could handle many more transactions than any current agent can, because others on the team handle the ancillary details.

The profile for the employee agent does not exist typically in the current “independent contractor” brokerages; the pool is external, perhaps younger, needing income, prospects in place, and perhaps benefits. The business in this model is created by the brokerage and retained by the brokerage, affording the broker/owner the control of business created and closed by the employee agents. The model for this is not new; we need only to look within our brokerages at the “teams” that exist there and mimic that model right in our own offices! This new model requires a shift from the “agent-centric” past to the “consumer-centric” present and future, which is where our consumer really lives! We need to show up. [emphasis added]

O.O

The writer here is not some random blogger like yours truly spouting off theories.  Nancy Rusinak is the broker-owner of a successful brokerage company in Colorado.  She has the actual ability to make this happen.

The blog she posted this on to share with the world is not some random blogger’s personal playpen either; that’s the official blog of the Leading Real Estate Companies of the World, the largest network of independent brokerages in America.

Dare I think that we may see the whole “Firm as Model” actually happen?

-rsh

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One Comment leave one →
  1. February 6, 2009 6:59 am

    Rob,

    I think the model you’re describing makes a lot of sense, conceptually. Smart companies use their highest paid executives to work on only the most important projects and pass off to other tasks to lower level staff. In addition, many companies create specialists so that individuals can create a deep, fundamental expertise which is hard to be replicated at other companies.

    To follow the legal analogy further, a client may work with a team of senior experts – one who specializes in real estate investment, one who specailizes in luxury real estate and maybe even one who specializes in the needs of real estate for seniors looking to protect their assets and limit tax liabilities for their families.

    I have thought about this model many times. It is similar to the organizational structure of real estate in the U.K. The piece of the model I struggle with in this market is cash flow. How can brokerages afford to pay for more staff when their transaction volume and cash flow is significantly reduced. Maybe a firm could try this idea with a subset of their firm to see if the model actually creates increased profitability over time.

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