EXP. Keller-Williams. Real. These are just a few names of real estate brokers that offer their agents high splits with caps. They are disrupting the industry and making it challenging for the traditional real estate broker. How can traditional brokers compete with companies like EXP or other online brokers?
These recruiting models are powerful as floods of agents are hanging up their signs at traditional real estate brokerages and setting up shop at these cap broker models.
In this article, you will find my opinion and recommendation for recruiting agents and competing against these brokerages.
Who Am I?
In full disclosure, I’m not a real estate broker. Nor do I manage one. Instead, think of this more of an opinion piece on how traditional real estate brokers can compete with these low-cost cap brokers.
My opinion is built on my experience as a real estate agent and former business owner. I built a company to $500,000 in revenue at 20 percent profit margins before stepping out of the operations.
While building that company, I gained a wealth of information on marketing, recruiting employees, and driving profits.
The experience of building a company gives me a unique lens through which I see real estate brokers.
So, with that said, take this article for what it’s worth. Be skeptical.
But, use it as a groundwork for further analysis and strategy development.
Let’s dive into my recommendations.
Profit Is The Objective
Making money and being profitable are not the same thing.
It’s important to really, really understand this.
I want to repeat it…
Making money and being profitable are not the same thing.
I repeated it twice because I watch real estate broker after real estate broker make this mistake as they try to recruit existing agents, especially those top-producers.
The real estate brokerages with caps and high-commission models have put a lot of pressure on the traditional brokerage to offer more money to their real estate agents.
They will offer better splits to recruit agents and to retain them.
As a real estate agent, I have been on the side of making requests for a better split. It’s been granted every single time.
I understand there is pressure to drive splits down. To limit the amount your brokerage is paid by the real estate agent.
Be very careful when you’re doing this.
I’m not saying it’s the wrong choice. In fact, there are some certain situations where it’s a great idea.
For example: Recruit a top-producing agent and accept them as a loss leader. Meaning, you won’t make money off them directly. Instead, they become a powerful agent attracting tool. A “come work where this top-producing agent works”.
As a real estate broker, you have to evaluate the cost of offering certain splits. You have to see if your business model can support it.
It’s important to understand the business model of a traditional real estate brokerage.
A traditional broker is built on offering higher levels of support, marketing, leads, culture, and more.
The whole premise to a traditional brokerage model is offering more value.
And that value costs money.
That’s the reason you can’t blindly start cutting your commission splits. It’s why you shouldn’t recruit on price.
Recruiting on commission splits is the laziest thing a broker or manager can do.
Stop trying to squeeze a cap brokerage model into a high support brokerage model. It’s not going to work very well.
You will be unprofitable. Limiting your ability to scale and grow. It’s not sustainable.
Focus on what you’re good at. See the negatives as positives.
That means selling on the right unique value proposition. It means selling on more support and a better culture.
Recruit On The Support You Offer
All traditional brokerages have one thing in common: better support.
No matter what people say about online brokerages or companies like EXP, they can never provide the support level that a traditional model is going to be able to provide.
It’s not just the systems or technology.
It’s the people within that brand. Everywhere I have gone, there is always far more support to the individual agent at a traditional brokerage model.
It’s because they have the revenue and funds to support a manager — that could be the owner or not.
These levels of people-support are what make the difference. It’s what you need to recruit real estate agents on.
Point out gaps where different non-traditional brokerages aren’t providing support to their real estate agents.
Most often it’s going to be people related. Don’t play the technology game and try to make the case that your technology is better.
From my experience (working in the Midwest), agents don’t care about technology. Or, they’re unable to distinguish the difference between the platforms and how that will help them reach their goals.
Look at your brokerage, where do you provide more support?
- Do you sit down with your agents and help them develop and execute on a business plan?
- Can your agents reach you or do you have a fast response time to help them when needed?
- Are you making personal efforts to build a connection to your agents even when they are working remotely and aren’t coming into the office?
Recruit on support. Not commissions.
Develop Your Culture
Culture is hard to create, regardless of the industry and the business model. However, it’s even harder for cap brokerage models.
This is because these models are often “hands-off”. There isn’t much involvement from their broker. Some agents love this. It’s the freedom and autonomy they wanted.
But, humans want to be part of something. They have a deep need for being part of a community with a purpose. This need can be filled through various avenues, from church to their workplace.
Part of building a successful culture is core values and holding people accountable to those values.
Under a traditional brokerage model, you have that opportunity to hold people accountable to your core values. I highly recommend that you do.
That might mean de-hiring a real estate agent that isn’t a fit for your culture.
One core value I have is compassion over commission. If anyone — from agents on my team, to vendors — acts in a way that is against this core value, I will de-hire them or stop recommending that vendor.
Hands-off brokerages will have core values, but they will rarely be able to execute on these core values. As a result, their values and culture will be nothing more than a piece of paper.
It will be a disorganized, non-unison culture.
You can build a good culture and then recruit on it.
Have Better Marketing
I shared two ideas that are fundamental to building a strong traditional brokerage. The next idea is to have better marketing.
This is about getting the right message in front of the right people as frequently as you can.
It’s not about being a better brokerage, like the last two ideas. Rather, it’s about being a better marketer.
The right message for a traditional brokerage is to focus on culture and support.
Next, you need to market that message to the right people. This means:
- New agents
- Struggling agents
- Agents at other high-support brokerages
The goal is to be relevant. Send the right message to the right people.
Lastly, be omnipresent. You want to be everywhere in that market.
Layer a multi-channel approach that effectively uses direct recruiting methods, direct-mail, social media, Facebook ads, YouTube videos, and more.
The point is that you want these agents constantly seeing your brokerage. I think there is a lot of self-doubt in real estate and agents are always wondering what they can do to improve.
Just Wait For The Market
If you feel like you’re executing pretty well on the above three strategies, then my last recommendation is to just wait.
Just wait for the market to shift downward. That’s going to change a lot of agent’s perspectives.
As the adage goes, 100 percent of zero is still zero.
Agents will need help getting clients and closing deals. They will need more support than the technology that a cap-model or high-split brokerage can provide.
As the market shifts down, you will have a lot less agents hitting caps. At that point, a traditional brokerage starts to look more attractive.
When will the shift happen? Who knows. We’re starting to see signs that it may happen in 2022.
All we can do is continue to monitor and be ready for it.
Through better marketing, culture, and support, traditional real estate brokers compete with high-split cap brokerage models.
