Untapped Real Estate in an Agent’s Pocket
[Editor’s Note: Below is the full text of our 209th Weekly Transmission, originally delivered direct to the inbox of more than 500 GEM members on April 7th, 2022. Some links included below are to members-only articles.]
Many are drawn to the real estate agent profession (most common Google employment search during the pandemic) for the perceived flexibility and theoretically uncapped earning potential.
An agent’s reality tells a different tale. More than two thirds of all new licensees drop out of the industry by the end of their second year, and those who do in fact manage to survive their first two years go on to earn on average $43,330 annually (NAR Agent Income).
This worrying trend can be explained:
- Lack of access to training opportunities. Brokerages have long been reluctant to invest in structured and personalized career development programs due to a desire to keep costs down and fear of agents leaving their firm.
- Painfully few individual resources. The best training often comes from the apprenticeship found as part of a great real estate team. However, a talented and motivated new agent seeking a team has little at their disposal to guide them to the team that best suits their individual needs. Teams are underserved from a recruiting perspective, often asking their office managers to hire junior help to no avail. Junior talent, who represents a company’s future earnings, is neglected in favor of already-producing agents presenting bigger revenue opportunities today. Interestingly, managers are also financially incentivized to maintain the independent status of agents who are not associated with teams, given the split structures in most offices.
- Digital noise. The array of possible digital strategies to gain more client leads—from online listing portals to social media to data-driven prospecting—and navigating this ever-changing technology ecosystem can be both overwhelming to consider and costly to experiment with. Agents often have to turn to expensive coaches to help determine where to focus their time and investment.
Those that do find success as an agent or team lead are presented with additional challenges that I became intimately familiar with while building and leading Compass’ national expansion team. In that role, I had the privilege of meeting and recruiting 1,500 top performing teams and agents from the smallest to the largest brokerages.
Despite already achieving success, these agents had aspirations for the future that were near impossible to realize. For example:
- Neil from San Diego was regularly meeting 2-3 new agents when he traveled to other markets, but was frustrated that his referral network was a dozen West Coast agents on a Whatsapp group rather than thousands of agents in large and small markets all over the country. Neil needed a way to use his track record to activate “cold” referrals from great agents he didn’t yet know.
- Following a departure from a top performing team, Frank from New York had no independent resume or track record to share with his contacts. He complained that his manager only knew top team leads but didn’t know many new agents he could recruit for his team.
- Leila from Miami was worried about how to step away from day-to-day operations and enjoy more time with her teenagers, without sacrificing the brand and client relationships painstakingly built over 30 years. She felt a need to micro-manage team members when it came to sifting through market data from the MLS.
The reality is that referrals, team building, and staying ahead of the market are completed today through painful and time-consuming workarounds. It’s no surprise that systems and tools designed 20 years ago are not adequate for the range of purposes modern agents and teams require.
It’s a well known fact that agents are the lifeblood of residential brokerage businesses—recruitable revenue streams that can just as quickly walk out the door to a competitor. After Compass, I had the opportunity to lead McKinsey’s residential real estate practice and lead a team of data scientists and software developers to help the leaders of top residential brokerages better support their agents.
Running a brokerage necessitates a tricky balance—one needs to determine how to effectively recruit agents while continually incentivizing each of your in-place agents to ensure their production continues. All of this must also be accomplished in an environment where brokerages earn relatively thin profit margins and will often look to attach adjacent products, such a Mortgage, Title & Escrow, to their brokerage transactions to drive revenue and much needed profit.
One critical learning from that multi-year exercise analyzing agent performance was somewhat unintuitive: The strength of an agent’s network of other agents is a key indicator of future career success.
After combing through the data of 1.4 million agents across all segments, all brokerages, and regions, some of the most important determinant factors indicating their future outperformance, or lack thereof, were:
- who the agents marketed to and collaborated with on both sides of the deal
- who the agents formed and joined teams with
- with whom they shared an office.
Interestingly, there was also a “halo effect” that indicated that the closer a junior agent was to a top producer (more deals together, more time together in the same office), the more significant the level and speed of their future growth. A quick way to assess the health of an agent’s network is to assess their referral business.
Brokerages have historically focused on recruiting as the key growth lever, as it was assumed an agent’s productivity is difficult to influence. However, this insight shows sales production can actually be improved by building a community of agents within an office, encouraging collaboration both within teams and across the brokerage, and counterintuitively enough, promoting strategic cross-brokerage networking.
These conclusions make sense. Across all fields, those willing to give to others find more success—in Give and Take by Adam Grant, he breaks down how people fare in life based on how they respond to simple requests from colleagues. Of the three types—givers, takers, and matchers—it’s those who give back within their network that are over-represented at the top. Givers look for ways to help others by making an introduction, giving advice, providing mentoring or sharing knowledge, without any strings attached.
The industry has long lacked a robust networking platform specifically designed to meet the needs of agents. Be it the MLS directly or a market insights platform, the tools available to agents to analyze the market are focused on exposing which properties are for sale or rent and all the relevant property details that help the agent assess its fit with the client’s needs. The agents that represent those clients and bring those properties to market are sorely neglected from a business intelligence perspective. This became abundantly clear when we began to ask agents a series of targeted questions:
- What if you could reach out to the agents who most recently represented buyers (now owners) in the building your client is desperate to buy in, with no available inventory on Zillow? Even better, what if you could automatically make them aware of your client’s needs and have a means to hear about corresponding interest from the would-be seller?
- Would you be interested in being introduced to dozens of agents whose experience in the industry exactly matches your team’s recruiting objectives?
- What would it be like to have agents that don’t know you find you based on your transaction experience, not your social media spend?
A professional network designed specifically to enable agents to achieve their growth objectives will fundamentally transform today’s archaic network-building (painstakingly slow, across hundreds of business cards collected at expensive national conferences) into the modern era. Such a network would empower agents to…
- Find the right agents for every listing and referral based on their active and past transaction experience (listing portal and search engines ads are confusing, even to the agent).
- Be discovered for those opportunities without active marketing.
- Find the right agents for a team based on what suits each team’s growth objectives. As an agent looking for a team, knowing exactly the right team opportunities based both on data and peer conversations.
- Stay informed with personalized market intelligence, using data to characterize each market and property, and then taking corresponding marketing assets to clients efficiently and in a way that reinforces an agent’s personal brand.
- Find a community of peers across the country to learn from, without hefty coaching fees.
The network’s technology needs to work without requiring a masters degree in computer science and be powered directly from the MLS–so agents can access new opportunities while enjoying a morning coffee or burning the midnight oil.
TRANSPARENCY OF MERIT
In spite of all these issues, the residential brokerage commission pool is valued over $100 billion annually and growing, there are 100,000 agent teams and counting, and close to one million closed deals per year are introduced through agent referrals.
Courted is founded on the belief that agents can and should be a central part of the residential transaction long into the future, and the insight that an agent’s collaborator network is crucial to their success. Using data to power a platform that is designed specifically for the agent to make these critical connections will reduce the failure rate of new agents, connect agents with career-changing opportunities based on merits rather than advertising spend, empower agents to find their community, and mitigate the loneliness that so often comes with being an independent contractor.
Real estate agents are local market experts, social media whizzes, community leaders, dealmakers, marketing gurus and more—they comprise the largest and most diverse group of entrepreneurs in the country. And yet, agents are systematically underserved, with little investment from their brokerages, few dedicated resources, and tech tools that weren’t actually designed with them in mind.
Courted believes that building a platform that harnesses data to build community will empower agents to make the connections critical to their success, reduce the failure rate of new agents, connect agents with career-changing opportunities based on merits rather than advertising spend, and mitigate the loneliness that so often comes with being a solopreneur—in other words, transform the experience of being an agent for the better.
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