Uncategorized July 30, 2016

Real Estate Cushion

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

There is an online real estate firm (no, I’m not going to give you the name) that offers buyers and sellers limited services for discounted commissions but that’s not the most interesting thing about them.

Their agents are full time employees, paid a salary and benefits and they receive bonuses for transactions closed.  Here, again, is the issue of realtors as independent contractors vs.employees.  This firm gives its agents the leads instead of the agents going out and finding their own.  Bonuses for closed transactions, on average, consist of about half of the agents’ take home pay.

My intention is not to defend the traditional independent contractor business model of most of my industry of which I am a participant.  I closed my eyes and imagined working for a company that cushioned me by paying me a salary, benefits and giving me my leads. Seems perfect until you realize that employers have much more control over employees than contractors.  If the company is giving the agents their leads, who determines which agents get what leads?  Some leads don’t amount to much, in general.  Can an agent be penalized for not producing on dead end leads? I cannot imagine that firm continuing to pay an agent who under-performs.  An employee/agent can be fired for low production. In the film Glengarry Glen Ross a real estate company gives its salespersons their leads and the agents desperately try to turn bad leads into sales or risk being fired. The employees resort to stealing good leads that are locked away.  There are accusations of favoritism and vendetta against certain agents as the company controls the flow of leads and business. The film depicts an angry, sullen, desperately sad atmosphere where average people are ground down until they are forced to behave recklessly. Maybe it’s an extremely dramatized example but one that could very easily happen.

Any firm who hires full time agents as employees can also dictate the agent’s working hours and conditions and can mandate certain kinds of training.  The agents I read about who work for this online company said they felt more secure but that sense of security comes at the expense of the agent’s autonomy.  If they are good producers I’m sure they’re secure but if you’re a middle of the road or casual producer you’ll be looking over your shoulder.

That online company is funded by venture capital and had to overcome extreme skepticism on the part of many investors who didn’t think it was a viable model.  In fact, it almost went under during the recession and now  only enjoys the tiniest fraction of the marketplace.

The problem I’ve always had with limited service models like this one is – why bother?  Would you hire a plumber to come to your house, give you the necessary parts and then leaves without servicing your problem but still charges you a fee for parts and  labor? If you’re spending money on a service you should get whatever you need to succeed.  Imagine going to a restaurant, giving the waiter your order then being told you have to cook it yourself and still pay for it.

Furthermore, this kind of real estate model suggests you can do it yourself, that there’s no big deal in pulling off one of the biggest financial transactions of your life – buying and selling property.  It implies that anyone can do it without much experience and just a limited amount of guidance and support.  Nothing could be further from the truth, in my opinion.  Being a realtor requires highly honed skills, an almost future-predicting ability and a sixth sense for trouble.  This limited service model is an outgrowth of the so-called “gig economy” or “shared economy” where everyone can do anything (drive a cab, be a landlord, be a content provider or a video producer).  I regard it as the dumbing down of every discipline.  No one is a full time professional and everyone is a talented amateur who can do any job in their spare time.

Call me old fashioned but I spent my life trying to get good at whatever was paying my bills and I found that to be a full time job.  When I was writing and producing for television it was assumed that if you were a content provider you had some specific, tested and developed skills and talent for that endeavor. Content providers on social media and in the gig economy have no such requirement.  In fact, in my world you were paid in exact relation to your talent and ability.  Gig-ers expect to get paid by simply showing up and saying they’re qualified for whatever it is.

But, I digress.  Back to real estate business models. I would find it very demoralizing if my real estate employer had that much employee-related control over me.  I don’t expect to be dependent on my company for success and I don’t want them to interfere with it, either.  I take my own set of  values to every job and they’re my values and not written in the company handbook. My company sets me free to succeed on my own within ethical and legal bounds and allows me to proceed, as long as I don’t violate the law, without the threat of any company sanction hanging over my head.

If I wanted a full time job with a salary and benefits it certainly wouldn’t be a sales job like real estate.  I believe the salary model best applies to workers who produce something tangible or do office work and applies less to the service economy.  Every morning I am unemployed until I make opportunities for myself.  I can think of no greater motivator.

Again, I’m not here to hawk the full service model.  I think the logic of it sells itself and it should be obvious that you get what you pay for.  A full service model requires a full service agent, a realtor who runs his or her own business and makes their own opportunities. I’m sure that agents who are full time employees are honest, hardworking folks but they are also smothered by, dependent on and beholding to the company they work for.  That’s a lot of baggage to bring to a transaction. Combine that with limited assistance to the customer and you have what I regard as a bad deal.

When past transactions have concluded I have been thanked by my clients for my calming influence and for my expertise.  Those are qualities I developed myself.  I had them when I joined this company and I didn’t rely on the company for those abilities.  I’m no different from any full time, full service realtor I know. Berkshire Hathaway supports me in a big way  but doesn’t control me the way an employee is handled.  I am free to develop my own business and run it like a professional, not just an employee.  Also,  I am not a part time, talented amateur.  This is not a gig and it’s not just a job. What I do is much more personal than that and, as such, I will do everything I can to perfect my abilities and protect my clients – and not in a limited way.