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Traditional Brokerage is Dead

I’ve worked for several real estate brokers since I got started in the mid-1970s.  When I started in Fairbanks, Alaska I worked for an independent broker who gave me 50% of my commissions.   I got a cubicle and a phone book.  I noticed that all the agents  in that office struggled to scrape together deals in a competitive market while the broker was raking in the cash.  That was the business model back then.  Things haven’t changed much, at least with the traditional brokerage model.  Agents kill themselves while the brokerage often cleans house.  Of course, in this recession this tired old business model is killing off the brokers too.  Overwhelmed with massive fixed and variable expenses under the roof of a large brick-and-mortar business, brokers are going out of business, filing for bankruptcy, and otherwise barely hanging on.

I decided to go to law school and specialize in real estate, which I did in Spokane.  While working my way through law school I worked for a large real estate brokerage.  Same story.  Big brick-and-mortar and the broker gave me 50% of my commissions.  I got a cubicle.  Wow!   The only one who got rich in that office was the owner.

After practicing real estate law for 20 years, I came back to my first love, real estate sales, and at first I went to work for a hot new real estate model where I could earn 10% of the commissions of agents I recruited.  I got to keep 70% of my own commissions.  I got a cubicle.  Wow!  The problem with this business model was that there wasn’t enough income for the broker, and he actually went belly up.  Of course, the fact that he treated everyone like dirt might have had something to do with his failure, but many of these brokers have struggled to survive, and the agents have not done well.  Of the offices where morale is good, the brokers were making big bucks, but agents are struggling to survive now, and I think many of the brokers are running in the red hoping upon hope that the market will rebound.

Another great brokerage model that made the founders very wealthy and a lot of early top recruiters has hit the skids lately.  The problem with a “profit sharing” plan is that when there is no profit, there ain’t no sharing going on.  One top recruiter with over 300 recruits to her name only made $11,000 in profit sharing income for all of last year.  Wow!

The last franchise I worked for boasted the largest educational network and the fastest growing real estate company in the world, or something like that.  I got to keep 60% of my commission, instead of 50%, but that was probably because I had more experience in real state than the owner and his wife.  But I also got to pay annual corporate management fees and monthly corporate management fees.  Oh, I also got a cubicle.  Wow!  By the way, they never used the so-called large educational network.  I tried it once, but it was useless and exceedingly weak.  Meanwhile, the founders of that franchise are so rich no one really knows how wealthy they are, but the agents are struggling to survive in this recession.

In each of these traditional brokerage models many have left the business entirely, and others are on life support.  Some are fortunate enough to have working spouses, so they will survive off their spouses for a while.  I know of one agent literally washing dishes to survive.

Is anyone else starting to figure out that there’s a serious problem with the traditional brokerage model?  The traditional brokerage is definitely NOT the business model of the future.  Realtors who hang on to that model will find themselves in serious financial trouble, and at that point they may not be able to stay in the business because they won’t have any business.

Realtors who are paying attention to what is happening in the consumer market, including the real estate industry, marketing, advertising, technology and the Internet will have a sixth sense that they had better make a dramatic change, and that change must be now before it is too late.  Actually, it does not take a prophet to recognize that the print advertising business, including newspapers and magazines, is on life support.  Those mediums no longer sell real estate like they once did, and they are more expensive than ever.  Go figure!

I started my own brokerage and built a large Internet presence, because I recognized that is where buyers are.  It wasn’t exactly rocket science, but it did seem like the writing was on the wall.  In the past two years I have been abundantly blessed with my leads generated on the Internet, and I’m making a good living.  But the best part is that I knew I had a bright future if I could make a good living in the worse real estate recession in 30 years.  When the market rebounds, I stand to be in a great position because of my Internet sites.

I tried two revenue sharing models before I came back to a simpler and cleaner business model, one in which agents could work out of their own homes, not have to pay any desk fees or monthly fees, learn to master the most powerful technologies so they could build a huge profitable business without all the overhead and with the most personal freedom.  With an 80-20 split that gets to 100% with as little as a $7,500 annual cap, and with the expertise and mentoring our CEO does, this is the best business model today for the top producer.

I strongly recommend you take a look at this company, and if I could have the pleasure of being your guide, I would love to.  You can email me at chuckmarunde@gmail.com.

Don’t get left behind.  This company is light years ahead of the competition.

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