REAL Trends recently completed a national survey of the largest 1,400 brokerage firms in the residential industry. The survey is part of the process leading to a new book called “Game Changers—The Unfounded Fears and Future Prosperity of the Residential Real Estate Industry,” that will be released April 30, at the Gathering of Eagles conference in Dallas. The survey was conducted in December of 2013 and January 2014.
Written by Steve Murray, publisher
No surprise. Our survey found that brokers are concerned about recruiting.
In our recent survey, one of the questions we asked was: What were the biggest challenges faced by the firms today? We also asked: What did the leaders expect the biggest challenges would be in the future? Not surprisingly, recruiting of agents was mentioned prominently. In fact, it was mentioned as the No. 1 challenge. Associated with this finding was the fact that firms are faced with an aging sales force and an aging sales management group. Firms also reported that they were having a great deal of difficulty in recruiting younger people to become real estate agents.
Not a Surprise
This is obviously not new information. Recruiting has always been a challenge for most firms, and the aged sales agent force has been right there, as well. We have never been an industry known for its ability to attract college graduates. The average age of sales agents has always been higher than the average age of Americans in general and has always been 15-20 years older than the average first time homebuyer, who historically makes up 35-40 percent of all buyers.
The History
From 1985 to 2006, the number of real estate professionals in the country doubled, from just over 700,000 in 1985 to over 1.4 million in 2006. Few think that the industry will grow at those rates again anytime soon, if ever. Those years were marked by a long-term up market in housing sales (with some softness in the 1989-1993 period). Prices of homes marched steadily upward, and housing sales increased from under 4 million unit sales to nearly 8 million unit sales. Again, while sales will increase as the population grows, it is unlikely we will see that kind of growth again soon. The industry has consolidated, especially in the share of all business captured by individual high producing agents and teams. While it may not have been certain in the past, we are very close to the “80/20” rule where the top 20 percent of the agents have captured nearly 80 percent of all the business being done.
Hostile Environment
The environment for new agents is more hostile than it was yesterday. It is harder to break in than it used to be. Complicating this further is that brokerage firms have suffered significant erosion in their gross margins. This has caused increases in the number of sales agents per office, increases in the responsibilities of sales managers and a substantial reduction in the availability of systematic training and accountability systems in the offices for new agents. Economics have dictated that there are fewer man-hours available than in the past for developing new people, particularly young inexperienced sales people.
Another factor is that everyone looks like a genius at recruiting when the numbers of new people entering the business were growing steadily at 3.5 to 4 percent per year. As one well regarded trainer/coach put it, “that is not recruiting, that is hiring.” It was relatively easy to add new agents when they are flooding into the business, and your main goal was simply to capture your share of them. It did not require any real outreach to sell the benefits of being in the business. It just happened.
There are examples of firms that have bucked these trends. Keller Williams has grown their total agent count by over 50,000 agents while the industry has shrunk by more than 400,000 agents. Many would credit this to their focus on investing in training and education, and while they and everyone else knows it is not perfect, they tend to focus their efforts and their message on the availability of training at levels.
Another firm that is having great success at recruiting new younger people into the business and getting them into production is The Group Inc. of Fort Collins, Colo., and home of Ninja Selling. Their focus is on new-to-the-industry people, and they have built a very successful track record over the past few years of recruiting new people into the business, providing high levels of training and education and having an accountability system that stays right with the new agents until they are more than making a living—or they have found another career. Does it perfectly work all the time? No system does, but they are succeeding far more often than failing. They don’t have gross margin problems of the kinds faced by most other firms either.
The answer to an aging sales force is actually recruiting and developing younger people to join our business. In our view, this requires that realty firms do a few things better than they have in the past.
• Develop a real system of training and education that not only teaches the fundamentals but also creates a business plan for each new agent and builds accountability into such a system.
• Develop messaging that describes the benefits of a career in residential real estate sales and target schools and other industries that are populated with customer-trained sales and service workers who also are not highly paid.
• Teams and true mentorship programs are a great way to develop new younger agents and potentially a way to get these new people some income sooner.
• It may well be that some experimentation with compensation and paying new salespeople for activities that lead to sales is in order (assuming one is serious about recruiting and developing new and younger people.)
These ideas are not new. Many have tried these actions with mixed results. But, based on just the two examples we shared, growing your business by hiring younger agents into your firm is achievable so long as there is an intense focus on the effort.
This article appeared in REAL Trends Newsletter and is being reprinted with permission of REAL Trends, Copyright 2014.