How to Attract the Best Talent to Handle Company-Generated Business
Remember when referral fees were only 25% paid to the source of the referral? Ahh, the good old days. It was all pretty clear-cut. We handled corporate relocation, mostly from Relocation Management Companies (RMCs), and broker-to-broker referrals. Eventually, REO business entered the scene for those brave enough to handle it. But today, our industry has evolved. It has become more complex as corporations that were desperate to cut expenses retooled their policies, and RMCs, desperate to compete, gave away the farm. The brunt of the costs fell to the brokerage providing real estate services to absorb.
Now, we see referral fees as high as 42.5% paid out to the sources of business, and some have annual, service, or membership fees on top of that. But my question is, are they doing more than they did when they only charged 20% - 25%? Sales prices have gone up, so the amounts paid out have increased significantly on each transaction as home prices have increased. The inflation rebuttal doesn’t work here, mainly because so much of the process is automated these days. I can say with confidence that they are not doing more. Some might say they do less.
I know that continuing to raise broker referral fees is not sustainable. There has to be a better way, such as reverting to the way it was in the past, with corporations paying a per-file fee.
The math doesn’t work.
Where does that leave the broker and the relocation/business development department? They have had to continually restructure their fees to try and bake in some revenue and, hopefully, profit to fund the department. They are expected to attend multiple industry and RMC conferences, deliver training, stay fully staffed for extended hours, have the best tracking software, cover their operating expenses and overhead, etc. Let us not forget that the brokerage and the agent bear the bulk of the risk. It costs a significant amount of money to run a relocation department. I know; I did it for years.
On the brokerage side, agents continue to pressure their brokers to give them more resources and higher commission splits. Recruiting competition is fierce, and the margins have gotten slimmer.
Residential Real Estate Brokerages Net Profit Margins:
3% to 7% is typical for traditional brokerages.
High-performing, lean brokerages can reach 10% to 15%.
Due to high overhead and franchise fees, some franchise brokerages operate with 1% to 3% margins.
Gross Profit Margin:
Usually ranges from 20% to 40%, depending on agent commission splits.
You can see how the slightest market change, commission variance, or something like the NAR Settlement payments can upend a brokerage running on such thin margins.
Various models continue to pop up, including multi-level marketing agent recruiting entities, virtual offices/companies, 100% companies, reduced commission companies, and capped models. However, according to Redfin data, 71% of US agents did zero deals last year. 100% of zero is still zero. Brokerages may look the same on the outside, but trust me, they aren’t. It is critical to find the brokerages that invest in the staff and training to create a culture of performance.
Variety is good.
This financial pressure rolls downhill to the departments providing services to the agents and external customers. As their own expenses have skyrocketed and the business diminished, it has become harder to attract high-quality agents to their teams.
The team handling a variety of business lines should be fluid. I remember we had agents on our team who had been there for years, and they did a great job. But the dynamics of today’s business require a variety of skill sets.
For example, relocation agents typically aren’t right for eCommerce leads. I am generalizing, but my experience has proven this concept true. And buyer’s agents aren’t necessarily suitable for listings. This means that the leader of these business lines must have a large and fluid team. Gone are the days of the one-size-fits-all agent. Agents working with relocating out-of-town buyers may have different strengths than those helping local affinity clients. Rental and tour agents may be newer agents who are not quite ready for buyers and sellers. Having a multifaceted team may be more challenging with smaller companies, but that also creates opportunities.
So how do we retain and attract company-generated business team talent?
ChatGPT states, “The average acquisition cost for a client in residential real estate varies depending on the agent's marketing strategy, location, and lead source. However, general industry estimates place the cost per client acquisition (CPA) in the range of $300 to $2,500 per client.” The key is to remind your team that you are the one sourcing these referrals. The unattached new client is a gift to them, and their acquisition cost is in the form of a one-time referral fee. They should be able to parlay that client into many other clients or transactions.
I have heard from many RDs that it is getting harder to recruit agents to the team due to increased referral fees, expenses related to training, background checks, certifications, and fewer referrals. It’s definitely not for everyone. It takes time and resources to create and manage a successful team.
Make it an honor to be on the team. It should be a highly coveted position in your company. That message comes from the top.
Use team agent testimonials to recruit other agents to the team. Have them discuss residual business they have received from being on the team.
Seek out agents who have an ‘account mentality.’ They do not think transactionally. They understand the big picture of teamwork and always strive to ensure the account is sound.
Engage your branch managers and leadership for recommendations regarding the agent’s strengths and weaknesses based on the skill sets needed.
Create a detailed outline of performance expectations for each line of business and stick to it. Make sure your leadership has it as well.
Train agents specifically on each line of business to maximize their likelihood for success.
Have them sign Agent Agreements that clearly explain what it takes to remain on the team. Have them review and sign it annually.
Consider having different teams for different RMCs or corporations to cater to their specific client base. For example, if hospitals are giving you business and you have agents who were formerly nurses, they may be an excellent fit for that business.
Create recruiting materials to help your leaders recruit the talent you need.
Consider using newer agents when your sources will allow it. They are often more up to speed on technology and eager to assist.
Ensure the agents’ personal performance stays strong and they don’t become too dependent on the company-generated business.
Review the agent’s production quarterly. If they aren’t meeting the metrics, set a meeting to discuss each file. There are two sides to every story.
Consider having your team agents do a listing and/or buyer presentation for you so you can ensure the message they are conveying represents the company culture and sets them up for success. Buyer’s agents may be struggling with the new buyer agency agreement guidelines and selling their value.
Keep the team tight. As long as the agents can cover the geography, you typically don’t need more than 10% of your agent population for each business line.
Praise the team, individually and collectively. We can't do our job unless they successfully do theirs.
Track ‘subsequent’ transactions if you can. When you give them a client, and a few years later they sell that client again, remind them that the client initially came from the company and is now their client with no referral fee due.
Don’t let your leadership use your business to ‘quiet’ underperforming agents. You are responsible for maintaining the satisfaction of that account to ensure future business.
As the business continues to evolve, it is critical that we keep a close eye on the team. Sometimes, that means making hard decisions about who remains. Try not to make decisions feel personal. They are professional. Building strong relationships with the agents is essential, but we can’t let that cloud our judgment. We must take a clinical approach to ensure that we can attract and retain the best performers for all stakeholders.
"Invest money in customer retention, because it’s a small fraction of the cost of customer acquisition." - Seth Godin is an American writer, successful entrepreneur, marketer, and public speaker.
