Editor’s Note: The Playbook is an RISMedia biweekly segment centering on what brokers and agents are doing to ensure they not only survive but thrive in these challenging times. Industry professionals explain the strategies they’re employing and unique ideas they’ve formulated. Tune in every other Thursday for another addition to the series.
If 2023 has been a challenging year for residential real estate sales, 2024 may make it look like most of 2022, when mortgage rates were low, sales were high and the skies were bright. There are ominous clouds hovering over the industry now, and not just because of rate and inventory issues. The Burnett vs. NAR trial outcome has spurred more class action suits nationwide. Commission percentages for many buyer agents have suddenly become uncertain, threatening their professional staying power.
Competition for listings and clients is always fierce. But especially now, cultivating relationships with as many agents as possible is a must. It’s more important than ever to not only be a team player within your brokerage, but to make sure your interactions with other agents are positive.
Whereas a commission for a sold house has almost always typically been split between the seller and buyer agents, that structure has been called into question legally with the recent NAR court case. While Article 16 of NAR’s Code of Ethics stresses the importance of REALTORS® working together and not doing anything that could undermine each other, it’s only natural that tensions could arise when several agents are competing for a share of the commission, especially when one is willing to accept a much lower fee than the other.
“Clearly, the industry is experiencing some changes,” says Broker Associate Jeffrey Decatur, with RE/MAX Capital in Latham, New York. “With change comes growth, with growth comes growing pains. The real estate industry is cyclical, and clearly, we are entering a new cycle, one of change. Agents who have only been in the business for a brief time are having a harder time with these changes than those of us who have been around since the dawn of fire and are adapting and continuing to provide professional service to our clients.”
Melissa Hoff, of The Hoff Group at Compass in Fort Lauderdale, Florida, notes that it’s even more vital now for agents to get along than ever before.
“Conversations with other agents regarding the state of the industry have been that we need to get back to the basics and really educate clients and network with each other,” she says. “We all need to work with each other to make transactions happen.”
Hard workers are rewarded
REALTORS® who have been through good times and bad understand that when times are challenging like they are now, it’s even more important to put the time and effort into the job, when maybe a few years ago going the extra mile wasn’t crucial.
“When home prices started increasing, we began to see a lot of people that don’t know what they’re doing enter the business,” says agent Joni Usdan, with Coldwell Banker in Westport, Connecticut. “There’s a belief among the newer agents, particularly since Covid, that they can serve their clients without actually familiarizing themselves with properties they’re trying to sell, or with their associated neighborhoods. This has been a trend, but it seems to have intensified as more people are trying to cover larger and larger territories. But there’s no substitute for experience and local community knowledge. And it shows.
“Now with the tight inventory and far fewer transactions, and the realization that it’s not so easy, a lot of people have been dropping out, or taking on additional jobs and treating real estate sales as their side job.”
HomeSmart Founder and CEO Matt Widdows tells company agents that going back to square one is usually the best way to move forward.
“It’s back to the basics,” he stressed. “Agents who have weathered these storms before will weather this one as well with hard work and sheer tenacity. Those not willing to do so will probably leave the industry, whether temporarily or permanently.
“The profession is always changing and has been for as long as I’ve been in this business. I think you will see more disparity between large and small brokerages, with fewer mid-sized brokerages and a majority of them being either large brokerages or boutiques. Scale or specialization will rule in the near future.”
That’s something that perhaps had not been widely considered before Burnett vs. NAR. Buyer agents working for companies and brokerages with major expenses, such as tech, overhead, office rents, etc., are less likely to suddenly be accepting of much smaller commissions, especially if they’re required to pay franchise fees. Independent brokers can be more flexible, making them more competitive and able to offer better deals to their clients.
Even so, before new regulations are established or laws enacted, workdays within the residential real estate realm going forward must be approached with open minds and open communications. Differing compensation models are likely, as are commission structures. Be ready to discuss your expectations and responsibilities with clients and other agents. It is also more vital than ever to stay informed about what’s happening on the local, state and federal levels.
In the meantime, as usual, nothing beats hard work.
“Stay consistent, be strong in guiding transactions to closing and don’t take anything for granted,” advises Pam Rosser Thistle, with Berkshire Hathaway HomeServices Fox & Roach, REALTORS® in Philadelphia. “The good agents are buckling down and doing fine. Some who have only known strong markets seem a little shaken.
“I see movement between and within brokerages…agents trying to align with the best opportunity for them—team or solo—to weather these times. The conversations are more accepting of agents making changes, returning to old brokerages, joining or leaving a team or exploring a new market.
“Depending on the final outcome of the Burnett trial, listing agents could be steering the ship more than in the past. We will see what happens. But buyer agency may be diluted. It’s a shame. Buyer education and protection are very important. For instance, if annual real estate taxes for a condo are showing as $1,500, unusually low, the buyer thinks this is a win. But six months after closing the taxes spike to $9,000 a year. No one mentioned there was an about-to-expire tax abatement. A buyer agent would have explained that.”
- Cultivating as many agent relationships as possible is more important than ever with commission percentages likely to be revamped.
- Having knowledge of and being able to share every aspect of your territory can make the difference in winning clients when it’s ultra competitive.
- Going back to basics is always a good strategy, as hard work will always be rewarded over the long term.
- Now is a good time to evaluate whether you are with the right company going forward, and decide what you need to succeed.
- Always value your worth as a buyer agent, and be ready to explain to questioning clients why what you can do for them is crucial as they seek to buy a home.