3 Models that companies follow and the 1 you need to associate with
This is a question that gets asked several times per week here at Earl’s Guide. And on the surface, it looks like a good question. Yet, in our experience, we have found that the core of this question and its motive is rooted in many of the problems that modern real estate agents face.
Our ongoing goal is to show you how to be successful for yourself as an agent. After reading this article, you will be one step closer to being a top producer and selecting a real estate company that has the best model to correctly answer this question. Not all companies treat real estate lead generation the same, as you will soon see.
The initial question is usually asked by individuals that fall into one of two groups:
- New agent trying to decide on a company. They are usually curious because they need to learn how to generate their own business. These individuals still need to know the ins and outs of the real estate industry.
- A previously licensed agent is struggling with his or her business and is looking for assistance. They have heard stories that agents at other companies are getting all types of business from the company and want in on the action.
Both have valid reasons to ask the question in their minds. And on the surface, the knee-jerk answer is a simple yes that the company provides leads or that company does not. Straightforward. Or so it appears. Many agents decide to choose their brokerage company based upon this quick yes or no answer, which ends up costing the agent in the form of lost commissions and frustration.
Peeling back the layers of the onion and asking a few more questions, we can address the reason for the question and what the agent is trying to accomplish, which is to get more business in the easiest way possible. It also exposes an inherent, systemic problem in the industry of agents being led to believe that their overall success depends on the company they select vs. an understanding of how different companies are structured to assist the agent in different ways.
One of the main reasons this question is asked is from either a lack of knowledge or a tendency towards this dependency. Some brokerages want this question to be asked by every prospective and existing agent. They want to perpetuate the dependency model, allowing the company to insert itself into the equation and charge fees for doing so. They want the real estate agent leads provided by the company to be perceived as the lifeblood of the agent.
Picture a baby bird in the nest with its mouth wide open, squawking away, waiting for the next morsel of food delivered by mom or dad. You have a picture that happens all too often in the modern real estate industry.
Many brokerages still operate like the 1950s, hoping to make agents as dependent as they can on the broker, the company, and the brand—many times by providing minimal handouts to please the average agent.
You’ll see why we say minimal in just a bit.
In my experience, companies approach leads in one of three manners for real estate agents:
1. Provide Leads
- They have set up a structure or a model to cause prospective buyers, sellers, and investors to contact a central location so that the company can, in many instances, sell these opportunities back to the agents in the form of leads. Often, these arrangements come with strings attached in the form of referral fees and dues to the company in addition to the already agreed-upon commission splits.
2. Provide the opportunity to acquire leads
- This is in the form of opportunity time/desk duty to generate real estate leads. Again, with a centralized system in place, for example, requiring that the brokerage phone number be on all of the signs as the primary number, inquiries on properties come into a central number that is staffed by an agent that can then convert that lead to a prospective client. Some company offices have an advantage in these areas due to location, providing minimal walk-in travel in tourist areas. (Picture the real estate office with the photos of all of the listings on the outer windows in a tourist area, just hoping that someone stumbles into the office)
3. They are teaching the agent to generate their leads.
- Surprisingly, this is an approach rarely taken by the brokerage community—the reason for this, in my opinion. Most companies are afraid that they will teach you how to be a licensed real estate agent that knows how to generate business; and that once you learn, as a licensed real estate agent you will leave. This would cut the company out of the equation, making them unneeded and, therefore, unable to continue to collect commission splits from the agents. This short-sighted approach dominates the industry.
Let’s take a moment to look at these three models and see how this approach is or isn’t in the agent’s best interest.
Model 1 – Providing Leads.
We have yet to be able to see a company accomplish this at scale. Even non-brokerage lead generation companies have tried it (Zillow, Realtor.com, etc.). They have yet to generate enough inquiries to satisfy the masses of agents. Suppose you, as an agent, want to be successful and want to sell a minimum of a home per month. You are dependent on the lead generation company providing leads to hit your number. In that case, the company will need to give some multiple of more leads for you to accomplish this. Only some inquiries are from an actual buyer, seller, or investor. While the company may call them leads, our experience has shown that they should actually be called suspects. And suppose the company adds a level of qualification screening services to the lead before it is delivered to the agent. In that case, the cost of the lead, in the form of a higher fee or referral fee, is attached to the resulting lead and passed along to the agent. This is a trap that many new real estate agents fall into.
Look at the big picture. The scale needed for a brokerage company to satisfy a majority of its agents would be thousands or tens of thousands of inquiries generated each day, month, and year. Despite the introduction of the internet into the lead generation process, no company has been able to accomplish this volume for the benefit of their agents.
Suppose they do invest in this manner of lead generation system. If they do provide leads, it is at a minimal amount. In that case, the funds are usually diverted from other services the company offers, usually in the form of what they would consider soft services or lost revenue services like education and training.
Model 2 – Provide the opportunity to acquire leads
Similar to Model 1, a brokerage will always need more phone calls or walk-in traffic to satisfy the agent’s desire to be successful. While they may provide a suspect/lead here or there, the overall model will never offer enough to guarantee an individual agent’s success.
One other consideration of this model that is sometimes overlooked is the time investment needed by the agent to be able to obtain this opportunity. The typical office duty time runs from 2 to 3 hours. In my experience, a considerable amount of this is performed either in the form of waiting or tending to the administrative task of the office (directing calls to other agents, answering questions that have nothing to do with specific homes or from actual buyers or sellers and in the walk-in environment, giving directions to other locations in the area, interrupted by the occasional call from a real buyer asking how much a home is listed for when they drive by a sign. Even this has diminished with the popularity of mobile phones and tools like QR codes and text response systems.)
Imagine if that 2 to 3 hours was utilized in a productive manner and as opposed to the passive approach of waiting. Every time I have worked with two agents, each taking the passive vs. proactive approach, the proactive agent has always cashed more checks.
This brings us to the third model – Teaching the agent to generate their own leads.
Those few companies that have adopted the approach of being a training company that happens to be in the real estate business have bucked the dependency trend. Keller Williams Realty falls into this category. These outliers have a philosophy that follows an old wise saying. “You can give a man a fish, and he will eat for a day. You can teach the man to fish, and he will never go hungry.” Doing so, they have found that agents thrive in the learning-based, action-oriented environment and end up staying with the company rather than immediately moving along. That is not to say that these companies don’t have agents leave. They do. But the vast majority stay planted in the culture of growth vs. handouts.
The training-based approach has proven time and time again to be the best for the agent. Yet why don’t more real estate companies adopt this approach? Some of it is due to the ownership structure of the real estate company, a topic we will cover in a follow-up article.
When agents see that they have the power to generate their own leads consistently, they have an ah-ha moment. The light bulb goes off, and they gain or regain control of their business. Or they decide to look for a company to provide for them, and a vicious cycle continues.
So while we can see why prospective agents and licensed agents ask the question, “Does your company provide leads?” The better question is, “Will you work with me to show me how to provide for myself so that I can accomplish the goals that I have for myself?”
The latter question will serve you the best in the long run.