A “great agent migration” is coming, according to Realogics Sotheby’s International Realty (RSIR) CEO Dean Jones. Here’s how his brokerage is seizing upon impending opportunities.
What market pressures are shaking the trees within brokerages?
There are ongoing and anticipated disruptions being caused by a spike in brokerage mergers, acquisitions, venture capital controls and changes within leadership, either due to succession planning or straight up consolidation with the principal exiting. Agents seek stability and industry-leading advantages to optimize their growth, and as independent contractors, they will migrate to another brokerage to achieve that goal.
What is causing the increase with such industry M&A disruptions?
It’s the inflection point of a new market cycle ahead and some companies need capital, enhanced advantages to compete, or both. The past three years have been particularly challenging as brokerages experienced thinning margins, recruiting assaults, and now 30-year lows with residential sales volumes across the United States. Most brokerage owners have had to make significant investments to maintain their service level or face agent attrition and branch closures. Some brands lack industry distinction and are caught in the middle of the trends playing out. Others are cutting costs and removing services, which slowly erodes the culture. Unfortunately, you can’t save your way to prosperity.
What has been the strategy for Realogics Sotheby’s International Realty in this sort of market environment?
We’ve always avoided commoditization, so we will thrive through and grow. We are doubling down on our culture of collaboration, exclusive advantages and retail services to curate dynamic workspaces. We welcome agents to join us and will help existing producers to scale into teams as an annuity for retirement. We are betting on our brand distinction and taking an alternative approach by investing in our own future without the control pressures of venture capital. This includes integrating an in-house creative agency, expanding our new developments team, amplifying referrals and providing a matchless broker care ecosystem to better support an agent’s ascension. It’s a sustainable win-win-win model for agent, client and company.
Have you been approached by larger companies for merger or acquisition?
There have been inquires but we are not interested in working for Wall Street when our focus is Main Street. Our executive team makes decisions for our brokerage, and we are guided by a steering committee of experienced agents that live and work in the communities that we serve. We don’t need to be the largest to be the best.
Wouldn’t it make sense for agents to associate with the largest brands with the most market share?
Not necessarily because market share doesn’t buy or sell homes – the most productive agents do, whether that’s here in the Pacific Northwest or anywhere in the world. We are proud to associate with the best-in-class real estate professionals who lead luxury and productivity compared with their peers. They prefer our boutique, locally owned franchise approach, which is closely associated with a global network of like-minded leaders. For us, culture matters. That includes having other franchise owners and corporate leadership in my personal contacts – making trusted connections makes all the difference in the world.
Given that so many agents got licensed during the COVID-19 pandemic, how does this factor now with sales volumes being so much lower?
Competition amongst real estate agents is only getting steeper as the average licensee is experiencing 31% fewer transactions compared to before the pandemic. The number of agents who joined the Northwest Multiple Listing Service in the housing boom only corrected slightly during the housing recession. So, agents need to either grow their business through a full-service brokerage or work part-time and consider a lower-cost, cloud-based model. There is also growing concern about commission compression as some agents chose to earn less and seek to pay less, which is spawning more virtual brokerage concepts. Our approach is much more personal.
How are you scaling your reach to add scores of agents to your brokerage roster in the coming quarters?
We recently extended branch office leases to accommodate our growing roster of agents. We added Shannon Olcese to our executive team to help lead our talent acquisition team, and we appointed Valerie Burmester to director of strategic growth in Washington State. We also invested in Project Accelerate – a curriculum of learning to help build better brokers through inspiration, education, and activation. Our team is optimized with business development, and other agents are drawn to this. We are committed to scaling our services through divisional leadership development as part of CORE (Center of Realty Excellence). The ecosystem is ready.
Why do you think now is the time to strategically expand when so many brokerages are consolidating?
Many agents are exploring new horizons because the market is rebooting, and they want to align their future with a brand that can help build their business and scale with them. Some have served out their prior commitments to marketing agreements, and so those golden handcuffs are now released. We provide a runway for those brokers to land with us, get the support they need and enjoy a myriad of cultural and industry advantages we offer in a new paradigm.
What are these industry advantages you reference and what makes them distinct to Realogics Sotheby’s International Realty?
We surveyed our company, and the top dozen ranked advantages include: global reach; collaborative culture; exclusive exposure; RSIR University/Project Accelerate; bespoke services; trusted legacy; benchmark performance; content marketing; local visionaries; dynamic events; inspired venues; and philanthropic causes. We feel these are unique to our brokerage approach and some platforms have been 15 years in the making. We can track direct benefits to our agents.
What general trends you are seeing with agent migration patterns?
We’ve witnessed a flight to quality, with full-service brands that add value. There is also a flight to quantity, with cloud-based brands that are lower service, virtual offices with discount commission models being more commonplace. We believe we offer agents opportunities to increase both their average sales values and overall production at the same time. We are proud to average higher price points and greater retained commissions for our agents compared with our peers.
Isn’t it more costly to operate a full service, full fee model when agents are facing lower commission rates and industry inflation?
Not if the agent is intent on growing their business because the cost of added production is greatly in favor of the agent. Our agents are focused on their 1099 returns. They oftentimes credit our brand distinction, corporate culture and industry advantages for augmenting their business. When the value of a service is greater than the cost, it is not an expense but truly an investment. Our clients feel the same way.
Are you still feeling the impact of aggressive recruiting tactics?
There are fewer cash offers to buy agents given that investors are demanding returns and prior campaigns were unsustainable. Those stock values were being hit by unprofitable business practices. Ironically, as those stock values have improved, agents that were vested or purchased stock can now sell and move on to their next. Some of the agents we lost during such campaigns are returning now.
What about agents who are retiring, how do you help offer solutions for the aging population in the sunset of their career?
We offer our Legacy Plan, which enables team building and support for referrals with limited day-to-day time commitment. This way passive income can continue without sunsetting opportunities in the sunset of life. We consider Sotheby’s International Realty to be a lifestyle investment. Many of our agents enjoy traveling the world and earning income along the way. It’s a pleasure to cultivate exciting programs like this with our agents for our agents.
How do you feel these trends will playout over the coming years?
There’s no doubt that significant mergers and acquisitions will continue, especially with succession planning for some storied brands as founders are looking to exit. This is an era of mega brokerage but not everyone agent wants that. Many smaller firms will find it difficult to operate, unless the principal owner is also selling and competing with the agent roster, which I won’t do. We want to be the Goldilocks brokerage, large enough to rank and compete but bespoke in our service. Boutique is beautiful.
For more information on “the great agent migration,” read or watch the following:
RSIR Blog: Housing experts predict “the great agent migration” is near
RSIR Podcast: FOX 13 Seattle interview on brokerage growth with RSIR leadership
A conversation with Shannon Olcese, RSIR senior branch manager
RSIR Podcast: A conversation about “the great agent migration” including:
• Tammy Fahmi, SVP of global strategy of Sotheby’s International Realty
• Valerie Burmester, principal of Beyond Brokers Consulting
• Sean Soderstrom, founder and CEO of Courted.IO
• Dean Jones, CEO of RSIR