This message was pulled from a blog on www.headofrealestate.com. Posted on February 26th, 2009 by admin and reposted with the permission of the author, Vincent Arcuri.
As I sit in my office thinking of how the real estate world operates, and I'm talking to Realtor's and Real Estate Franchises, I see the world changing before my eyes. Since I am one of the highest ranking ERA Agents in the world, I feel like I can honestly evaluate all franchises models and tell you why I don't think they can or will survive this downturn.
ERA for example, charges me a 6% franchise fee on every dollar (gross) that I bring in. Newer franchise owners are charged 8% of every dollar. When my contract with ERA expires, they will try and stick me with the 8% number for certain when they ask my company to renew the agreement with ERA. RE/MAX, Century 21, Prudential and Coldwell Banker are similar models.
If you are a new or low producing agent, what you get for that 6%-8% is tons of support and or training and a generic "box" of marking tools to boost your self esteem and make you look like you have experience to the uneducated consumer. If you make $50,000 per year, that $3,000 to $4,000 per year in franchise fees is well worth it. After all, you are giving 50% to your broker anyway.
Once agents start to get it (the few who do) and start to sell more real estate, that 8% number starts to choke us. When you factor in what you get for your money, those figures are so unwarranted that you start to wonder why you pay them. In 2008, my Team, The Arcuri Team paid over $57,000 in franchise fees to ERA. Did I get a free ticket to the ERA Convention? NO! I was in the top three Teams in the world in 2008 for ERA. Has anyone called me? I have been one of the top agents in the world with ERA since 1995. Have I ever shaken hands with the CEO of ERA? NO. Those privileges are reserved for "the good ole boy network", the same agents every year. One agent who is on the lecture circuit with ERA is the wife of a big military man. They live outside the20Base in their town. Her husband sees to it that she gets all the leads from that Base. WHAT CAN SHE TEACH ME OR ANY AGENT? She is jet set across the country by ERA to tell everyone how her magnets are prettier than everyone else's and that is why she is so good! She does not know why she has success! 2 + 2 = 4. It really is insulting.
Agents are getting tired of the "same old same old" and we are expecting marketing in exchange for our dollars. I pay for 100% of my marketing! What was ERA's part in my 2008 success? I really don't know. I saw ZERO ERA ads in Tampa, no T.V. ads in Tampa. What I DO know is that with that $50,000, I certainly could have used that money in the TAMPA market! How do I benefit from handing ERA $50,000 per year and nobody knows your name?
New franchise models like EXIT Realty are the future. They are not taking advantage of their agents and they allow the agent to keep more money and make more money with their referral program. Agents there can make more than 100% of their commissions. MORE THAN 100%! Other franchises like Charles Ruttenberg and Future Home Realty in Tampa Bay charge a small fee off each closing. Models like this are popping up nationwide and those models ARE the future of real estate. GREED will kill the traditional model and in five short years, the Broker landscape in this country will look very different than it does today. The greedy dinosaurs of today will fall to the wayside just like the real dinosaurs of yesteryear.
Again, this blog was reposted with permission from the author, Vincent Arcuri, one of the top ERA agents in the World. This was not written or altered by myself for the benefit of EXIT Realty but rather to give an third-party perspective.
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