The 80-20 Rule of Real Estate Agents

I was reading a blog by a fellow real estate agent who I follow Richie Alan Naggar (Shocking and I hope this happens to you too) and it got me to thinking that real estate is very much like many other industries. Whether you are a real estate professional or a consumer looking for one, it is important to understand the 80-20 rules of real estate agents. 

Many of us are aware of the 80-20 rule (Pareto’s Principle) where 80% of the effects come from 20% of the causes. In this case we are going to apply it to real estate agents. In particular the two agents that are most likely to be involved in a property transaction: the listing agent and the buyer’s agent. 

Current Market
We are going to state that 20% of buyer's agents are really good at their profession while the other 80% manage to get the job. We are also going to state that 20% of listing agents are really good at what they do while the other 80% manage to get the job done. After all this is about the Pareto rule.

In most property transactions, these agents have to work together. The chart below provides you some very interesting information. The rows represent the Buyers's agents and the columns represent the listing agents. We are going to call the 80% agents journeymen and the 20% eagles. Now follow me as I explain the chart’s implications.

1. Upper left hand quadrant 64% (red)- This means that the average consumer is going to select an agent from the 80% (whether that is listing or buyer agent.) If you look at the statistics from NAR, most consumers do not research the agents they select. In fact most select the first one they meet. These agents will most often work with one the 80% of the other agents. Based on this information 64% of the time consumers will be working with two agents that can get the job done but not necessarily the best experience. This is where many negative stereotypes are generated about real estate agents.
   
   
2. Lower Left Hand quadrant 16% (yellowish)- this means a consumer either took the time to research an agent who knows how to represent a buyer or simply got lucky. Still most of the time (80%) this agent is going to have work with a listing agent who is not on top of their game. This is still a better situation from the buyer’s perspective as their agent will make the transaction happen and the consumer may never know the issues with the other agent ever existed. For us real estate agents it is almost like working both sides of the deal without getting paid for our additional work except when we get to see the look on our buyer’s face when they get the keys to their new home.
   
   
3. Upper Right Hand quadrant 16% (yellowish)- this means a consumer either took the time to research an agent who knows how to list their property or simply got lucky. Still most of the time (80%) this agent is going to have work with a buyer’s agent who is not on top of their game. This is just like the situation above except the agents have switched sides and the extra work we perform is reflected in the profits are sellers receive at closing.
   
   
4. Lower Left Hand quadrant 4% (blue)- this is sort of sad for the real estate industry. This is where the consumer either found a great buyer’s agent or a great seller’s agent. In addition, the house they are buying is represented by another great agent or the potential buyers of their property are represented by another great agent. This is when all pistons fire in synch. All the coordination and communications work, closing occurs on time and each principal of the transaction is thrilled with the results. You have an ecstatic buyer and seller who both went through one of the best experiences of their life involving one of the largest financial transactions they will ever go through.

Real Estate Agents
This is just food for thought. Are you an eagle or a journeymen estate agent? Customer service is one measurement. One question is how can we get honest feedback from another agent? Maybe you can’t. I highly recommend you sit down and conduct win and loss reviews with somebody you respect. Find out what you can do better in every transaction. This will ensure you are in the top 20%

Consumers
This is me waving the flag and telling you that you get to select one of these agents depending on if you are buying or selling. How do you find one of these 20% agents? That’s for another blog but as I have said before here are some quick suggestions: interview several, pay attention to their answers but also to their questions, ask for and check their referrals, can you see yourselves being successful working with this agent. 

For those in North Texas please call me. If we are not a fit I will be glad to recommend someone who might be better. Yes sometimes even though I consider myself to be an Eagle (in the 20%) based on many things, I still may not be the best fit for you. While I can certainly use the business, I always live by my tag-line: Your success is my focus.