"PAY-TO-PLAY": THE REAL REASON FOR THE STRUGGLE IN BROKERAGE TODAY??

By
Real Estate Agent with Douglas Elliman Real Estate 30HA0800896

"PAY-TO-PLAY": THE REAL REASON FOR THE STRUGGLE IN BROKERAGE TODAY??

It's a good question especially with the chaos going on within the brokerage community and with the top producers leaving in droves to go to work for their former competitors! Looking for a new "home" may not be the answer however, as the top brokerages are all in the same stew: High splits for their top agents are killing their profits!

In one of my last posts: REAL ESTATE BROKERAGES ARE STARTING TO CLOSE IN NYC! , I had several encounters with the type of agent who has fallen into line behind a number of Top Producers who get their leads from Zillow and the like. In that post I included the article from THE REAL DEAL: The Death Of The Brokerage. 

It was such an eye opener to many that the large brokerages could be affected so instantaneously as they struggle to keep their top producers happy...The biggest splits go as high as 95% acccording to the Real Deal article.

Now, these top producers can't possibly be out there seeking out their own leads, pulling in the most  contacts through their own efforts. No, most are paying big time to get the calls from leads through these national sites. In my own experience, I can tell you it does not cost $1,000 amonth to get the results these power brokers need to stay on top...It is more likely they are paying thousands a month to get the leads away from the many other agents who are out there paying big time as well! An agent in my office bragged that she was spending $40k a year to get the leads she is getting. Of course here in the Hamptons, it is the lower end of the price spectrum that gets the lions share of the leads. So she is making her Top Producer status by selling in the outlying areas of the Hamptons or West of the Canal, just outside the Hampton's proper.

The top end of the market--the $15million+ market is not as likely to get the calls from Zillow....yet! It is beginning to happen in spite of the fact that most of those leads end up to be the ultimate in Lookie Loos! Curiosity makes them call more than the desire to buy.

That seems to be changing as the exposure to these national websites changes and as Zillow, redfin and Streeteasy capture more and more agents at the higher price spectrum using these sites and paying a huge amount of money trying to ceate more growth by participating.

Agents who pay big time to get big results are really playing the "Pay To Play"game...Pay To Play is alive and well in real estate--at least it is at the moment! You will not show up on Zillow next to a big listing if you are not paying them thousands a month--and I mean thousands! Some say anywhere between $3000 to $10,000 a month!BIG BUCKS--PAY TO PLAY

Now, we see the brokerages falling by the wayside as they try to absorb the cost of many of their top agents who are doing most of their business by buying leads from these sites. They can't absorb the costs!!

How do big brokerages survive the requirement of their Top Producers to pay huge amounts of money to buy leads? How do the high splits ultimatley affect these large brokerages?

Well, you don't have to be a genius to figure it all out.

We will soon see what happens as these Top Producers who choose to do business by paying to play with the Zillows and Redfins of the Techno-World, find out that the brokerages can't pay them their commissions! Why? Because the brokerages can't make enough money from these agents! The splits are too big!!

IN SHORT:  In order to make big bucks top producers need leads. In order to get the number of leads to accomplish their goals they need to pay to get them!  Rather than work to get the leads, they would rather pay someone else to get the leads for them--they welcome the idea that Zillow will give them those leads for big bucks!

In turn, the agent needs a bigger split to pay the huge cost of buying those leads.

THE BIGGER THE SPLIT, THE BIGGER THE FALL WHEN REAL ESTATE SLOWS DOWN!

This, my friends, is what real estate has become: One big Pay To Play game that is leaching money from the hard working agents who DON"T pay to play, and destroying the very foundation of the brokerage business itself! 

Right now, it is no secret that real estate has slowed in many areas--A reason cannot be identified. The best one is the idea that the public does not need to move as they did in the past--jobs can be done long distance, thanks to the internet! Whether that is the real reason behind the slowdown is yet to be determined, but the business is in the process of some form of change and we are feeling the brunt of it....

...And now,  Zillow is lobbying in Washington to identify those brokerages who they claim are withholding information from the consuming public! That means all of us!  The claim made by Zillow is that real estate professionals are keeping the public from the having access to the information need to buy and sell their own real estate!!

Oh the IRONY of it all! 

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  1. Felix Figueroa 05/16/2018 12:14 PM
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top producers pay for leads
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Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi John:  I agree--it is self-defeating to join in the Pay-To-Play game. Once we have enough agents who agree that things need to change, then we can see a shift away from the Pay-to-Play to a more word of mouth and referral form of doing buisness again. We need to do that in order to survive. Even if the big brokerages can't survive the choas they are facing now, that does not mean we cant continue to do the work we all love to do! Maybe that is the way of the future for us all. But it can only happen through awareness of what the Pay-to-Play mindset does to our profession...Get those agents who pay out of our profession so that we can move forward!

May 17, 2018 09:25 AM #43
Rainmaker
427,922
Bruce Hicks
Best Homes Hawaii - Honolulu, HI
Your Lifetime Friend/Helper!

There are those entities who THINK we are making tons of money for little work and they want a piece of the cheese Paula Hathaway, REALTOR, LBA .   Remember the book "Who moved my Cheese?". 

May 17, 2018 10:01 AM #44
Rainmaker
1,245,981
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Paula Hathaway, REALTOR, LBA ~ I've been waiting to hear from brokers and agents in the NY area. From what I gather, NY agents and brokers are up in arms over the StreetEasy ordeal.... 

I hope that this is the start of the end for ZG! NY regulators need to step up and start fining agents and broker alike that "violate" and “advertise” on the exclusive listing of another agent.

Thanks for this post and information, the more we talk about this, the better chance we have to overcome

Game Over

May 17, 2018 10:04 AM #45
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Bruce: Thanks for sharing the book--I have heard about it but never read it---so now is my opportunity! It appears that if we all take the lead here and start to think differently about Paying-to-Play then those who do it will be less apt to want to continue and those who think it is a possible opportunity for themselves may get the drift. I have been writing posts about Zillow for so many years that my eyes glaze over now when I read about the agents who are paying so much without relizing what they are really doing...The sound of nails being pounded into the coffin of real estate brokerage is resounding and they have to get the point real soon. Change is good---but killing off a profession is unacceptable! We will survive!

May 17, 2018 10:16 AM #46
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Jon: The problem is that Zillow and Streeteasy are not licensed brokers so they are not bound to the State licensing laws! They are getting away with this and the State stands there and watches! No one is doing anything about it! Thanks for reading and commenting, Jon

May 17, 2018 11:11 AM #47
Rainmaker
1,000,520
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I just stay in my lane and work hard. When someone asks if I pay for leads, I just laugh...so far, what has worked for me for years has been doing a good job, being honest, being ethical and communicating regularly.  I have as much business as I want and don't need to feed the beast.  

May 17, 2018 12:56 PM #48
Rainmaker
284,543
Michael Mahoney
eXp Realty - Boston, MA
Boston Realtor

Susan Haughton that is what people want. To be honest and work hard. That's what builds a business! Good job!

 

May 17, 2018 01:17 PM #49
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Susan: Michael is right--the hard work that we all did to begin this business is almost unheard of, at least here it is. New agents come into the office and they already have a partner to work with---they become part of a team that mostly answers phone calls from all the leads they buy---it is really something to see! Now, these agents may very well become the experts that they claim to be on Zillow but they sure don't start out that way. They barely cut their teeth before they are rolling in the dough that the established agents bring in. No research done to find buyers and sellers--it all comes to them through their hefty fees on Zillow. Is it wrong? Well, I have heard the complaints from the public and it is not what I want to hear about myself!

May 17, 2018 01:27 PM #50
Ambassador
1,632,924
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

We tend to stay in the same mindset as Susan Haughton. This industry has some huge egos and some greedy agents who can't, or won't realize, the repercussions of paying to play. It's hurting all of us - and the industry too. The only thing we can do at the moment is continue to offer exemplary service to our clients. 

May 17, 2018 02:48 PM #51
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Debb and Bernie: Great! We need more like you...if the trend that has been going for 2 years now in my neck of the woods continues, we all be looking for work. It has been crazy here. I used to get listings that I could pitch from owners who read my blog posts but not since the Zillows, Streeteasy's and others have adjusted their algorithms to match everything real estate! If someone wants some local information on the web for Southampton--the only thing they get are the national websites. They (the websites)have settled in here in every aspect of the local community and they claim to be local experts now(which they are not of course!)and the only businesses who are benefiting from SEO right now are those sites! Even ActiveRain is on the last page....This is bad

May 17, 2018 03:01 PM #52
Rainmaker
574,102
John Marshall - FORE!
The K Company Realty - Cherry Hills Village, CO
Specializing in Golf Course Properties

This is a great post and great commentary, years ago I paid for leads and found that I really sucked at following up on those leads, since I enjoy the freedom, lifestyle and flexible work schedule, I needed a different solution... SO I started to study the truly elite agents, salespeople, artists and leaders and found that what separates them is that they all specialize, they have a passion about a certain segment or niche and they learn it better than anyone else, they are the go-to for that niche and no one can touch them. 

I also see the Z word being tossed around, I wish everyone would stop saying/typing that name, quit giving them juice, what will/is happening is that there will be a big separation between those that buy leads and those that  attract the type of clients they wish to work with. Think Walmart vs Saks Fifth Avenue.

I choose to attract the type of client I wish to work with and will never pay for leads.

Think like a musician, play the music you enjoy and dance with those that like it.

May 17, 2018 03:53 PM #53
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi John:...And sing as if no one will hear you!! Sorry I just had to catch on to your last sentence---what a great way to state it!

This is a transitional time, a transformational time and we will determine how it all ends, in my opinion. I am not so ready to give up and give in---I will NEVER give in. My job right now is to work my bu--off and make money that I know I can make--it is out there and people have sickened from the spending of it to "buy" a place in our profession that is less than honorable. I will make it and you will too--we just have to commit to the hard work and the creative aspect that we must find to make it happen!

May 17, 2018 06:44 PM #54
Rainmaker
129,382
Eva B. Liland with Century 21 Doug Anderson
Century 21 Doug Anderson - Lancaster, CA
Glad to be of Service

I am such a small fish in a big pond, various companies call me all the time trying to sell "leads". So far I have doubled my business every year. No, I DO NOT need them because being active gives me the right attraction.

May 17, 2018 07:56 PM #55
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Eva: Perfect! You must know on some level you have the draw of the public because they know how hard you work! That is what is missing in the group who pay for their leads; they don't do the real work and they appear to be phony agents to those who see their faces on Zillow!

May 18, 2018 05:16 AM #56
Rainmaker
1,245,981
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Paula Hathaway, REALTOR, LBA ~ I know you can't go after ZG or StreetEasy as they are not regulated "but" you can go after the agent and broker! Here's the regulation that's sited. 19 NYCRR Section 175.25. It deals with rules of advertising real estate listings. Specific to this matter, subsection (b)(2)(ii) of 175.25 states as follows:

“No property shall be advertised unless the real estate broker has obtained authorization for such advertisement from the owner of the property or as hereinafter provided.”

Anyway, this is what I was talking about and this is what NY regulators need to penetrate

May 18, 2018 09:19 AM #57
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Jon: Thanks for that--I had actually talked to one of the people at the NYSAR office and he was the one who gave me the fine $$ figures---He thinks they are really going to go after the agents and brokers this time---watching it very closely. He says the revenue from the fines alone will drive the project and with the increased $30 a year membership fee they will have windfall of revenue for staff to do the watching....too bad they have not been effective in protecting their members from the likes of the Zs and Ts!!! Maybe your idea that the regulators will get involved is not such a bad thing...

May 18, 2018 10:18 AM #58
Ambassador
1,819,596
Michelle Carr-Crowe Just Call 408-252-8900 Top 1%!
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

It will be interesting to see how this actually plays out.

May 19, 2018 12:15 AM #59
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Michelle: It sure will--I can't wait!

May 19, 2018 08:35 AM #60
Rainer
49,197
HOMEiZ.COM HOMEiZGROUP
HOMEiZ.COM - Los Angeles, CA
THE REAL ESTATE SOCIAL NETWORK-COMING SOON

This article comes from the heart of its writer.Everything Paula wrote is 100% right.But, there is a solution to everything in life except death.The problem can be solved, just if real estate agents will be united.NAR , the MLS, left real estate agents homeless.They all care only about their own gain and nothing more.Who created this problem?Real estate agents did! They digged their own graves by falling into the trap of nice words like , " List for free"

The root of the problem starts here, if you do not manually upload your listings, then you do not own your listing anymore.The XML feed technology maybe a nice thing to have and saves time to many brokerages, but it does not going to be a benefit for the agents future.Zillow did not kill your future. Zillow is the cat who was left to guard the glass of milk, your own brokerages left behind.Zillow`s leads system is working in the benefits of those brokerages who just can not provide leads to their own agents.If you compare the numbers, there are way more agents who do not have listings than those who have the listings. So, Zillow prefers to XML feed the listings for "Free" and sell Zip codes. In this way Zillow makes way more money than to just charge the agents for manulaly upload their listings.I do not blame Zillow, I blame your own stupidity to believe that anyone will give you something for free. We all live in this great beautiful country and should have known long time ago that, nothing is free.

May 21, 2018 10:37 AM #61
Rainmaker
465,446
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

...Very hard to communicare when I don't know to whom I should address a response. It almost feels like I am speaking to AI so I wll keep this brief: 

A good example of what is wrong with real estate right now is to take a look at the case brought against Z in Illinois. That case was brought by homeowners who did not want their personal data shared with the world--that is only one part of the problem. Homeowners are very unhappy with Zillow as am I.

May 21, 2018 11:55 AM #62
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