"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!
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!