The Most Important Customers Of A Brokerage May Be It's Agents

Written by Posted On Monday, 25 June 2018 13:23

The relationship between a real estate brokerage and its agents is a multi-faceted one. Those in the business, the first one that comes to mind is probably that of independent contractor. That is the relationship that determines income tax treatment, and, life in the USA being what it is, it is probably the relationship that most agents and brokers think about.

But others come to mind as well. State laws require brokers to exercise varying degrees of control over their agents. Simply put, the broker is responsible for seeing to it that the agent acts within the law and does things the right way. Most brokerages develop substantial sets of rules and procedures to ensure that their agents act properly. When viewed from this perspective, the relationship between brokerage and agent looks quite a bit like that of employer and employee.

And, of course, there are other relationships between agents and brokerages that can range from business models (partners, shareholders) to metaphors such as team mates or family members. (Keller Williams, the largest real estate franchise on the globe, calls its annual convention "family reunion.")

All of these have their place and their use. My purpose here is to suggest another model for the agent-brokerage relationship. (This is certainly not original with me; but, from what I have seen, it is employed far too infrequently.) It is the premise that agents are the customers of the brokerage. (Now, please, let's not get bogged down on legal definitions or whether this is "right" or "wrong". I am just suggesting what I think could be a useful and beneficial way of looking at things.)

To be sure, the commission money that comes in the door ultimately comes from principals -- buyers and sellers. That money is then shared between the brokerage and the agent. Think of the portion that goes to the brokerage as the price the agent pays for the services that the agent receives (often advertising, office space, managerial support, etc.).

Now, this may seem to stand the model on its head. "No, no", some will say, "it is the brokerage that brings the customer to the agent; and the commission split to the agent is what the brokerage pays him or her for handling the transaction."

Maybe that was a more accurate way to look at it in the past. It was the broker's adds, office location, and reputation that brought the consumer in, and it was the broker's investment in the office and its infrastructure that enabled the transaction to be processed.

But that's not how it works today. Computers and the internet have changed all that. Individual agents today have the tools and the ability to generate leads, advertise inventory, and develop and maintain data bases that far exceed anything a brokerage could do twenty-five years ago.

While it might be technically and legally true that a principal is the customer (client) of the brokerage, in reality, principals are the customer (client) of the agent. It is, for the most part, the agent, not the company, who provides the customer service experience that the principal will remember. For good or for ill.

It is all too easy for brokerages, at the management level, to envision their relationship with agents as that of employer-employee. (And, yes, then it does make the management job seem akin to herding cats.) Because of the broker's duty to supervise, there will always be an element of truth to the employer-employee model. But, if brokerages can also see that their agents are their customers, then, presumably, they will take seriously the idea that they should seek to maximize the customer service experiences that they provide.

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Bob Hunt

Bob Hunt is a former director of the National Association of Realtors and is author of Ethics at Work and Real Estate the Ethical Way. A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at [email protected].

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