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Like it or not, Aug. 17, when rules triggered by the NAR commission lawsuit settlement go into effect, will be here in the blink of an eye, and real estate as we have known it will change. While many speculate that in the long-term things will normalize, there is certain to be confusion over the next few months. Thanks to the ridiculous media coverage (full of mistakes and in some cases, blatantly misguided), we are already seeing sellers slash commissions to buyer agents and buyers themselves responding with all kinds of angst.
Adding to the mix is the fact that we have seen a significant increase in the number of potential sellers approaching us to ask about getting their homes on the market. As inventory rises, recent price increases coupled with high interest rates are softening buyer demand. The logical outcome is a slowing in the rate of sales and a corresponding lowering of prices by sellers eager to get their homes sold.
Factor all of these things together and I believe we are going to see a measurable impact on one specific group: Those who function primarily as buyer agents. If, as forecast by any number of pundits, buyer-side commissions drop, then the inescapable conclusion is that those agents focusing on buyers will need to complete more transactions just to stay even.
As a result, I believe this is a very good time for solo buyer agents to consider hooking up with a team. Here are my top five reasons:
Buyer leads
Most teams produce a higher level of leads than individual agents. There are a number of reasons for this, including more listings, higher lead generation budgets, increased market visibility, better prospecting tools and so on. In fact, many individual agents start teams because they have learned how to produce more leads than they can handle on their own.
Another factor ties in directly with the length of time a team has been operating. Teams that have been in business a while, have generated a number of leads through various sources and have maintained an active database offer an added bonus for team members: a lead pond. These are contacts that have, at some point in the past, raised their hands and stated that they were interested in a specific property, visited an open house and more. While they did not do any business at the time, their data has been kept in the team pond and is available for agents to “go fishing.”
Many larger teams I am personally aware of have a significant number of contacts in their ponds, meaning that their team members can access the pond to see if they can generate a client. Since these leads have, at some point in the past, stated they were interested in real estate, they are typically warmer than those contacts made while cold calling or door knocking.
A bonus is that, as contact is made with a pond lead and a relationship revived, that person gets transferred out of the pond and into the team member’s personal sphere of influence.
Open house opportunities
Since many teams focus primarily on securing listings, their seller-to-buyer ratio is often skewed towards listings. As an example, historically our team has seen the seller/buyer ratio hover around 60:40. Coupled with higher advertising budgets, it is not unreasonable for teams to hold the lion’s share of listings in any given market. As a result, teams usually have significantly more open house opportunities than individual agents.
This reality will become increasingly important as the implementation of buyer/broker agreements becomes mandatory. Agents in those states where buyer agreements have not been mandatory are beginning to see pushback from buyers who are unwilling to commit. Since a buyer/broker agreement is not required to visit an open house, I predict we will see two things happen: Unattended buyer traffic will increase at open houses and more buyers will attempt to negotiate directly with the listing agent in those states that allow dual agency.
The upshot of this is that the opportunity to pick up buyer leads at open houses will — in my opinion — be increasing significantly. Since teams typically provide a higher number of open house possibilities — do the math.
Prospecting tools
Those solo agents who actually use a CRM (the numbers are remarkably low) are more often than not using a low-cost program either provided by their broker or utilized because of their low price point. In contrast, larger teams utilize expensive, robust technology solutions that far exceed the capabilities of the lower-end products.
Besides all of the basic functions of CRMs, advanced features include dialers, access to FSBOS and expireds, extensive auto-drip programs, market evaluations, local area info feeds and so much more. Additionally, teams usually spend significant time coaching their agents in the use of their CRM to maximize their effectiveness.
Training and accountability
When I started in real estate back in 2001, I attended a week-long training with about 100 other new agents and was then left to sink or swim on my own. By luck, I managed to lock in some effective business practices from Day One (including quickly building up a database to approximately 800 families) and I was off and running.
I also decided to get coaching early on to improve my effectiveness. Utilizing the information as I learned it, I adapted and shifted as I went and began building a successful business.
I will quickly concede, however, that if, at the beginning of my career, I had had access to the resources that our team currently has, I would have been down the road much faster and would have spared much of the expense of my trial-and-error efforts to find systems that actually worked.
Fortunately, things are much different today, especially for members of larger teams. Large teams have significant, time-proven systems and rhythms in place, including daily morning Power Up sessions to get their agents off to a successful start every day, production rhythms that include mandated daily prospecting, continued training, production targets and a minimum required number of open houses. Teams also cover the costs associated with these systems, allowing newer agents to get up and running without incurring the normal costs associated with starting a new business.
Additionally, since teams have a larger exposure to potential liability, they usually provide a higher degree of ongoing training designed to keep their agents current with emerging practices. As an example, our team, ever since the NAR lawsuit, has been actively training with scripts around new practices, including buyer/broker agreements.
Transaction support
While it is often relatively easy to find a client to work with, once an agent begins working with them, it becomes harder to find additional clients since the time once given to prospecting is now being redirected to the new client, especially if you manage to get them into contract. Here is where teams shine: by taking the majority of transaction support off the plate of their clients, agents are freed to go back out and find new clients instead of getting sucked into the morass of managing the minutia.
While I agree that teams are not for everyone, the simple truth may be that teams and their agents stand a good chance of coming out even further ahead as the market changes are enacted on Aug. 17, 2024.
Carl Medford is the CEO of The Medford Team.
