Agent Churn: What It Is, Why It Happens, and What You Can Do About It
They have a name for it. It is called “Agent Churn.” You might think that now more than ever is the time to pursue a career in real estate because the market is so hot or you might be considering switching brokerages because the grass appears to be greener, however, before you take the leap, consider this:
The Grim Reality
Currently, there are significantly more real estate agents in the country than there are homes to sell. Slightly more than one million homes were on the market in the U.S. at the end of January, which is down 26 percent from a year ago. That figure is the lowest on record since 1982, The Wall Street Journal reported, citing the National Association of Realtors. In the same month, the NAR had 1.45 million members, up 4.8 percent.
Housing inventory shortages are to blame, and we currently do not see an end in sight. The Milwaukee Association of Realtors monthly new agent orientation session attendance has historically averaged about 40 agents a month in a balanced market. In this post-pandemic market, membership orientation has ballooned to over twice that many.
The likelihood of success in a residential real estate career in today’s market is low considering the statistics, and the result of this is “agent churn” -- agents floating from brokerage to brokerage in search of the silver bullet that will make them successful. Unfortunately, our industry preys on this perception that one shiny object can make an agent’s career and, we know this isn’t true. It takes a combination of things – some of which I address below and others I’ll address in a future blog post.
Much of our industry is built on creative recruiting tactics that instill fear and create feelings of dissatisfaction so an agent will leave their current brokerage and jump to the next one. It is a shame for home buyers and sellers that the industry is more focused on agent recruitment than customer service. In my opinion, it is a major failing of the real estate industry, but this is how they profit.
A Game of Distraction
The brokerage business models are built on agent’s backs. Therefore, brokerages need agents to survive and grow so they invest heavily in recruitment training, marketing programs, and long seminars to teach their people how to recruit new and existing agents. These programs overflow with war-like maneuvers and tactics. Recruitment meetings are resplendent with scripts, role playing pitches, and carefully contrived character assassinations of an agent’s current broker. They promise agents better systems to win more clients, “the latest” technology, bonuses, and more lucrative splits.
Brokerages chase the agents to accumulate monthly agent fees, and agents chase better commission splits and fall prey to recruiting tactics that lead them to believe the jump will improve their business. A Milwaukee five-year spreadsheet of agent churn from brokerage to brokerage comparing brokerages and the agent success rate in accumulating more transactions after the agent jumps brokerages is less than 12%. Recruitment favors the brokerage successful in their recruiting efforts, not in the agent. This is the distraction.
Be Your Own Start-up
Real estate agents should look at their business as a start-up, if they are to be successful today. High uncertainty and a high rate of failure yet some endure. The five things that make or break a start-up? Money, marketing, and a hell of a lot of passion, perspiration, and support. Without these key elements, agents’ careers are likely to fail or just skip along the bottom. Splits are the not the key to agent success and implementing a business plan is a must. A broker who can mentor agents provide the support to show agents how to run their business like a business is immeasurable in this fierce competitive market. The odds of success are not favorable. Having a personal coach who has been successful and can show agents the “how to” is priceless. Agents, be prepared. It takes about two years of fierce marketing to build a brand. The failure rate nationwide in 2020 in residential real estate was 57%, even in one of the most robust real estate markets in history, because so few agents have a business plan, a budget, and a marketing schedule.
The statistics for start-ups are rough. In 2020, 90% of new startups failed. Seventy-five percent of venture-backed startups failed. Under 50% of businesses make it to their fifth year. Thirty-three percent of startups make it to the ten-year mark. https://review42.com/resources/what-percentage-of-startups-fail/#:~:text=90%25%20of%20new%20startups%20fail,to%20the%2010%2Dyear%20markKnowing this information is powerful. It means there has to be a well-thought-out plan and plenty of funding.
There will be another new brokerage coming soon to the North Shore…another large national brand brokerage who will bring their recruiting toolbox of a better tomorrow and rich bonuses to the local agent pool. They have stockholders and need to answer to their stockholders so the most aggressive recruiting tactics this small town has ever seen are about to get underway. Change is here again. Just remember agents, the consumer decides. Focus on your customers and their satisfaction. If you do not have a book of business, focus on how to build a business. No one company or changing companies will improve your outcome until you decide to become a business entity in your own right. Learn everything you can about the business and develop a smart, strategic business plan.
Powers Realty Group is a distinctive boutique real estate broker focused on the needs of customers delivering exceptional results. We are the trusted local experts. Call us today about buying or selling your home.Call Suzanne Powers