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Oregon Real Estate, Realtor contracts, real estate transparency, brokerage transparency

The Importance of Transparency for Brokerages

May 2, 2019

by Colin Marcum

Imagine yourself being a Realtor, and having to shop around for a brokerage that works best for your desired business model. When considering different brokerages, you're weighing the benefits of association, and consider promises of support. Perhaps you were promised numerous listing and buyer leads, or told the only monetary costs were either the monthly fee or split commission at closing. You made a decision based on what you believed was full disclosure of all the costs and benefits between one firm versus another.

Did you ask about the negatives of the firm? Do you remember a time when a brokerage volunteered that information without being questioned first? We don’t know of many firms that do. Just like any product or service, a business usually focuses on the positives of what they offer. Do any of these sound familiar?

“We will give you leads.”

“We have the lowest monthly association fees.”

“Pick your own commission models.”

“State of the Art dashboards and agent profiles.”

“Join a robust network of real estate professionals.”

While these statements may be true, or at least partially true, when engaging potential brokerages, you need to be clear on what you want and what you are willing to compromise on.

TrainAgents, which is an excellent source for Oregon licensee training and continuing education requirements, offer the following advice.

“When a brokerage has many licensees that have been with the firm for a length of time, this may be an indication that the licensees are very satisfied with the management, support, and staffing of the brokerage. There are usually reasons why brokerages have a high or low turnover rate. Ask about the average time of affiliation of the licensees who are with a brokerage.”

If a firm has low turnover, then you would expect that the agents are satisfied with the arrangement, and choose to stay. If a brokerage experiences high turnover, you expect that many agents came on board only to eventually find something wrong, and they abandoned ship.

There are two reasons the later occurs. First is that some agents are simply not properly weighing the pros and cons of joining that particular firm, which is highly unlikely. The second, and more likely occurrence, is that the brokerage is not providing sufficient information for the Realtor to make an informed decision.

This could be because the recruiter may be more focused on touting what they feel is great about the firm, but may neglect to mention a few points they deem unimportant since they don’t apply firm’s business model. The other reason could be that they simply want to ensure that you join the brokerage and fear the discussion of anything negative. Their focus is on recruiting as many brokers as possible without concern as to whether you and their firm are a good match. You need to know what’s important to you and be ready to ask direct questions.

Our own preamble to the Declaration of Independence states, “experience hath shown, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.”

The unfortunate truth is some recruiters may feel that once you’re in the firm you are more likely to stay and just “deal with it” than take the time, effort, money and disruption to your business by switching companies. Regardless, some will leave and, for many brokerages, this reflects in their retention rates.

The Problem with Recruiting Under False Pretenses

Low Retention Rates can make recruiting harder and lack of transparency contributes to it.  There are two sides that hurt from these practices; the firm and the Realtors they bring onboard.

For the brokerage, the influx of new agents into the firm will provide income, but if those agents were lead to believe that they were recruited under false pretenses, they may soon decide to leave. A constant outflux usually means not only are agents unhappy with the brokerage, but the brokerage, too, wastes time and effort on agents who will eventually leave.

When Realtors leave, their criticisms and complaints about the brokerage may be shared with their colleagues. As a recruiter for a firm, imagine attempting to recruit a person who has already heard about the firm in a negative light. Everything you say will be judged against this bias. Additionally, since the firm’s name is a brand that all its agents work under, an aura of untrustworthiness besmirches the reputation of these agents; even if, logically, people know they are not directly involved in bad practices.

Another side-effect of such negative publicity is when it makes it way into search engines. Search Engine Optimization (SEO) is based on multiple sources of information that browsers use to determine which website to show first on search engines. One source of information comes from reviews from sites; like Yelp, Google Reviews, Glassdoor, etc. Dissatisfied Realtors may post poor reviews for the brokerage, and choose to spout their grievances online and provide poor ratings. This produces two negative effects. One is that individuals looking for information on the brokerage will see these negative reviews, and those reviews may be the only ones ever made on the firm. Two is that poorly rated businesses are less likely to show up in generalized searches, meaning that if someone were to Google “Oregon real estate brokerage,” or something similar, then those businesses would not be shown over others more positively reviewed.

Realtors, who were not given a truly transparent view of the brokerage, can not only generate malice towards the firm and its leadership but also be disheartened with the industry as a whole. From talks with some of our own Realtors, some had voiced how their frustration left them wondering whether they should even stay in the industry or find employment elsewhere.

In the end, the brokerage exists to support the business of its Realtors. If you want to get more specific, a brokerage is a lot like a privatized middleman between the Oregon Real Estate Agency (REA) and the thousands of Oregon Realtors operating within the state. The brokerage, on one hand, ensures the REA’s regulations are being followed for the benefit of Oregon citizens and the state, and on the other hand, they provide the needed support for the Realtors to conduct their business effectively. There is no change on the conduct of following the regs, but what differentiates brokerages is what they offer to their Realtors.

Realtors are unique in how they like to conduct their business, and they look for a brokerage that can support that. Some like to work with integrated teams that provide step-action guidance for how to find and engage clients, process transactions, and deal with open houses, and some like to work by themselves with minimal interference from the firm. Some agents need an array of facilities, printing services, marketing tools, and mentors, while others work independently. Basically, the industry has Realtors who benefit from working under brokerages that satisfy their niches and goals. But how would a Realtor find a suitable brokerage that met their particular needs if their recruiters were more focused on trying to convince them to join rather than providing them with as much information as possible to make an informed decision?

Common Problems Realtors Have Faced with Recruiters

When Realtors we’re polled about their experiences, we noted of a few recurring issues within the industry causing them to leave their brokerage.

Extra Fees: Brokerages have many expenses. They pass on many of these expense to their agents. This isn’t inherently bad, except when in the process of recruiting they don’t divulge ALL these fees to the recruits. Fees to the local, state and national Realtors board, online file management systems, errors and omissions insurance, desk fees and copying costs that are passed onto the Realtor should be stated upfront. While these should be covered in the Independent Contractor Agreement, many agents act on faith and don’t read the fine print, trusting the recruiter was completely forthcoming.

Forwarding Leads: Some firms utilize the tactic of, “if you join us, we will give you leads” and many agents state this as one of the biggest reasons for joining a firm. That isn’t inherently bad. If you have the leads to distribute, then why not promote it. The issue happens when the firm doesn’t follow through with consistent leads. We’ve heard from agents promised this, they receive a lead the first month, then never again.

Social Media Management: We understand that businesses are concerned about the conduct of the people that work for them, and real estate brokerages are no different. Disrespectful and unprofessional activity reflects poorly on the firm, but on occasion micromanagement from the brokerage; principal brokers or team leads can feel uncomfortably controlling for some agents. If the conduct of individual agents is going to be monitored and managed, then the brokerage should state what they expect of social media conduct. It will allow the prospect to determine whether that level of oversight over their private lives is acceptable.

Your Business, Your Way: Probably the most insidious of unspoken conditions or false pretenses is that a Realtor can conduct their business as they please. While many firms pride themselves on providing a structured process, for many, this has helped inexperienced and skilled agents alike. For the broker seeking more independence, being micromanaged may leave them feeling suffocated. This isn’t an issue for those that agree to join under those conditions, but what about those who were told the opposite? That they could conduct their business according to their own design? We have seen numerous agents throughout our industry that have have been told this verbally, only to have it reneged once they’ve joined a firm. Issues that were mentioned are being required to use their firms signage for exorbitant rental rates, pay for marketing material from their only the firm’s sources, pressured to use the firm’s preferred mortgage brokers, or be required to only use their approved marketing systems.

In all of these cases, it is apparent that any agent that entered as an independent contractor under the banner of a firm that was not forthcoming about how they operate would feel compelled to leave when an opportunity arises. Many of our own agents have felt this way, and our industry is not at a loss for similar stories. Far better for a brokerage to be honest, and earn the association of agents that truly mesh well with their business model and standard operating procedures. Regardless, those brokerages and recruiters who look only for the short-term gain of signing on agents by any means, will see significant turnover and dissatisfied associates. For those agents looking for a brokerage, you must ask the tough questions in order to find a firm that is best suited for you. For both the brokerage and the agent, transparency is essential to long-term interests. If our industry endeavors to competent and dedicated fiduciaries to Oregon’s citizenry, we should start with by being transparent with each other.

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