It's Time to Clean Up Real Estate
If a recent article stating that the competency level of the real estate industry has reached an all-time low isn't a call to action, I'm not sure what is. The RISMedia article quotes former National Association of Realtor's Chief Economist, Dr. John Tuccillo as the originator of this statement. Of course, Dr. Tuccillo would never utter those words if he was the acting Chief Economist and, in fact, the current Chief Economist is probably working on a rebuttal to this claim as I write this.
The reason the NAR would never admit to this is because they get their money from agents and the
more agents they have as members the more money they have to spend on crap like Bill Clinton speeches that cost over $100,000. They would like every person in America to be a member and could care less about the quality as long as they paid their dues. Therefore, they will probably act to overthrow any effort to limit the number of potential agents that they can solicit money from.
I wouldn't look to brokerage firms to make any effort to improve the image of the real estate industry. This might sound crazy given the fact that it is their image that is being tarnished as well, but upon closer look that is not the case. They have their business models set up so that low producing, part-time and ineffective agents cost nothing to support/sponsor. Therefore, if an agent only sells one house they will in essence become a profitable commodity. The commission and fee structures are set up in such a way that the mediocre agents are the bread and butter of a brokerage firm. They will not be receptive to any restrictions that could limit agent counts.
That leaves the states to institute some form of control over agent quality. Currently, each state has their own schedule of fees, tests, continuing education requirements, etc. The fees are nominal and the education requirements are so low as to be non-existent. But they have the power to charge brokerage firms for the number of agents they have sponsored. The states could easily institute a per agent fee on the brokerages that will make brokerages think twice about sponsoring an agent.
Here is a recommendation that might work:
Charge a brokerage firm an up front fee to hang an agent's license. This fee should be large enough so that if it was passed on to the agent, the agent would think long and hard about joining that firm. If it was not passed on, it should be large enough to motivate the brokerage firm to properly train and support the new agents they hire. In addition, a termination fee would be charged every time an agent quit or switched firms. The fee would be paid by the brokerage firm on a sliding scale from very high to almost nothing. The longer the agent worked at the firm, the lower the termination fee. The brokerage firm would also pay an annual fee for each agent that was based on years of service. The more years with the same firm the lower the fee.
The states could also charge a non-education penalty. The brokerage firm would be charged a fee based on the average number of hours of continuing education and real estate education seminars and other programs that each agent attends during the course of a year. If the average number of hours is below 40 (just a suggestion) per agent, the brokerage office gets hit with a stiff penalty. If it falls within a range of hours than they pay a small penalty. If it is more than a certain amount than they pay no fee.
Whether or not a plan like this would work, I have no clue. But it sure would be better than sitting around waiting for the industry to sink further and further down in the minds of our own customers.
Related Articles:
The Real Estate Brokerage Firm Business Model - A Consumer's Friend Or Foe?
Who Cares If You're A Realtor? Nobody, It Seems!
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