Masterclass: Navigating New Realities in Real Estate Recruitment

As the industry stands on the brink of potential widespread changes, this masterclass is designed to equip brokerages with innovative strategies to not only sustain but also grow their agent counts through strategic and value-driven recruitment.

Chip Murphy (Vice President of Business Development, Michael Saunders & Company), Sean Soderstrom (Co-Founder & CEO, Courted), Steven Goldschmidt (Director of Sales, Coldwell Banker Warburg), and Tyler Simmonds (Director of Growth, Windermere Real Estate) participated in a masterclass moderated by Audrey Whittington (SVP Sales & Partnerships, Local Logic) to discuss the evolving landscape of real estate agent recruitment in the face of market uncertainties and the recent NAR settlement.

In this masterclass, you’ll learn more about:

• Understanding Market Dynamics and Agent Mobility: Discover how national transactions influence agent mobility and develop strategies to adapt to projected surges in departures due to market fluctuations.
• Value-Centric Recruitment Strategies: Learn how to enhance recruitment efforts by focusing on value creation for agents, fostering loyalty and motivation, and leveraging unique value propositions to set your firm apart.
• Data-Driven Recruitment and Geographic Targeting: Utilize data and agent production maps to identify and attract top-performing listing agents, optimize recruitment needs, and determine the best timing for recruitment initiatives.
• Best Practices for Agent Retention: Explore effective retention strategies to keep your most valuable agents, despite market volatility, and discuss the comparative advantages of firm size in recruitment and retention.
• Navigating Recruitment in a Competitive Landscape: Understand the strategic differentiation opportunities in recruitment, how to attract agents poised for growth, and maintain a competitive edge in retaining talent.

Watch our latest Masterclass on “Navigating New Realities in Real Estate Recruitment”:

Understanding Market Dynamics and Agent Mobility

Why are we talking about recruiting when there’s a settlement underway?

Last year, 17% of productive agents moved between brokerages. Those agents account for north of 15 billion dollars of commissions being transferred from one brokerage to another. This kind of massive migration presents real opportunities for brokerages in post-settlement scenarios. When markets are slow, recruiting can be an effective foil as innovative brokerages are looking at ways to invest in their growth to stay competitive.

But which agents are actually moving to other brokerages? 

There’s a persistent inverse correlation between sales volume and an agent’s likelihood to switch from one company to another. Top producers are agents with a sales volume of 50 million dollars or more. They’re the number one agent in their respective offices. Of those agents, only about 5% (1 in 20) move between companies each year. At the other end of the spectrum — the one to five million dollars sales volume segment — closer to 19% (1 in 5) of agents move between one brokerage and another.

What are the impacts of the NAR settlement on agent recruitment?

Recruiting has always been an integral part of building a sustainable business, and renewed focus will be placed on it to bolster businesses. This is partly due to the uncertainty associated with potential commission compression across the industry.

The impact of the changes on new and experienced agents

New agents joining the business will have plenty of questions about how the settlement is going to change the industry. However, changes in the industry will not affect them as much since they are coming into this new normal. Adapting to the changing terms and conditions might be a bit more difficult for the more seasoned agents, as they will have to undo and reshape some of their long-standing habits.

Showcasing differentiated value to ensure fair compensation

The settlement has made it necessary to teach agents how to communicate and defend their value proposition. Up until now, agents haven’t necessarily had to do that. Previously, a listing agent would tell the seller that he’d split his commission with the buyer agent. Through proper assurances and agreements, the buyer agent was then able to ensure he would get paid a share of the commission. That’s not the case anymore. 

Sellers are questioning commissions a little more. Buyer agents are no longer guaranteed commissions from the sell side. And it’s up to listing agents to explain why an owner should compensate both parties. However, if the owner is not offering proper compensation, then it is now up to the broker or agent realtor to make sure they get paid what they deserve. And that’s a conversation they have never had before.

Lead generation by artificial means will be inefficient

Currently, the industry is very dependent on technology, which produces all sorts of leads and is the least insurable source of income for agents. The settlement will weed out people who rely on artificial means to quickly generate leads and draw in unsuspecting people. 

Relationship-building still comes out on top

Businesses that are built on a sphere of influence and learning will have the upper hand and can be certain of being fairly compensated. People are more likely to compensate you if they know you. Homebuyers might be aware they don’t have to use a buyer agent, but the moment they meet that person, they wouldn’t feel comfortable denying them compensation or even negotiating the latter.

Which type of agents should you recruit?

The news is filled with speculation about a variety of possible outcomes. Brokerages need to prepare for any of these potential scenarios by adapting to buyer agent commission erosion, defending value propositions, and deciding between lead and influence agents.

Why should you keep a different mix of agents?

Diversification in portfolio theory is based on having a basket of different assets (in this case, agents who generate revenue streams) to minimize risk. Considering that buyer agent commissions may erode over time, you may want to expand your portfolio by including agents with spheres of influence and those who handle listing side deals.

Gradually training your team to change their behavior is hard. In the short term, it’s easier to focus on proactively recruiting and targeting segments that might outperform those that may be riskier in the future. Look for people who provide resilience to potential outcomes, such as lower commission rates if the seller doesn’t pay.

What makes agents attractive?

The most attractive type of agents have these two characteristics: high quality and confidence.

While most of the top agents specialize in listing sales, it is somewhat irrelevant whether they are stronger in listings or buyer sales. The important thing is that good agents have the potential to become great while the others will fall short.

Newer agents are usually more confident, as fewer expectations are placed on them. In a market where buyer broker agreements are required and proving your value is essential, being confident about your own value proposition is appealing. An agent who is confident in his or her abilities will have no hesitations or problems with the commission as they know they’ve earned it.

Which segments of agents should you include in your mix?

Many brokerages focus exclusively on new agents. However, the revenue that comes to brokerages in the first year is four times greater if they concentrate on the one to five million dollar segment instead of brand-new agents. 

For Sean Sodertrom at Courted, the settlement has made it even more important to hire experienced agents rather than new ones. With competition stiffening, this type of shift is beneficial for the industry. Everyone will need to refine their skills, and commissions will be higher. Recruiting up-and-coming agents and rising stars can be interesting as well —  someone who is not yet a top agent, but has the potential to be one.

Value-Centric Recruitment Strategies

Apply lead generation to recruiting

As part of its recruiting process, Windermere Real Estate uses a lead generation model where recruiters have to hit a certain number of appointments per day. While the company doesn’t have the power to hire for all their offices, they do the pre-screening, scraping out candidates that are not a good match, and introducing the most suitable candidates to their offices. If they think they are a good fit for their offices, they can then recruit them.

Consistency is the common denominator among all the different models. Often, agents forget about prospecting and constantly filling up their pipeline while working on transactions. Recruiting is no different. In the end, it’s all a numbers game.

Take on a more hands-on team approach

At Michael Saunders & Company, branch managers are responsible for recruiting for their offices. The company also involves its full leadership team as a hands-on approach, where they will personally meet the agents. Management fully supports and believes in this system, and will step in when necessary.

Invest in agents’ growth beyond splits and payouts

Unlike many of its competitors, Coldwell Banker Warburg does not squander money on agents. Their splits never exceed 75% (with rare exceptions). Rather, they provide a lot of marketing support that other agents don’t have. They brought on several decent producers in the last few months (5,600,000 GCI) who were more interested in dollars allocated for marketing.

While that may not be considered an aggressive approach to recruiting, perhaps that’s why they’ve had success bringing in agents and retaining them. Their focus is on agents who are just starting out and are showing great potential. The goal is not necessarily to take on the highest volume agent, where they’re earning less and spending more, but instead to target a middle-tier agent, where the sweet spot is much more lucrative. With the resources they can bring, they can substantially boost their income to the point where they become big runners.

Leverage agents as recruiting tools

As spokespeople for your brokerage, agents are powerful recruiting tools. You should, however, be careful to not overstep with your deals. Instead, you should assess each agent individually, and provide realistic numbers.

Get to know your competitors

Each broker is at a different stage of their business. Having a good pulse on the structures of your competitors can be beneficial. The most important thing is to know what their value proposition is compared to yours and to be able to adapt quickly.

Foster a compelling culture

As a third-generation family-owned company, Windermere has not brought in agents with money. Their average agent tenure is 14 years, which speaks volumes about their focus on culture and value props. Regardless of why people come and stay at a company, their long-term loyalty is a very strong indicator of the quality of the company.

One of Michael Saunders & Company’s biggest differentiators is its people. Their average productivity per agent is around 7 million, compared to 2 or 3 million for their closest competitor. Essentially, it serves to be a selective company looking for the right people. Rather than being caught up in a split game, it’s important to hire high-quality people who believe in the culture and see value in what the company provides.

Data-Driven Recruitment and Geographic Targeting

Avoid recruiting the same segment of agents as other brokerages

The importance of recruiting cannot be overstated. It also takes a lot of time and capital. This is primarily due to the lack of data available in this industry to identify interesting ponds of opportunity. Are you going to fish where all the other boats are? Or, will you find a place with a lot of fish but no other boats?

Should you recruit high-performing agents?

Recruiting high-performing agents creates buzz. It builds momentum and gets people excited. Bringing on a big agent won’t necessarily attract other agents by itself, but combined with other recruiting strategies, it will give your brokerage more exposure, increasing the interest of mid-sized agents.

Beware: Top performance doesn’t equal followership.

Quality and reputation are more important than the agent’s sales in the past 12 months. Sean Soderstrom (Courted) launched markets at Compass by going after the top 10-15 agents from a variety of different companies that they thought were a good fit. Despite being a very orchestrated process, there was still a huge caveat: top producers don’t necessarily have followers. They can have a terrible reputation, and any agent who’s been in their market will know. 

Leverage AI to supercharge your agent recruitment

Recruiting agents in the one to 25 million dollar sales volume range, who will all have slightly different splits depending on the market they’re in, is the real opportunity. These are usually the most profitable agents for the company. People in that group have a future profile that looks even more attractive than their past performance.

The problem is finding those agents. An absence of personal relationships with all of these agents makes it nearly impossible to discern between agents who still have their best years ahead of them or who are in currently their prime, especially with only superficial data available.

Recruitment in New York is hampered, for example. The RLS, which is a real estate board form of residential listing system, does not register the buy side of deals, so you can only determine a broker’s true GCI by what they tell you or by 1099.

Considering more data and using it in your recruiting process will lead to better conversion rates and shorter recruitment cycles. Among the things Courted does is analyze future growth scores using AI, specifically predictive analytics and machine learning. This includes the future sales volume numbers for each agent, the likelihood that they will leave their company, and several other factors that might indicate that it’s the right time for an agent to leave the company.

Building relationships is still important

Brokerages rarely have the budget to hire 20-50 recruiters at once. So, how can we do more with the same or even less? Though data and modern technology can support recruiting initiatives, relationships are still important in this industry. Technology just helps speed up the process, with a higher frequency of face-to-face conversations, for example.

Best Practices for Agent Retention

Retention is the flip side of recruiting. While some agents may not be your biggest producers today, they might be tomorrow. While the first step is to identify those candidates, it’s also critical to keep them.

Understand what your competitors are doing

Some firms enjoy high retention rates because their agents are bound by onerous repayment terms. To understand what your best retention policy is, you have to turn your attention to your competitors’ recruiting efforts, leaving aside contractual retention terms that are backed by the law. Take the time to learn what they are offering while re-assessing your own offers.

Avoid penalizing agents if their production drops

As a general rule, resetting splits at the end of the year has gone out of the window. If agents had a bad year, don’t reset their split to some low number they’ve never seen before. Learn how to better support them with resources tailored to their needs instead.

Understand your agents’ needs

The key is to identify and address each agent’s specific needs. Take the time to understand the business of your agents. Get to know your agents on an ongoing basis through marketing and strategy meetings. Be aware of what doesn’t resonate with the agents. For example, some agents may care about what kind of technology a brokerage offers. Others, like high-producing agents, won’t care as much since they’ve already built up their business.

Stay focused on relationship-building

Striking a balance between building relationships with current agents, recruiting new ones, and building a pipeline can be challenging. To maintain quality relationships with its agents, Windermere Real Estate intentionally keeps its offices small. They also rolled out a new suite of technology platforms company-wide to stay updated and know at a glance details about every agent in their office (e.g. who just had a closing, who is up or down, and who will be leaving soon). By using real-time information, the team can have timely check-ins with agents, ensuring they remain top-of-mind when recruiters contact their branch manager or team leader.

Give agents the recognition they deserve

Nothing replaces a pat on the back and recognition. Agents who are high-producing always want to hear that they are doing a great job. To them, being shown appreciation is what matters most.

Navigating Recruitment in a Competitive Landscape

As the settlement changes recruitment (and retention!), agents are seeking more clarity and guidance than ever before. These changes present companies with an opportunity to stand out even further and build stronger relationships with the communities they serve. The water in the crystal ball is a little bit murky. But agents can see which brokers and companies are confident and embracing the opportunity to adapt to evolving conditions — and which ones are sticking their heads in the sand.

Watch for our next masterclass on June 11, 2024, where we’ll discuss SEO beyond keywords — it’s not what you think it is anymore.