The Unproductive Agent Exposed

by Victor Lund on August 31, 2012

REALTOR Ocean Front ExpertIn today’s Real Trends eMail update, Steve Murray talks about an important topic for REALTOR Associations and Brokers – the unproductive agent. The unproductive agent is both a blessing and an anchor on our industry. However, taking advantage of the unproductive agent may be a great source of new business for an emerging business model in real estate brokerage.

The unproductive agent is a great source of revenue. Lets face the reality – without the unproductive agent paying dues to REALTOR Associations, the Associations would fail, or at least be delimited. The nation’s largest trade association, which does the most to affect legislations that protects private property rights, would have about 44% less revenue. If you cut NAR in half, and cut local Associations in half – you probably cut the effectiveness by more than half. In other words, 1,000,000 minus 500,000 is likely equal to less than 500,000. At some point, the threshold falls below the level needed to be effective.

But wait, there is more. If you cut the number of members in an MLS in half, you drive up costs for operating the MLS. The dollar cost averaging across productive and unproductive agents is lost and fees would need to be raised or services would need to be cut. The cost averaging of dollars per subscriber per month has allowed the MLS to wholesale services to Associations for between $12 and $25 per month; or retail services directly to agents for $30 – $50 per month. In other words, full MLS services are often less than the cost even the simplest technology tool like IDX.

Murray’s article points out that the new brokerage model targets lower producers. Forget about commission splits, and focus on what the brokerage can sell the agent. You may find that 90% splits with a compulsory monthly desk and technology fee may generate more money to the brokerage than 70-30 or 60-40 splits.

Think about it.

Run some pro formas.

Steve Murray is a consultant I have known for years and greatly respect. I read his daily newsletter Real Trends, attend his conferences when able, and purchase all of his research. His niche has always been supporting brokers on Mergers, Acquisitions, and valuations. He has a solid history of success. If you are not familiar with Steve Murray or Real Trends – Here is a link to his website – http://www.realtrends.com/.

 

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