The recruiting game has often been high stakes, with real estate brokerages looking to attract the industry’s top-performing agents and teams in order to build a powerhouse office (or series of offices) that can not only compete with local brokerages, but also communicate the value to consumers.
But what about retention? If brokerages are solely focused on attracting new business, they risk losing the stronghold they worked so hard to build. Competing brokerages are now putting more resources toward recruiting, with some tactics bordering on aggressive and intrusive, say industry experts. But how successful are these strategies, and what can real estate brokers do to nurture agent loyalty and keep agents from leaving or ensure they come back?
“Recruiting has changed in the past 10 years to look more like mergers and acquisitions, with companies acquiring agents with signing bonuses or stock options or things like that,” says Joe Rand, chief creative officer of Howard Hanna | Rand Realty.
But according to Rand, many of these efforts are often temporary if brokers are not mindful of agent satisfaction.
“The problem is that you never actually ‘buy’ an agent’s business, you only ‘rent’ it,” says Rand. “And when that ‘lease’ is up, you leave yourself open to the risk of having to re-lease that agent’s business again or face them going to the highest bidder.”
Poaching or Attracting? Brokerages Straddle the Line
Agent attraction strategies have changed drastically, with traditional methods still in use, while a larger focus is on dollar signs. As Rand mentions, brokerages with the available financial backing are offering “easy-cash” incentives such as sign-on bonuses, stock options and atypical commission structures.
Rick Haase, president of United Real Estate, had a front seat to these recruiting strategies, with real estate brokerage Compass laying claim to 15 of his agents after moving into the local marketplace.
“They basically said ‘here’s a sign-on bonus.’ But it’s not a sign-on bonus. It’s structured as cash flow to the agent, but they have to work a number of years to be able to qualify to keep that money,” says Haase of the incentives that often seem attractive at first glance, indicating that they largely carry terms and conditions that handcuff an agent to the brokerage or force them to leave substantial money on the table if they leave.
Michele Harrington, chief operating officer of First Team Real Estate, had a similar experience with Compass, and has witnessed other real estate brokerages such as Coldwell Banker implementing comparable strategies.
“When Compass first came into our market, they paid a lot of money to entice some of our top agents to leave,” says Harrington, adding that her agents had to sign long-term contracts when making the move.
“We kept in touch, and most of them feel they were definitely over-promised but did not want to return the money and had harsh claw-back provisions,” adds Harrington. “We did have a team leave that was there for maybe 60 days and was so disenfranchised that they did return all the money and came back.”
Compass, however, pushes back against this notion, holding firm that the brokerage has agent support in mind when implementing its recruitment and retention strategies.
“Agents join Compass because we help them grow their business, serve more clients, save time and stand out as trusted advisors in their markets,” a Compass spokesperson tells RISMedia. “Our agents close an average of 19% more transactions after joining Compass and sell homes in 21% fewer days on average than their peers. This is one of the reasons we have a principal agent retention rate of over 90%.”
As tensions rise amid a difficult environment, brokerage competition grows fierce, with traditional recruiting battling against more modern strategies that some say cross a line, particularly as the industry navigates an unprecedented crisis.
Bess Freedman, chief executive officer at Brown Harris Stevens (BHS), says she has seen several brokerages take advantage of the ongoing pandemic, offering flashy onboarding packages during a time when agents are looking for stability and solid financial footing.
“I have never experienced the level of egregious recruiting as I have during these last 18 months,” she says. “As the world navigated COVID, trying to avoid illness and death, other brokerages had full-on recruiting teams calling our agents several times daily to entice them to switch brokerages.”
Freedman says she’s seen everything from six-figure, sign-on bonuses to upfront loans paid back through commissions.
“Some really eye-popping stuff,” says Freedman. “But if you read these contracts all the way through, you realize these terms are fleeting and designed to get you in the door to show scale.”
Are these Strategies Sustainable?
Brokers are reporting ongoing churn in the industry, as these increasing financial incentives work to lure agents but may not adequately provide the support they need, creating a revolving door.
“I have to say, most of these agents found this to be a huge turn-off,” says Freedman of the competing recruiting efforts her agents experienced. “Some of my agents were actively mourning loved ones that passed due to COVID, and the onslaught of recruiting texts and phone calls they received was disgusting.”
And though some agents did leave, Freedman had several return to her brokerage citing “promises unfulfilled.”
“Once the agents signed and joined these other brokerages, they were all but ignored. The object was to get them over to the other side, not to nurture and support their businesses,” says Freedman. “We had agents who left who still called their former managers at BHS for guidance because they could not get answers from their latest sales directors.”
And of the 15 agents that left United Real Estate for Compass, 12 returned, two have committed to return and one has retired out of the business,” says Haase.
But if agents don’t stay for long, how are these brokerages maintaining profitability?
“It appears that some companies have been in a race to get to the public market, creating a critical mass of agents so they can report top-line revenue growth,” says Haase. “But when companies forget to create a viable, sustainable business model to get there, I think that strategy is bankrupt over time.”
Haase adds that many are seeing companies that say, “If you leave any time during the three-year period, you owe us that money back,” and so it works in the short-term for agents who really need a cash payment.
“It’s really just a recruiting and retention handcuff situation,” says Haase. “How is that a viable ongoing, sustainable business strategy? You kind of scratch your head.”
Building a Solid Retention Strategy
Regardless of the recruiting strategies being employed, brokers must focus on retention to maintain a loyal agent base, and that begins with honest and upfront education, say experts. Simply telling agents they may be approached by a competing brokerage, and the repercussions others have faced by leaving, could ensure they don’t make moves they may later regret.
“Our best agent is an educated agent,” says Haase. “We proactively provide for them with the knowledge about what’s out there, how it really functions, what’s a great idea, what’s not a great idea and we try to dispel the myths.”
Freedman says she is warning agents ahead of time as well.
“These firms are not only buying you, but your entire book of business,” she says. What do you think happens to all of your client data should you leave? Will your loans, commissions and marketing budgets get clawed back? The answer is probably ‘yes.'”
On top of that, Harrington says, is communicating the value of the brokerage to agents, adding that the main reasons her agents returned were due to their management support, marketing support and better tech.
Candace Adams, president and CEO, Berkshire Hathaway HomeServices New England, Westchester, New York Properties, says agent retention should always be a priority and at the core is keeping lines of communication open.
“Something our company had during COVID was an established company vision and values system,” says Adams. “Our Support Center Team, including myself, remains accessible to all and we never let up with our agent focus group meetings to keep communication flowing.”
For a long time, says Haase, the industry has over-regulated the behavior and actions of their agents, creating artificially restrictive environments. “As a result, they frequently stifled the entrepreneurial nature and creativity of their agents.”
And so providing agents with the freedom to choose the tech and marketing platforms that work best for them, is key to ensuring retention.
“We make sure to never limit their business, marketing or business development techniques and tactics,” says Haase. “We simply load in all of the tools and services and don’t mandate any of them.”
Freedman reminds brokers that competition comes in various forms, and industry leaders need to be able to provide the tools and resources that allow agents to feel fulfilled and ready to tackle anything.
“Right now, the work of real estate agents is being attacked by all sides: listing aggregators, iBuyers, discount brokerages and most recently the Department of Justice,” says Freedman. “Firms need to offer support and access to programs and services that are value-adds.”
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to firstname.lastname@example.org.