Are the big 6% Brokerages unethical?
The big brokerages, such as Keller Williams, Coldwell Banker, Century 21, Remax, are primarily in the business of recruiting agents, not providing the best and most competitive services to the consumer.
Their top priorities:
- Sign up as many agents under their brokerage as possible. It’s a numbers game. A small percentage actually do make it.
- Retain new agents long enough to get some fees out of them and maybe a commission
- Try to teach their agents not to do anything that could get the brokerage sued
Their large offices on major streets are NOT meant for the public to walk in to find a house or a Realtor. They exist as an agent recruiting and retention tool. The “training” they offer the agents is primarily for retention to keep them paying fees. They typically charge new agents desk fees, office fees, training fees, etc. Some charge a big training fee if the agent wants to quit and go to another brokerage, or they take a big chunk out of their first commission.
The brokerage tells the new recruits how much money they can make, and may cite an example of someone who made $100,000 last year. The truth is that for a new agent to get started, he/she needs clients. That’s hard part. That means soliciting friends and relatives, cold calling expired listings and For-Sale-By-Owner listings, or paying substantial amounts of money for “leads”.
Examples of leads that can be bought are from Zillow or Realtor.com. Each property listing on those sites has a link that says “Contact Agent”, as though it is a link to contact the listing agent. Sometimes it IS the listing agent, but only if that listing agent pays for the privilege. Most of the time, if you click on the “Contact Agent” link, your name gets sent to 3 different agents who pay to get prospects from listings in that zip code on that website. That’s why you get bombarded with 15 agents calling you after you merely click on and enter your information on the “Contact Agent” link of 5 listings. And that’s only if each one only calls you once.
Homelight.com is another sleazy lead-selling website that has been advertising heavily recently. Their advertising claims on TV are that you will sell your house “faster and for more money” if you use one of their agents. The truth is that any agent can sign up to be a Homelight agent. As long as he/she agrees to pay Homelight 25% of their commission on any transactions. As for using the Homelight.com website to select and screen the best agent, just be aware that the agents can write anything they want in the bio that you’ll be seeing. Homelight doesn’t screen or verify. It stands to reason that the newest, least experienced agents will be signing up to be “Homelight” agents, and may “embellish” how experienced they are.
You can check how long any agent has been licensed on the Texas Real Estate Commission website (TREC) by clicking here.
However, be aware that an agent can be licensed for years and never complete a transaction.
Things you may not have known about the typical big brokerage 6% agents
The big brokerages typically tout their agents as competent, experienced professionals. The fact is that 5% of their agents do about 95% of the transactions. That means your chances are 19 out of 20 that a random Keller Williams agent has virtually no transaction experience.
And 80% of all new real estate licensees never renew their license after the initial 2 year license period. That means that 4 out of 5 agents out there have been licensed for less than 2 years, and have little or no transaction experience.
In contrast, a Creekview Realty agent closes well over 100 transactions a year. Few Keller Williams agents close that many in their lifetimes. Creekview agents actually come to the office every day, work full time, and do actual work on transactions. They don’t screw around folding flyers, sitting on an open house, cold-calling for prospects, or “networking” with other non-productive agents. Creekview agents are not on straight commission, and make less per transaction than 6% agents. The focus is on being competent, available and providing value to clients.
The majority of typical agents do real estate part time because they can’t support themselves with the income they make as an agent. If you ever wonder why it takes so long for your big brokerage agent to call you back, it may be that he/she is busy driving for Uber!
Any 18 year old third grade drop out can get a real estate license. All they have to do is take a few easy courses and pass an easy test. It’s the easiest “profession” to get licensed for.