The practice doesn t fly at BHS or Town. “Real estate is a full time job,” said Freedman, who noted that BHS doesn’t have a desk cost or a set production minimum. “You can’t do it well part time. Brown Harris Stevens is not the right firm for anyone who wants to do that.”
“Some of the more established firms warehouse licenses. I know it for a fact,” Heiberger added. “They have over 500 people working as virtual agents who have zero earnings.”
Some firms view the practice as carrying dead weight while others see a savvy business strategy.
The biggest firms, Douglas Elliman and the Corcoran Group, allow brokers to stay on the books through virtual employment. A virtual employee is not obligated to come to an office, so there is no desk and therefore virtually no cost associated; the agent pays for his or her own license and the Real Estate Board of New York membership fees.
So if they make a sale a year or even once every few years the firms feel it’s usually worth keeping them on the books. If there are really no costs associated with hiring a virtual broker, why not have a lot of them?
The free market takes care of itself
In fact, Elliman executives said they ll hire any qualified would-be agent who wants a job. The firm then allows the realities of the marketplace to determine who stays and who goes, according to Steven James, the brokerage s New York CEO.
“We set a desk cost between $150,000 and $165,000. Not everyone makes that desk in a year, because the business is a business of peaks and valleys. If we believe someone is having an off time, and we still believe in their abilities, we are going to keep them,” he said. “If someone has been here for three years and made no money whatsoever, and if they are getting in the way of people who are actually making the money, desk or no desk, we will probably let them go. But we are not super well known [for] letting people go.”
By the end of the third quarter, Elliman had 2,262 agents in Manhattan and Corcoran had 1,456, though it wasn t immediately clear how many of them are virtual agents. (Corcoran declined to comment for this story.)
The argument against so-called warehousing is that allowing inactive agents to carry your business card harms the brand. At Town, for instance, Heiberger said that their agents need to be actively engaged to stick around.
“Why should a non-producer carry the same card as somebody who is here 60 hours a week?” he said.
“A lot firms will throw out this big net and take everybody, added Freedman. To me it seems desperate. There is no quality control.”
James contends that a hands-off approach is actually more productive, more entrepreneurial and, frankly, more attractive to brokers.
“We don’t have a set number for how many we retain or recruit If we feel that some has a great opportunity and a great chance to succeed, we are going to hire them,” he said. “It gets crowded at times. But we work around that. Not everyone has a desk.”
A few make a lot
In residential brokerage, firms used to live by the 80/20 rule the idea that 20 percent of the agents made 80 percent of the money. That ratio has changed, said James. It s more like 85-15; 15 percent of the agents make 85 percent of the money.”
In 2015, a TRD analysis found that star brokers at some of Manhattan s biggest firms on a single day claimed anywhere between 20 and 57 percent of their firm s exclusives, worth hundreds of millions of dollars.
In some cases, a single broker team will produce more revenue than well over 100 agents at the firm combined. Breakaway stars with names and reputations make the brokerage world turn, and the firms usually dedicate big resources to making sure they re happy.
Though their philosophies differ, all brokerages struggle with how much time and what resources to put into hiring and training.
“It’s a major, major issue. I have staff whose primary function is just paperwork and onboarding,” said Chin. “As head of the brokerage I spend 10 hours a week training brokers, because that is an incredibly important part of retention. If they see senior management caring to that level, they are like, ‘Okay, this is the kind of place I want to be. ”
All of the brokerages said that better retention saves everybody time, paperwork and money on administrative costs. And perks and in-house training programs are the primary way brokerages work to keep agents.
Freedman said she increasingly sees firms offering over-the-top perks to attract new agents, like 100 percent commission for two years and a signing bonus.
And Keller Williams offers a profit sharing model that brings agents a steady stream of income the longer they stay at the firm.
Perhaps the most important and least tangible consequence of high turnover, is its impact on office morale.
“When someone leaves, I take it personally,” Heiberger said. “I feel like it is our failure. This isn’t all about dollars and cents. Even if someone doesn’t produce any money, they might be important to the office. They might have friendships here. That is the biggest challenge sometimes. It changes the dynamic and culture of the office when someone goes.”
Lucas McGill contributed to this story.
Tags: NYC Brokers, Residential Real Estate
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