What if Realtors were Ranked from White Belt to Black Belt?

by Steve Crossland, REALTOR in Austin TX on September 23, 2009 · 7 comments

blackbeltImagine your grandmother needed to be escorted through a dangerous part of town, and you had to select from available bodyguards. One is a White Belt, a part timer with very little experience, but he returned your call in less than 10 minutes.

Another is a Black Belt with 20 years experience and hundreds of successful missions. Who would you pick for this important assignment? You’d go with the experienced veteran with the proven track record of success, right?

What if your child needed a special surgery, and you wanted to interview surgeons? What sort of criteria would you look for? What sort of questions would you ask? You’d probably ask “how many of these procedures have you completed, how long have you been doing it and what is your success rate?”, right?

Make up your own scenarios – you need an attorney to defend you against a frivolous lawsuit, or an accountant to assist with an IRS audit, or a tree person to work on your 300+ year old trophy oaks. Would you hire newbies with no track record of success? Probably not.

Buying or selling a home is an extremely important financial event, with many variables and 100′s of different ways that things can go wrong, yet the real estate industry, for whatever reason, is not one in which the customer typically uses a strong selection process when looking for professional help. Why is that?

In a real estate seminar I attended recently it was stated to us Realtors, “if you’re not returning your phone message and emails in less than 10 minutes, you’re losing business. 70% of buyers and sellers go with the first agent to respond, so you need to make sure you’re that agent”.

Crap. I’m still “old school” and think that it’s ok to return a non-urgent call within one business day, though I’m usually much faster. But I don’t go for the 10 minute rule. I don’t live my life in permanent hyper-response mode. I’d go insane.

So what would be better selection criteria that would be easy for consumers to understand and relate to? What if Realtors had a ranking system, such as in martial arts, where one earns progressively higher belt color rankings as their experience and competence grows?

And what if we had to wear these belts to listing appointments. Might that change things a bit for agents and the customer as well?

Brand new Realtors, fresh out of real estate school and passing their test, would have to wear a White Belt, signifying to all that they’ve never closed a real estate transaction and they’re brand new. After one or two completed deals, they could be promoted to Yellow Belt, and so on. Of course Realtors like me and Sylvia, with 20 years experience and hundreds of successful transactions would be Black Belts, as would our peers who have paid the same dues and gained the same level of experience.

In the martial arts world, it takes about 6 years to achieve Black Belt status, depending on the discipline being studied. To become a Master Plumber in Texas takes about 7 years. I’m not sure about Electricians, or HVAC specialists, but there are many examples in life of individuals having to work long and hard before achieving a status that is recognized as being a “master” level.

Yet in real estate, if you can pass the test and return your phone calls and/or emails in less than 5 minutes, that will be the main selection criteria used by the majority of consumers who are looking for help. That’s it! Be the first one to call back and you might have your first listing. Is that stupid or what?

What’s really unfair about this is that when one of these White Belts Realtors screws up a deal big time, the entire industry gets a bad rap but nobody ever asks the person telling everyone about his lousy Realtor what sort of questions were asked before hiring that Realtor. They never scrutinize the hiring process that resulted in the hiring of the deficient Realtor.

We run into agents regularly who have no business being in the real estate business. They don’t know what they’re doing. Yet someone hired them anyway, using criteria and rationale that would never be used to hire equally important advisors or councilors in other industries. I guess real estate is just weird that way.

So, next time you’re interviewing Realtors, talk to more than one. Not just the one who you reached first. And ask them what belt they are. Make them tell you, if their real estate experience were equated with martial arts, what “belt” they’d be. Why pay the same fees to a White Belt Realtor that you would for a Black Belt Realtor?

Better yet, here are some sample questions:

1) How many homes have you sold in the past 12 months?
2) How long have you been selling homes?
3) What is your success rate? (Percentage of listings that actually sell)

I could write a longer list, but these three questions alone would provide enough insight to help most customers get started with a proper selection process.

{ 7 comments… read them below or add one }

1 jim September 24, 2009 at 4:28 pm

The problem with this analogy is that martial arts students, plumber, electricians, etc.. are given an opportunity to advance, improve and gain experience without starving along the way due to lack of business.

If everyone passed on a new agent, or paid them 1/3, they’d never have a chance. There are just as many stupid experienced agents. I’ve run into many so called veterans of real estate and it’s obvious the only way they keep getting business is people equate know them or their friends with expertise, and so they do sales, and screw up a bit, but the experience looks impressive to a potential new client who doesn’t know them.

The problem also lies with brokers who are happy to hire anyone and everyone, and even promise older agents kickbacks by bringing in new agents (keller williams, exit realty)

What we need are much stricter entry requirements (like a BS degree) and a mandatory PAID apprentice period. This will force brokers to carefully interview agents, only hire the best, and give those agents a chance to succeed without having a huge marketing budget, large network of friends who don’t know any better, or other means of getting new business that don’t depend on how good you are.

2 Steve Crossland September 25, 2009 at 7:28 am

Hi Jim,

The premise of my point is really that the selection process used by many real estate customers is a ridiculously unreliable method. I don’t think there can be any disputing that. Yet when the result of the poor choice is unfavorable, our industry takes all the blame while the selection process is never questioned or examined.

We’ve become such a “can’t wait” society of people needing instant gratification, response and feedback, that we often don’t evaluate our decisions very well, or even ask the right questions.

That said, I also agree with your point that there are some lousy experienced agents and some really good new ones. But that can’t be ascertained by who returns the call the fastest. That would require interviewing agents with good questions, and knowing what the right answers should be.

I think, originally, the Broker/Agent relationship was meant to be a Mentor/Apprentice relationship. So a new agent would be granted the credibility and trust needed to earn new business by means of association with a trusted Broker or brand name. That, over the years, evolved into agents being more of a “solo practitioner” even if they are affiliated with an established Broker and/or brand.

Finally, there is no “kickback” system whereby “older agents (get) kickbacks by bringing in new agents”. KW has a profit sharing plan, but the agents in one’s “down line” have to succeed in order for that to work.

With regard to mandatory PAID apprentice period, companies such as Zip Realty and Redfin pay agents salaries, albeit low ones, so there are ways for agents to cut their teeth in the business without starving. On the other hand, I’m of the belief that you should NOT enter the business if you don’t have 6 month’s living expenses set back, and that if you don’t make it in the first 6 months, you don’t need to be in the business anyway.

Steve

3 E.B. September 25, 2009 at 8:02 am

I think other professions do a much better job of protecting the public from their rookies. Professional/graduate school requirements, and/or internship requirements are common. That way, an individual have typically had at least 4 years of training in the field before they can take the exam to prove that they are qualified to serve the public in their profession.

I believe that in Texas, you need only 210 hours of class time to become a licensed real estate agent, but 1000 hours of training in order to become a licensed manicurist. Given that a rookie real estate agent can do a lot more damage than a rookie manicurist, why does the real estate industry require so little training before someone can hang his or her shingle? Why does the industry place responsibility on the client to do due diligence to find out whether or not a licensed professional is capable of even performing his/her job?

4 Sylvia Crossland September 26, 2009 at 11:31 am

I am often disappointed with agents and their slow response time to other Realtors. It seems our calls are put on the back burner while they are responding in possibly 10 minutes to actual buyers that they perceive as their customers. How you treat your peers (other Realtors) is very important and agents will start getting a certain reputation as “slow responders”. They don’t realize this could hurt their business. Other agents may be less excited about showing your property if you respond slowly to their calls about availability and showing instructions.

5 jim September 29, 2009 at 9:51 am

Hi, the point I was trying to make is that you can’t tell if an agent is good or not simply by how many deals they’ve done, since good agents will find good brokers who will mentor them through any unfamiliar situations.

And many consumers themselves aren’t smart enough to ask the kind of questions that’ll provide insight into the agent’s thinking abilities. Real estate is, for the most part, a ridiculously easy job, from the intellectual perspective. What separates good agents from the bad is their lead generation abilities (which provides no value to consumers) and how good their critical thinking and problem solving abilities are, which can’t be tested.

There needs to be a mandatory paid apprentice period, of at least a year. It’s done with inspectors, appraisers and all types of other professionals. This will force a more thorough selection by brokers.

In regards to Keller Willams, except for Exit realty, I have never seen so many agents from a single company try to actively and persistently recruit other agents. They’re asking others to be their competition, so there must be an incentive, and that’s the kind of system that promotes more and more agents, regardless of competence.

6 Justin Belch October 6, 2009 at 8:18 pm

Hello Steve -

First of all.. long-time reader, first-time poster! I thoroughly enjoy your blog and find the information contained therein very valuable.
As a member of the management team at Zip Realty, I just wanted to clarify that we do NOT pay our agents a salary like Redfin does. We do offer our agents benefits such as medical and dental insurance, 401K, stock options and expense reimbursement. If they reach a certain level of productivity, they are given a monthly stipend for that particular Quarter. Once they close 100 deals in their career, they are in “Century Club” and do receive a large monthly sum (thogh they must maintain a certain productivity level to remain there) But our agents are essentially 100% commission like most of the REALTOR world. They work warm internet leads (they get about 60-100 a month depending on their level of productivity). In our first year in Austin in 2006, we did over 400 transactions with approx. 40 agents. This year we are tracking to do around 750-800 sides.
I agree that sometimes newer, “raw” agents sometimes give our industry a bad name. At Zip we are ADAMANT about ongoing training and mentoring. Our agents spend their first month in training, and we have a mentor program ,headed by our Team Leaders, that never ceases during one’s career at Zip. At Zip Austin, we only have 70 agents and do not hire just anyone. Resumes and references must be submitted and background checks are done. The interview is a 3 part process (first with our Staffing Manager, then Broker, and ultimately our District DIrector) We also have minimum standards that agents must meet in terms of productivity and customer satisfaction ratings. If those standards are not met, the agent is let go. Since our folks ARE techincally W-2 employees and are working very expensive leads on a very sophisticated website and agent platform, we sometimes have to part ways if folks are not up to snuff.
One of the greatest joys I get out of my job is assisting newer agents with their contracts, transactions, and technical aspects of the job. I remember when I started in real estate in 2002 and felt like a feral wolf! Hands-on, personal support/training and coaching/mentoring is not nearly as readily available at tradtional brokerages like it is at Zip. We have all been brand-new at some point in our careers, and those of us that were eager to learn, perservere, and ask for help have weathered the storm. I believe I read where 80+% of agents do not renew their license after year one (but don’t quote me on that stat!)
I am rather tolerant and respectful of a newer agent who (in no particular order):
a) is not afraid to ask his/her manager or Broker/Team Leader for help
b) will not mislead/misinform their clients and/or cooperating agents/clients. That is to say: ETHICAL!
c) is determined to not make the same mistakes twice
d) continuously is seeking to improve their skills and craft via Continung Education and training/mentoring
e) has thorough, professional, and timely communicaction systems
f) does not give our industry/trade a bad name!

Again, thanks for being one of those agents who represents the REALTOR brand in a positive light! And thank you for your excellent blog! Maybe we will see you at Realty Roundup tomorrow! Cheers Steve!

7 Steve Crossland October 7, 2009 at 7:20 am

Hi Justin,

Thanks for your comments. Zip sounds like a good approach to sheparding new agents into the business. I know other Brokerages in Austin, such as Goldwasser, take the same approach, offering smaller splits but providing a massive amount of training and absorbing a lot of the incendental expenses that can prove challenging for new agents as they try to get started. So, agents under such a setup get to avoid a lot of overhead, but they receive smaller splits, such as 50/50 instead of 70/30 with a cap as KW offers.

Just curious, under your compensation structure, if a solo agent is achieving, for example, 15 closings a year, or $3M in closed transactions, such that they produce a $90K CGI for the company, what would their net income be?

In the Millionaire Real Estate Agent book by Gary Keller, agents are advised, when budgeting the amount of NET income they need to earn, to figure it will be about 43% of CGI. Thus, an agent at KW, for example, producing $90K in CGI might actually net $38,700 on their tax return, after all business expenses and commission splits are deducted. From that amount, they still need to pay their own self employment income taxes and health insurance.

If an agent says they want to NET $100K in commission income, they’d need to divide .43 into $100K to come up with $232,558 in needed CGI, which would translate into almost $8M in closed transactions need per year, which would be about 38 closed transactions. Quite a lot for a solo agent.

Can an agent earn $100K+ at Zip, under your structure? Do they ever “cap out” and go to 100%? How do you keep them from gaining experience then leaving in search of better splits?

I haven’t yet done a transaction with Zip Realty, but I look forward to it when we do.

Steve

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