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Taking REALTORS® Above the Bar

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Toby Boyce

Toby Boyce

By Toby E. Boyce

It seems that everywhere a licensed real estate agent looks today, the discussion is centering on raising the bar (#rtb Twitter hash tag). It is has been a trending topic on Twitter, its own Google Wave, a session at Real Estate Barcamp New York, an article in Inman News, and even was featured on the YPN Lounge last week with Nobu Hata’s “For the Member, By the Members.”

In case you’ve been living under a rock, raising the bar is a discussion on increasing the standards of our profession. We are right there with used car salespeople and lawyers on a lot of industry lists. Is that where we as REALTORS® want to be? Or better yet, is that an accurate reflection on the quality of our industry? Well, perception is realty. So we need to make changes in an effort to adjust the public’s perception of licensed real estate agents.

I’ve heard several arguments for addressing changes in the legislature of each state. And while that would be a wonderful ideal world, it is just that – a Utopia. My best example is that within the state of Ohio, the Ohio Association of REALTORS® is the largest trade organization in the state and it has been working with ASHII and NAHI to require home inspectors to be licensed within the state. I’ve never heard a legislator say it is a bad idea or they don’t see the need. However this bill has never passed through the state legislature. If this logical bill can’t get passed, how are more stringent real estate licensure standards going to work?

Now we all know that while the National Association of REALTORS® has done a great job maintaining its trademark, to the “normal” person they don’t see a difference between a licensed real estate agent and a REALTOR®. Now, let’s get one thing right from the beginning, NAR is very powerful lobbying organization and has done amazing work to protect our livelihood from the folks in Washington, D.C., and from Topeka to Albany. Their current charge is to give REALTORS® better chances to succeed, not to dictate that success.

And I’d like to see the charge adjusted to developing better REALTORS® so that when you have an non-REALTOR® they are seen in the same light as a CPA and a bookkeeper. I’ve had a lot of discussions with people in other industries and have come up with a basic model.

The first-level of entry is to pass your state’s real estate license exam and apply for membership with the National Association of REALTORS®. Upon acceptance you will become an “intern” within the office of your choice.

As an intern, real estate agents will have the ability to work with buyers and sellers under a supervised role. All of your actions, from contracts to listings, will be reviewed by the assigned mentor – and the buyers and sellers will have a meeting with the assigned mentor to make sure they understand everything in the contract. This would be done separately from the intern practitioner to encourage the mentor to really get to the heart of the deal. Not only would this assist in making sure the intern hasn’t messed up the deal, but also will provide a teachable moment from the mentor to the intern.

The intern is to remain an intern until they’ve completed 12 transactions (I don’t like dollar amounts since $4,000,000 in sales in is one deal in New York City and 30 in Ohio) and passed the REALTOR® exams.

The first exam would be similar to what other industries currently are using. There would be a national exam that would focus on NAR, national regulations, etc. The second exam would be state-specific, since real estate laws vary from state-to-state across the nation.

The final piece of the test would be a professional testing option. Practitioners would not be required – but highly advised – to pick an area of specialization and then could test into that area of real estate. It would be similar to tax accountants specializing in tax but being able to perform the duties of a general accountant. The areas are debatable, but could include buyers, sellers, distressed, commercial, and others.

How would you change the current system to improve real estate and raise the bar for agents?

Toby Boyce, MBA, is a real estate practitioner with Keller Williams Consultants Realty in Westerville, Ohio. Visit his Web site: www.delawareohrealestate.com.

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Comments 20

  1. Nice Toby, this is exactly what this industry needs: solutions instead of bickering. Kudos. This type of “mentorship” is done at my Edina Realty office in Minneapolis with great success. Hopefully we get some comments from leadership as to why something like this couldn’t be launched on a nationwide level, I’d love to get some insight, wouldn’t you?

  2. I agree Nobu but I have it on good authority the folks in Chicago are reading and asking for follow-up on conversations that are occuring off-line. I don’t expect anything to change quickly, but as we plant the seeds it will allow for changes to begin working through the process.

  3. Hi Toby,

    Regarding this:

    As an intern, real estate agents will have the ability to work with buyers and sellers under a supervised role. All of your actions, from contracts to listings, will be reviewed by the assigned mentor – and the buyers and sellers will have a meeting with the assigned mentor to make sure they understand everything in the contract. This would be done separately from the intern practitioner to encourage the mentor to really get to the heart of the deal. Not only would this assist in making sure the intern hasn’t messed up the deal, but also will provide a teachable moment from the mentor to the intern.

    Unless I’ve really misread the relevant laws/regs on agency, isn’t the Broker supposed to be doing this with each and every agent in any event? Legally speaking, if I’m a buyer, my relationship is with the Broker, not the Agent. The Agent represents the Broker, and legal liability and payment both flow to the Broker.

    Also, I’ve seen issues arise with “mentors” and the like in offices that mandate it (much more common in commercial real estate, which can be complex). What’s in it for the mentor? Why should an experienced agent who is running her own deals be spending hours with some newbie? You would have to layer on some sort of compensation for the mentor, and have it be worthwhile.

    Finally… suppose this (or some other RTB measure) passes and is accepted.

    Will I, as a consumer, pay more for the services of a certified REALTOR vs. a simple licensee? If the answer is no, then what difference does such certification make to anybody?

    -rsh

  4. Tried and true means dating back centuries for craft guilds; conceptually I think it’s a solid idea. I would be interested to hear ideas on compensation during internship; would limiting or eliminating any income be a good filter for entry into the profession, or would it create a type class discrimination, forcing out great candidates because they cannot afford to work without compensation during whatever period those 12 transactions required?

    Also interested to understand what part of that internship would be helping the new agent develop a contact pipeline so they aren’t starting with a completely clean slate once they can go out on their own. In other words, what training not directly related to a transaction, which to me is a huge part of being an agent.

    And finally, what rules would have to be in place to prevent an agent from changing brokerages once their internship is completed? Apprentices signed 7-year contracts in the middle ages. Surely the Brokerage should expect some term of service in exchange for mentorship?

    Your thoughts?

  5. Awesome! I’m glad to have some really thought-provoking questions to work on after this topic. I will admit that I have two concerns in my analysis. (1) How do we pay the mentors? (2) What does this do to the small independent brokerages?

    Okay, here I go Rob…

    You are technically correct that the broker has ultimate fiduciary responsible with the buyer/seller and is the only person “legally” paid in the transaction. However, in the real world I believe the brokers coverage is more often about keeping the brokerage legally compliant and reducing its opportunities to be sued. In three different real estate offices, I’ve NEVER had a broker truly sit down and go through deals with me one-on-one. I think the current model is in place to protect the broker, while the new aspect of my plan would extend it to protect the buyer/seller in this transaction.

    I totally agree there has to be a level of compensation attached to the mentor and — I’ll be honest — is the weakest point of my argument. I don’t have a great answer. You can’t really make it a percentage of the commission checks because then mentor’s compensation is tied to the deal closing, which in essence defeats its entire purpose. Do you pay them a salary? Which makes it tougher on the smaller brokerages.

    Wil the consumer pay more for this service? They might. However, I believe that it will protect our current compensation structures and force non-REALTORS to lower their compensation structure to compete. If too many REALTORS keep the “gate keeper” approach, then the industry will slowly move the way of travel agents. Sometimes it isn’t about making more, but keeping the amount you currently have.

    Okay Rich, thanks for the well-thought out comments and analysis.

    Like I said, this is the biggest hole in the theory for me. I thought of a “draw-down” methord which would allow the agent to continue making an income while developing their transactions. Part of me says, they’d would make their traditional commission on closed deals and pay “x%” to the mentor for his/her services — but as I pointed out earlier that opens up the mentor to being more apt to “get a deal done” rather than truly work in the nature of the buyer/seller. And I think you make a great point. A lot of people get into real estate for the “illusion” they are going to make millions of dollars, so this might be a barrier to entry for a “dreamer”. But I also don’t think “paying” dues will keep a lot of the talented sales’ professionals out.

    I think you’re right on target. How you interact with the consumer is very important, but if that pipeline isn’t being developed then you’ll never has a customer to worry about. I still remember the training I got at my first brokerage, grabbing a copy of the MLS listing form, “now you see here is where you put the address.” Fifteen minutes of stuff that was totally self-explanatory (the forms has instructions for what to put in each box!) and that was it. I was fortunate enough to find my way through the woods, how many get lost. Hence, I think it requires a strong connection that goes down to the importance of building that base, touching it, and working it.

    I don’t think you could create a “7-year contract” anymore since that would probably have a major impact on your ability to recruit agents. However, I think each brokerage would establish its “average cost per transaction” to train new agents. So, first transaction would average $5,000 and it goes down to $1,000 for the 12th transaction on a descinding scale. In essence the intern would be accruing a “student loan” with the company that would have to be paid back in terms of commissioned sales or cold-hard cash. So if it costs $30,000 to train an agent and have them become a REALTOR, then that agent now “owes” the company $30,000. S/he has a sale and the brokerage takes $1,000 from that transaction. Now the agent owes $29,000. If s/he was to attempt to leave the company at that point s/he’ll be writing a check for $29,000 to cover the expenses. Basically, this wouldn’t guarantee that the brokerages would make money on the agent — but it would at least break them even.

    Just my thoughts. Thanks again for the great conversation.

  6. Whew…here we go:
    When I was first licensed, the broker I worked for MANDATED that I work my first three transactions under direct supervision of a mentor. Training classes were MANDATORY and compensation was as follows:50/50 split-then 50%of MY split with the mentor.

    Didn’t seem fair at the time and as someone that was just starting out and struggling to “get business” without “KNOWING the business” it was at times a bit daunting.

    HOWEVER…I would not have learned what I learned and been a successful and knowledgeable Realtor had I not learned that way.

    I changed offices a lot in the beginning until I found my “home” a company who’s core values I could and did call my own. Part of that movement though was also brought about from unethical (YES) brokers, and we quickly parted ways.

    Raising the bar is done on a personal level. I strive to give my clients the BEST….period, end of story.

    Every industry has people that look for ways to work around the system…I personally choose not to work with them.

    Most consumers DON’T know the difference between a Realtor and an agent, and most don’t care. They just want the house they want or they want to sell the house they have and that’s it.

    Sellers will work with discount commission agents and then assume that we are all the same…much the way two people fighting for custody have an attorney representing them. One will think their attorney’s a saint the other will think the attorney milked them out of their hard earned money.

    Until we as professionals inform the community what it is we do and why, until we show them the VALUE of working with a professional, how do we ever hope to change minds?

    Everyone hates a lawyer…until you need one to defend you…is this how we want to be perceived?

    Jumping off the soap box…I LOVE REAL ESTATE and I enjoy working with professionals who return calls, stay on task, counsel their clients in the clients best interest, close on time, and sometimes even kick in some of their commission to either ensure their client gets the home or has money for repairs….How do you legislate that? 😉

  7. Some states, like WA State just changed their licensing laws and have raised the bar already.

    I’d stil like to see a college degree required. That would DEFINITELY rais the bar MUCH higher than it is now.

    There’s tons of turnover in real estate as it is. So even with grandfathering in existing licensees, a college degree raises the bar overnight.

    This would never pass though because the brokers make money off of churning out new agents every year and the friends/family transactions they bring.

  8. Also, if we raise the bar on education we’d also need to raise the bar on EDUCATORS.

    Sales-u-cation conventions where the vendor is hawking a product …and agents earn CE hours for that should go.

    Realtors, understand that if you want to raise the bar on education, your education is going to get more expensive. Compare the cost of your classes now to what a doc,lawyer,cpa, etc. pay for their CE.

  9. Hi Toby, BTW it was great meeting you at Inman in NY this month. What’s the real issue here? Are real estate agents just tired of reading the surveys of what consumers report about bad service? Or are agents just tired of having to work both sides of a deal to get it closed because the other agent is a deadbeat? Or maybe it’s the brokerages hiring anyone that breathes to hope to get a deal from a relative. As a broker in two jurisdictions and a current manager of 76 real estate professionals it is my duty (not a mentor’s) to make certain that the agents representing me and my company(s) are trained and conduct themselves at the high standard I set for myself as a leader in this business. My opinion? Our industry needs to be rebuilt from the ground up with quality individuals, by committed, quality brokers who are up for the challenge of building brokerages that hold themselves and their agents to a very high standard. Today’s bloated brokerages do not have the will or the funding to pay what would need to be paid to qualified, successful agents/brokers capable and interested in mentoring apprentices. What a forced period of apprenticeship might do is to disuade newcomers to become agents; States can do that by raising the bar on the fees to enter the business for licenses. The States are broke; instead of charging $275 for a license (in Ca) why not charge $1500. That surely would raise the financial bar for entry. If we really want to raise the bar, let’s have a national referendum to force the States to adopt a national real estate quality service and productivity law. The broker would be responsible for reporting to their State licensing authority any agent in their company who received five or more written complaints about their service from five different licensed real estate professionals or consumers. Five complaints=license placed on monitoring status. Five more=revocation.

  10. Lots to take in here.

    Jill — That’s part of the issue is that the state’s are not on the same page — even remotely — with their license laws.

    I’m also a big proponent of NOT requiring a college degree to sell real estate. When I first got in the business I had “MBA” after my name because I felt it gave me some credibility in communities. And it did, but there are studies that show that formal education doesn’t equal success in real estate.

    My mom was recently promoted to a new job in the accounting office at a branch of the Ohio State University. The job description “requires” a bachelor’s degree and she has an associate’s degree. So she has two years to get her bahelor’s degree or they will fire her. Once she gets it are they going to give her a pay raise? No. She’s still doing all the items that she’s been doing for the two years while she’s getting the degree. Seems pointless to me on a lot of fronts that she’s required to get a degree to simply make a point to the institution.

    I’m all about education – I had three-times my needed continuting education credits when I renewed my license in December – and even teach CE classes in Ohio. But I think sometimes we take the “BA or bust” attitude too far.

    In regards to “selling” items -> I’ve helped get CE liscenses revoked by these charlitans. Ohio CE teachers are prohibbited from selling an item during the course time.

  11. What a great conversation you’ve started Toby (and on a NAR site).
    When I started in the business, I worked under our county’s top producer for two years. She was the lead. I shadowed her, asked questions, and learned over the course of over a hundred transaction sides. She had me to do the “busy work” tasks that are time consuming. And she could spend more time with clients. As I learned more, she trusted me with more important duties. It wasn’t long before there wasn’t much I wasn’t doing, but I was supervised and had a place to go for advice when I needed it. I was paid a percent of each of her commissions. The volume of transactions was much more than an new agent, so it worked for me financially.She also had more volume. I also didn’t have the high startup expenses for signs, marketing, etc. On transactions when I brought a buyer or seller from my sphere, I would earn more for the referral. She knew upfront it would be temporary and she was training “her future competition”. It takes a “mentor” agent who really cares about RTB! We are still in the same office and she refers business to me because she knows the kind of agent I am.
    Now that I’m on my own and don’t have a mentor to consult with who shared client confidentiality, it would be a deal breaker for me to not have a broker who is available when something out of the ordinary happens. We also have regular “coaching meetings” one and one and as a group.
    And my last two cents are directed at your concern regarding compensation:
    “Part of me says, they’d would make their traditional commission on closed deals and pay “x%” to the mentor for his/her services — but as I pointed out earlier that opens up the mentor to being more apt to “get a deal done” rather than truly work in the nature of the buyer/seller.”
    If there is any risk that they would rather get a deal done than work in the best interest of their clients, they SHOULD NOT be a mentor. Raising the bar HAS to start with agents already in the business!

  12. Pingback: What Would It Take to Get You to MidYear? : YPN Lounge

  13. Amanda – You make a lot of great points. We are in a business that involves a lot of money (to most people) so there are always going to be those that “love” their agent and those that “hate” their agents. I know an agent that is one of the world’s biggest horse’s rear ends — and he’ll admit it — but he’s also one amazing agent. He is frank, blunt, rude and sometimes borderline on mean to clients — but they keep coming back. Why? He is very good at getting homes sold and finding them the best deals on their next home. I guess my point is this, we need to raise the bar in the business without taking the character out of this business. There is business for nice guys (and girls) and jerks in this world.

    Bob – It was great to meet you as well. And here we are talking around Amanda, almost feel like back in NYC. You make very valid points and I agree with the basis for your thoughts. What is the issue? I would say a portion of all three. I don’t really care what consumers think of real estate agents — I care what consumers in central Ohio think about me — but it is pathetic that at times you fell like you are forced to almost ‘apologize” for being a real estate agent when you meet new folks. However, I have a “competitive” advantage over other real estate agents in my area because of my online presence and my focus on staying on top of things. What happens to that advantage if we raise the bar? I see that as the issue with a lot of “established” agents. My ego is small enough that I put the professionalism of our business ahead of my “advantage” but recent experiences in the re.net make me wonder if others will do the same. The one thing I wonder though is if raising license fees will actually make the profession better? Sure you wash out a few part-timers and tire kickers but will it also change our profession to only the “rich” are part of the game? I’ve only been in the business for three years and just renewed my license ($135 for three years in Ohio) but if it’d been $1500 for the three years — I would probably be working at Denny’s right now. This business takes time to become established and the wash-out rate is already so high that adding more financial burdens would not neccesarily (in my mind) improve the business.

    Susan — That’s a very telling comment and I have to admit that if I found one that was honestly committed to that I would probably join you. However, I think real estate brokerages are sort of like insurance agencies — they can “say” how customer focused they are but they have to make a profit to keep the owners happy. Which is in many ways directly contrary to the customer’s best interest.

    Karen — Very well put!!

  14. Well said! We have a mentor program at my office and I wish every office did! My mentee was just telling me the other day that it’s so frustrating when you’re dealing with other agents who don’t know what they’re doing or act unprofessionally. Taking an exam shouldn’t give you the right to call yourself a REALTOR. There should definitely be higher standards set for that designation. I’m all for it!

  15. Hello,

    I will just come out and say what I feel.

    I find it very offensive. Just because you yourself may or may not have been incompetent when you started real estate (As you insinuate all of us are), or a select few people you deal with need their hand held, does not mean that holds true for everyone.

    I would go on to say that most agents that are uncomfortable at first already have and use their Broker as a mentor and those brokers are very much involved with the first few transaction of the agent.

    As far as “testing” in specialties, isn’t that what the designations are?

    Finally, as many other people I talk to agree with me. I feel a 4 year college degree should be required. Maybe even limit the degree to only a business degree. It is not only the extra education you receive, but it is also the proof that you can start something and see it through to the end.

    Furthermore, an internship is something you do in college as a requirement. So your idea would already be built into a required degree.

    As for the argument of BA or Bust, it is the American way with the exception of a very few entrepreneurial people. I believe more than ever it is becoming MBA or bust in this country and others. Take India for example. They are turning out engineers with masters left and right. If we halt the education of our people we as a country will cease to be number one.

  16. What is interesting….. I wrote an offer on another agents listing and attempted proactively to present the offer face to face with the listing agent and seller as
    I have done for 31 years. Finally the agent informed me her broker said I was:
    “old fashion” I said: I may be “old fashion” however I offer a higher standard
    to the buyers I represent. I believe we have a fiduary oblighation>>>>>>>
    I have NEVER lost in the last 25 years when there were multiple offers.
    Does a man email or fax a woman to propose marriage?…..not yet any way.
    Does an attorney email or fax the judge and jury? ….not yet.

    You see Negative Ned and Debbie Downer complain about the market, yet
    the ONE time they have an opportunity to “represent a buyer” the one time
    they have about one hour to MAKE the commussion, unfortunately they
    walk away………….
    In Arizona any Realtor new to the business in the past 20 years, doesn’t even
    understand what I am talking about when I ask to “present my offer”

    Dan Dee McGinnis,CDPE,NADOTA

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