by Kevelyn Guzman | Sep 2, 2024 | Industry, News Feed
Buyers failed to bite this summer despite falling mortgage rates. It has agents about as down on their business prospects as they’ve been all year heading into the NAR settlement era, according to Intel’s Client Pipeline Tracker.
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As mortgage rates continue to drop, real estate agents are increasingly able to picture a future in which more seller clients are lured back into the market.
There just may not be many buyers waiting to meet them.
Agent sentiment toward their future revenue pools reached a 10-month low in late August, according to Intel’s Client Pipeline Tracker metric.
These worsening attitudes were mostly driven by a reported thinning of buyer pipelines over the last 12 months — and a growing sense that first-time buyers will remain tough to recruit in the year ahead.
Client Pipeline Tracker score in August: -10
- Previous score: -7 in July
- Recent peak: +7 in January
Chart by Daniel Houston
The Client Pipeline Tracker is an updating measure of agent sentiment toward the pool of potential real estate buyers and sellers. The metric is powered by the Inman Intel Index monthly survey of real estate professionals.
This souring of expectation over the past month coincides with the immediate aftermath of the Aug. 17 deadline for changes stemming from the NAR settlement.
However, an Intel review of its own surveys and purchase-loan data suggests that market forces are also weighing heavily on the brokerage business.
Read the full breakdown of the latest Client Pipeline Tracker results in the report below.
Buyers beware
Intel’s Client Pipeline Tracker is a compilation of how agents feel about their buyer and seller pipelines — both over the past year and in the near future.
Intel described the full methodology in this post, but here’s a quick refresher on how to interpret the scores.
- A score of 0 represents a neutral period in which client pipelines are neither improving nor worsening.
- A positive score reflects a market in which client pipelines have been improving, or are widely expected to improve in the next 12 months. The higher the rating, the more confident agents are in that conditions are moving in a positive direction.
- A negative score suggests client pipeline conditions are worsening, or are widely expected to get worse in the year to come.
An extremely positive combined score falls somewhere around +20. This type of score would signify that much of the industry is in agreement with the fact that pipelines are improving and will continue to improve.
An extremely negative combined score, on the other hand, falls closer to -20. That’s a bit lower than where the industry stood in September, the first time Intel surveyed agents about their pipelines.
For the four individual components that go into the score, results as high as +50 or as low -50 are sometimes observed.
Here are the component scores for August, and how each sentiment category changed from the previous month.
CPT component scores
July → August
- Present buyer pipelines: -33 → -41
- Future buyer pipelines: +2 → -5
- Present seller pipelines: -18 → -18
- Future seller pipelines: +2 → +5
This represents a clear downward shift in buyer pipeline conditions — both in the present day and in terms of what is expected to occur over the next 12 months.
The latest numbers appear to confirm last month’s slight improvement in buyer pipelines were a one-month blip. They also contribute to a broader pessimistic trend that has only deepened since the NAR settlement was announced in March.
Notably, agents in August actually reported an uptick in optimism when it comes to their listing pipelines.
- 35 percent of agents in late August told Intel they expect their seller pipelines will be heavier a year from now — up from 31 percent the previous month.
One possible contributor to this? Recent economic data has made the path ahead clearer for the Federal Reserve.
Inflation has cooled, job growth is slowing and “the time has come for policy to adjust,” Fed Chair Jerome Powell said Aug. 23 at the Jackson Hole economic conference in Wyoming.
That could mean lower rates in the near-to-mid future, softening a stubborn impediment to homeowners swapping their ultra-low mortgage rates for a new loan at today’s prices.
But real estate agents, despite being well aware of these signals, appear to have more pressing issues on their minds.
Trends overshadowed
It’s unclear how much agent pessimism can be attributed to the Aug. 17 deadline, and how much is linked to actual business conditions on the ground.
But looking at the data, there’s a case to be made that both are affecting agent attitudes.
When the NAR settlement is most on the minds of agents, they tend to report a more pessimistic outlook on their future buyer prospects.
The two biggest single-month drops in the future buyer pipeline score each occurred after major developments in the lawsuits:
- the largest in late March, when the NAR settlement was first announced and the future buyer pipeline score dropped by 19 points;
- and the second-biggest just this past month, when agent sentiment toward future buyer pipelines fell by 7 points immediately after the NAR changes went into effect.
But these aren’t the only factors potentially weighing on agents.
- Existing-home sales as reported by NAR continue to come in especially low — at an annualized rate of around 4 million a year or below.
Even in more recent weeks, as mortgage rates continued to drop, buyers were reluctant to apply for purchase loans.
- After a brief spike in January, the Mortgage Bankers Association Purchase Loan Index in August fell back down near where it was in October, effectively its lowest point in decades.
All that to say, market forces may be playing a big role in agent assessment of their present-day buyer pipelines, and both may be souring the future outlook, for now.
Methodology notes: This month’s Inman Intel Index survey was conducted Aug. 19-30, 2024, and had received more than 620 responses as of Aug. 26. The numbers used for this article are preliminary and subject to revision. The entire Inman reader community was invited to participate, and a rotating, randomized selection of community members was prompted to participate by email. Users responded to a series of questions related to their self-identified corner of the real estate industry — including real estate agents, brokerage leaders, lenders and proptech entrepreneurs. Results reflect the opinions of the engaged Inman community, which may not always match those of the broader real estate industry. This survey is conducted monthly.
Email Daniel Houston
by Kevelyn Guzman | Aug 22, 2024 | Industry, News Feed
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
Building a real estate team is like constructing a skyscraper; it requires a solid foundation and a strategic blueprint. Yet, many teams crumble under the weight of high turnover, lackluster performance and disjointed efforts.
So, why do these teams fail? A deep dive into team dynamics reveals a glaring issue: A significant majority of team members crave more role-specific training. This insight points to a broader problem within team structures and underscores the need for strategic leadership. Let’s uncover the root causes of team failures and how you can sidestep these common traps.
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Identifying the root causes
The downfall of real estate teams often boils down to a few critical areas that are overlooked or mismanaged. Patrick Lenconi wrote one of my favorite books on team dysfunction, titled The 5 Dysfunctions of a Team. In his work, he talks about five reasons teams fail and how to avoid those dysfunctions.
Our coaches are trained to identify dysfunction and provide real solutions for eliminating as much dysfunction as humanly possible.
I have always said, “We don’t have people problems, we have process problems.” If your people are letting you down and failing to succeed, we always want to ask where our systems fail us. By attacking processes, not people, you begin to solve real problems such as communication, training, tracking and accountability.
Training and development, or the lack thereof, is often the root of failure. Team members yearn for growth opportunities and clear guidance on their responsibilities. Without this, they may feel directionless, leading to decreased productivity and morale.
Training and development
With all of the confusion, disruption and stress in today’s market as a result of the class action lawsuits and settlements, high inflation, limited inventory, pent-up demand of buyers, lack of housing affordability and higher interest rates, we have moved from a skills-based market to what I like to call a professional’s market.
This is where the true professionals are needed — and celebrated — as experts in handling transactions. To be a professional requires specialization, ongoing training and development outside of CE classes, and real estate experience and knowledge. High-volume and well-coached teams can provide all of these things to agents who are hungry, teachable and smart.
Effective training is the cornerstone of a successful team. Here’s how leaders can implement robust training practices:
Hands-on experience
Encourage learning through direct involvement. Accompany team members to appointments, allowing them to observe and absorb the nuances of client interactions and transactions.
A team leader who is in production should never list or show alone. As a leader you have two primary responsibilities: First, business development, and second, people development.
Debrief and reflect
After each appointment, hold a debrief session. Discuss what went well, what could be improved and how the team can apply these lessons to future engagements.
Leverage technology for training
Use video conferencing tools to conduct training sessions, even if team members are in the same office. Record these sessions to create a digital knowledge base for future reference. Leverage training developed for specialization in real estate, for listing agents, buyer’s agents and admins, for example.
You see, specialty training can be an incredible resource when used or a massive expense when there is no adoption. It’s your responsibility as a leader to set the tone of how your team is going to function as professionals or simply as average.
Establish clear systems and processes
Develop documented systems for all repeatable tasks. This ensures consistency and quality, providing a roadmap for team members to follow. Systems, systems, systems. Anything you do three times or more repeatedly, you must create and have a system for that task.
The role of systems and consistency
A lack of established systems can lead to inconsistency and confusion.
Here’s how to integrate systems into your team’s workflow:
Regular live and online training sessions
Hold scheduled training sessions to review procedures, introduce new tools and ensure everyone is up-to-date on best practices.
Mentorship programs
Create mentorship opportunities within your team. Pairing less experienced members with seasoned professionals can accelerate development and foster a supportive culture.
Feedback mechanisms
Implement a system for feedback. Encourage team members to voice their ideas for improving processes, which can lead to innovation and a sense of ownership.
Building a culture of productivity
A successful team is built on a culture of success. We win as a team, and we improve as a team, or we fail as a team.
This culture is fostered by:
Clear communication
Maintain open lines of communication within the team. Ensure that everyone understands the team’s goals, their role in achieving them and how their work contributes to the team’s success. This should be done with regularly scheduled huddles or stand-up meetings.
A daily huddle is recommended for wins, victories, challenges and direction, 15 minutes max at the beginning of every day. A great question to ask here is, “Can your team articulate and describe in clear language what it means to “win the day”?
Recognition and rewards
Recognize and reward team members for their contributions. This could be through formal awards, bonuses or simple acknowledgments in team meetings. Recognition fosters motivation and loyalty.
Team-building activities
Engage in team-building activities, retreats and vision board creation and sharing, all activities that strengthen relationships and promote collaboration. Whether it’s a team retreat or a casual outing, these activities can help build trust and camaraderie among team members. This becomes more critical as every team faces challenges. The culture keeps the team together.
Don’t set your team up for heartbreak
Real estate teams fail for various reasons, but poor communication, inadequate training and the absence of solid systems are often at the heart of these breakdowns. As a team leader, it’s crucial to prioritize comprehensive training and establish clear systems that guide your team’s operations.
By fostering an environment of continuous learning, structured processes and a culture of success, you can build a resilient team that not only withstands the challenges of the real estate industry but also excels within it.
Investing in your team’s development is not a one-time event but an ongoing commitment. It requires a proactive approach to identify and address the unique needs of each team member.
Embrace the role of a mentor and coach, and create an atmosphere where continuous improvement is the norm. When team members feel supported, valued, and equipped with the right tools and knowledge, they are more likely to be engaged, productive and loyal.
Teamwork makes the dream work
Remember, “The strength of a team lies in its unity and collective expertise.” By avoiding the pitfalls of neglecting training and systems, you can lead your team to achieve remarkable results.
Cultivate a team that is not only skilled and knowledgeable but also aligned with your vision and goals. With dedication and strategic leadership, you can turn the potential of your real estate team into a reality of success and growth.
“Suppose I could show you a way to build a team that thrives in disruption — is there any reason you wouldn’t listen?” As the great, late Howard Brinton used to say, “Let’s get out of judgment and into curiosity” and make decisions based on data and communication and eliminate dysfunction.
Your team’s success is just a few strategic steps away. Let’s build a culture of productivity, engage in the right training and coaching, and watch your team soar to new heights.
Verl Workman is founder and CEO of Workman Success Systems. Connect with him on LinkedIn or Instagram.
by Kevelyn Guzman | Aug 19, 2024 | Industry, News Feed
Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
After months of anticipation, we’re finally living in our New Normal, where buyer’s agent compensation is no longer offered via Realtor-affiliated multiple listing services, and all buyers need to sign some type of agreement before a buyer’s agent takes them to tour a property.
We’ve known for a while that the rule changes of the proposed National Association of Realtors settlement would go into effect on Aug. 17, but with all of the questions, concerns and confusion surrounding the implementation of the new rules, agents and brokers are still looking for clarity.
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We wanted to put together some of the questions we’re still seeing, along with others we’ve encountered in conversations with agents and brokers all over the country. The goal is to create a compendium of the advice we’re hearing and the answers you need, so you’ll feel more confident and secure as you answer questions and change up your daily practices.
How did the system work before? How and why is it changing?
Previously, NAR-affiliated MLSs required some offer of buyer agent compensation when taking a listing, even if it was as little as $1. While there was not a set “standard” commission rate, many areas had more or less consistent rates of commission, usually ranging from 2.5 percent to 3 percent on each side of the transaction, with the seller paying both sides of the commission.
In October 2023, the Sitzer | Burnett lawsuit in Missouri saw a jury award seller plaintiffs $1,785,310,872 in damages, which, under the law, would be automatically tripled to $5.356 billion. The jury agreed with the plaintiffs’ assertion that NAR and various large franchisors conspired to keep commissions high via the trade group’s cooperative compensation rule, also known as the Participation Rule, requiring listing brokers to make an offer of compensation to buyer brokers in order to submit a listing to a Realtor-affiliated MLS.
Just hours after the Halloween 2023 verdict in the Sitzer | Burnett lawsuit, a slew of copycat lawsuits began to be filed against the NAR, brokerages and real estate associations. These came from buyers and sellers in many different states and asserted that a conspiracy among industry participants had resulted in inflated consumer costs and violations of antitrust law.
On Mar. 15, 2024, NAR agreed to a settlement, which, among other things, promised to pay $418 million over the next four years and promised to make major changes to the way agents conduct business.
According to the terms of the settlement, NAR would no longer create rules that allow listing agents to set compensation for buyer brokers, and offers of compensation would no longer be displayed on the MLS.
In addition, buyers would need a signed agreement with an agent in order to tour a property..
What does the Department of Justice have to do with all of this?
At the same time consumers were challenging NAR’s policies, the Department of Justice was repeatedly questioning the way agents are compensated and how agent compensation was communicated.
The DOJ has previously indicated that it doesn’t want to see offers of compensation from a listing broker made to a buyer broker anywhere. Those offers will be removed from multiple listing services as part of the NAR settlement agreement.
However, some in the industry are still looking for workarounds that would allow them to advertise offers of compensation, with new companies springing up to offer agents and consumers options for advertising commission offers.
In a recent update, NAR President Kevin Sears confirmed that “the DOJ continues to keep a close eye on perceived efforts to create ‘loopholes’ or ‘workarounds’ to the intent of the settlement agreement” and “seems particularly focused on whether [buyer] agreements are tools for that.”
Is this going to bring home prices down?
Probably not. Rising home prices over the past few years have come from a strange brew of pandemic-era demand, changing work-from-home policies, low interest rates, subsequent high(er) interest rates, the ensuing mortgage lock-in effect, increased construction costs and climate-change-induced increases in homeowners insurance.
The resulting combination led to a lack of supply and increased costs for financing that significantly drove up home values in the majority of markets.
Compared to all of these economic factors, the cost of a buyer’s agent will not necessarily make or break affordability, except, perhaps, for those who are already struggling to put together the down payment and closing costs involved in a home purchase.
Is this going to lower my commission?
According to a recent report from Redfin, buyer’s agent commissions have already begun falling in the days since the NAR settlement. In fact, even before the settlement, there were brokers and agents already looking for alternative commission models that brought buyer commissions below the industry average.
New consumer-focused guidance from watchdog Consumer Federation of America (CFA) encourages buyers and sellers to negotiate lower-cost services, including a fee-free showing contract and a 2 percent agent commission.
The truth is that we don’t yet know where the industry and consumers will land when it comes to commissions. It will probably involve a combination of market conditions — wherein a more experienced agent becomes more valuable during times of intense competition — and an ongoing effort by agents to better communicate the value they bring to the buyer transaction.
Will buyers need to use a real estate agent?
Buyers have never been and still are not required to use a buyer’s agent, but most have chosen to use an agent because they feel it is in their best interest to have someone negotiating on their behalf and shepherding them through the transaction process. Those reasons will remain after the settlement changes.
If a buyer wants to use me as an agent, how much will that cost them out of pocket?
When they sign a representation agreement, you’ll have the opportunity to negotiate your commission with your buyer client. There is no fixed percentage or dollar amount assigned to buyer agency.
While the buyer may end up paying your commission out of pocket, they may also be able to ask the seller of the home they buy to pay your commission or provide a compensatory concession at closing as part of the offer negotiation.
Will more buyers use dual agency or buy without an agent?
Due to some of the early consumer-facing media coverage about the NAR settlement, buyers may believe that they’ll do better bypassing the buyer’s agent and going directly to the listing agent.
According to broker Cara Ameer, here’s why that might not be in buyers’ best interests:
“The listing agent works for the seller. […] Buyers need to understand that the listing agent was hired by the seller and signed a listing agreement that authorizes the listing agent and their brokerage to put the property into the multiple listing service and market their property based on certain terms, conditions and a listing price that has been agreed to.”
If more buyers do choose dual agency, it will be important for agents to make sure they’re complying with best practices for serving their clients.
From a compliance standpoint, compliance expert Summer Goralik writes, dual agency, or representing both the buyer and seller in a transaction, can impose a heavy burden on the agent caught between competing interests.
“The dual agent is bound by fiduciary duties to each party, necessitating equal loyalty, care, honesty (including full disclosure of material facts), fair treatment, and confidentiality to both the buyer and seller,” Goralik writes.
Are sellers allowed to pay buyer agent commissions?
Yes, sellers are still allowed to pay the buyer’s agent commission; however, they can no longer advertise that fact or the amount they’re willing to pay in their MLS listing.
Many agents and brokers initially saw this as encouraging or even requiring a workaround — for example, posting compensation offers on a personal or brokerage website or communicating with buyer agents by phone or email. However, many are now discouraging any form of communication about the seller’s willingness to pay.
As the listing agent, your fiduciary duty is to your seller. Just as you wouldn’t, of your own volition, go to all of the buyer’s agents in your market and say that your seller is ready and willing to take a huge cut in their asking price, many say you probably shouldn’t go to everyone and say that the seller is willing to pay thousands of dollars in buyer’s agent compensation.
As Goralik puts it, “As an agent representing a seller, you must follow your seller’s instructions and always put their interests first. Ultimately, you will discuss these options with your clients and proceed according to their wishes.”
What if the seller is willing to pay a smaller amount of agent compensation than I have agreed to with my buyer client?
There are a few ways that this could end up being handled:
- The buyer may choose to pay the buyer’s agent out of pocket.
- The buyer’s agent may choose to waive the balance of the commission.
- The buyer may ask for additional concessions to offset closing costs, leaving them with more money to put toward the buyer’s agent commission.
- The buyer may discuss with their lender whether they can increase the sale price to offset an additional concession from the seller, which could then be put toward the down payment, closing costs or buyer’s agent commission.
In the case of VA loans, the U.S. Department of Veterans Affairs unveiled new rules just before Memorial Day that would temporarily allow veteran buyers to pay their buyer broker fee when buying a home under a government program intended to benefit them. Previously, VA buyers were banned from paying directly for broker compensation.
Should my listing clients offer to pay a buyer’s agent commission?
While much of the earliest mainstream reporting of the NAR settlement asserted that real estate would now be 3 percent cheaper, that has given way to a more clear-eyed assessment of the realities of real estate transactions.
On the pro side, sellers may feel that offering a buyer’s agent commission is part of the cost of doing business and getting their transaction to the closing table. In a time of unprecedented challenges to affordability, expecting buyers to come up with additional thousands out of pocket to pay their buyer agent directly may prove to be an insurmountable obstacle for many.
On the con side, sellers in a high-demand, low-inventory market may feel that they can afford to hold out for a buyer who can and will pay the buyer’s agent out of pocket. After all, during the pandemic-era buying frenzy we saw buyers who were willing to offer tens of thousands of dollars above asking price or in additional incentives to get their offer accepted.
What happens if my client and I agree to a lower commission and the seller is willing to pay more?
According to the terms of the NAR agreement, which is scheduled to be finalized in November with terms going into effect on Aug. 17, “a Realtor or Participant may not receive compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.” If the seller is willing to pay more, the difference can be rebated to the buyer or become part of the overall purchase negotiation.
What happens if the buyer for my listing doesn’t have an agent?
While many industry experts believe dual agency, where allowed, may become more common after Aug. 17, listing agents may end up picking up the slack as “unofficial” dual agents, maintaining the flow of documents and deadlines without officially taking on the role of fiduciary to buyers.
This leaves essentially unrepresented buyers having to do their own due diligence, including determining fair market value for a property, finding an inspector, and juggling the requirements of mortgage approval and closing.
What do I do if a buyer agent calls me asking how much my seller is willing to contribute toward their commission?
There are different approaches to how such a request can be handled. NAR has advised its members to make such calls and continues to promote cooperative compensation from sellers or listing brokers to buyer brokers.
On the other hand, according to NextHome CEO James Dwiggins, “There is zero reason sellers/seller agents should advertise buyer’s agent compensation, concessions, or anything in advance of an offer. The only thing agents should state and put in the MLS (which is legal) is the following: ‘Seller is willing to entertain any and all requests you put in your offer.’ The end.”
What do I do if I think an agent is breaking the new rules?
The process for reporting agent misconduct is already well established. You may choose to speak to the agent, their broker, or the MLS in charge of enforcing the new rules.
Email Christy Murdock
What questions did we forget? Let us know in the comments and we’ll update this post as answers reveal themselves.
by Kevelyn Guzman | Aug 8, 2024 | Industry, News Feed
Franchisor reported its U.S. agent count fell 6.3 percent during the second quarter as revenue fell 4.8 percent compared to a year earlier, according to its earnings report.
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RE/MAX announced on Thursday that its revenue has fallen each quarter for the past two years as the down market continued to cut into the company’s earnings and agent count.
The franchisor reported losing just under 1,000 agents in the second quarter of this year, dropping 0.7 percent to 143,542 agents. In North America, the drop was even steeper as RE/MAX reported losing 4.4 percent of its agents in the U.S. and Canada, where it had 78,599 agents to start the third quarter.
Revenue fell 4.8 percent compared to a year earlier, the franchisor reported, and it expects it to keep falling.
In a statement, RE/MAX Holdings CEO Erik Carlson called the second quarter results “better than expected.”
“We continue to operate our business as efficiently and effectively as possible, which contributed to better-than-expected second-quarter financial results,” Carlson said. “Both during and after the quarter, we were pleased to announce notable brokerage and team conversions to RE/MAX, testament to our brand’s strong reputation and value proposition in the market.”
The company reported earning $3.7 million in profit for the quarter, according to its earnings report.
Agent count fell sharpest in the U.S. during the quarter, dropping by 6.3 percent to 53,406, RE/MAX reported. It grew by 4.2 percent outside the U.S. and Canada, to 64,943. At best, the company said it expects to lose none of its agents next quarter. At worst, it said it’s anticipating losing up to 1.5 percent of its agents.
Overall, the company generated $78.5 million in revenue during the second quarter, which was down $4 million from a year earlier.
The company has been aggressively moving to control its expenses at the same time it has watched revenue drop. It reported cutting 10.1 percent of expenses in the quarter compared to a year earlier.
As of June 30, the company reported having $66.1 million in cash and cash equivalents, down $16.6 million from December 2023. RE/MAX has $442.7 million in outstanding debt, down slightly from the end of last year.
RE/MAX said it expects to pull in between $75 million and $80 million next quarter. That would represent a drop between 1.5 percent to 8.3 percent compared to the third quarter of 2023.
RE/MAX is set to hold a call with investors on Friday morning.
Email Taylor Anderson
