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The Downside to Working with Real Estate Teams

  • Big real estate teams are selling a lot of houses across the country.

  • Teams hire assistants and junior agents to show houses and negotiate deals.

  • Agents are technically freelancers, and can't scale business like an "entrepreneur".

  • A list of questions to find out who buyers & sellers will actually be working with.

Over the past few years, real estate “teams” have become very popular in my industry. Everyone is teaming up and growing their businesses like crazy. There are some teams that sell hundreds of millions of dollars in real estate each year, and it's impressive. Who wouldn't want to list their home with a team that has this much success? Is there any downside? Absolutely.

In my opinion, big real estate teams are not everything they’re cracked up to be.

It Starts with One Agent

Most of these teams start out as great "solo agents". In fact, they're so good, they end up with more business than they can handle, so they expand like any good entrepreneur would. First, they usually bring in a "Buyers Agent" so they can focus on the most important aspect of their business: Listings.

Eventually, they become the "Rainmaker", and their sole job now is to go on appointments, get the listings, sign new buyers, and move on to the next one. At this stage, they don’t have time to handle any of the day-to-day work since they're out getting new business all day. We call this focusing on "money making activities", but let's talk about the casualties: the clients. Since they don't do "real estate agent stuff" anymore...

  • Who actually lists the house?

  • Who is there with the stagers?

  • ... helps the photographer to get the right shots?

  • ... holds the open houses and meets the buyers?

  • ... does the private showings?

  • ... attends the inspections?

But forget the easy stuff... what about something important like negotiating contracts?

Fun Fact: Some of the "Rainmakers" of the biggest real estate teams in Los Angeles do not stay involved personally with the clients after they sign the listing or buyer representation agreement, that is, unless they have to clean up a mess when a deal goes south.

Aside from the obvious issues, there's a bigger problem with this arrangement...

Entrepreneurship vs. Freelance

While many real estate agents consider themselves entrepreneurs, they're not. Technically, they are FREELANCERS because of one big difference: entrepreneurs can "scale", freelancers can't. It's not a bad thing, they're just different, and this difference is pretty important:

  1. You pay an entrepreneur for what they've already built.

  2. You pay a freelancer for their time and services they provide on an ongoing basis.

Quick Example:

  • Mark Zuckerberg is an entrepreneur. If he takes a vacation for three months, Facebook goes on without him.

  • But, if a freelance real estate agent takes three months off, he will come back to an empty office with no new clients and a whole bunch of angry existing clients.

In business, we call this issue "scalability" ... "Can we recreate similar results on a larger scale?"

With physical goods like a car, the process can be streamlined like Henry Ford did with the assembly line. Websites like Amazon can handle a larger number of visitors by increasing their bandwith and server space. But what about someone who talks on the phone putting deals together? Can you replicate the actions of one talented person?

Some Would Argue "It's the Process"

They are able to expand their business because they have created a great process for their employees to follow and close deals the same way they would. Yes, process is extremely important, and 99% of the real estate agents in Los Angeles don't even have a process they follow--which is saying something about your options.

However, these processes only work because they're at the helm personally executing those deals. The very moment you bring in other people to replicate what you do, it won't be as good.

Hypothetical Situation:

If you pay the famous chef, Mario Batali, to come to your house and cook for you, then he sends one of his cooks in his place to follow his process (recipes), you would be upset. But why? ... You know why.

In that same vein, agents who lead these giant real estate teams are "diluting their value" by no longer doing what makes them amazing.

Here are some VERY IMPORTANT questions to ask potential agents:

  1. Is this phone number your direct line?

  2. Will you actually answer the phone when I call you?

  3. Will you be the one showing my home and holding the open houses?

  4. Will you be the one negotiating the contracts?

  5. Will you be at the home inspections with the Buyers to manage the drama?

  6. Will you be hands-on, overseeing the entire process, enforcing the contract, and making sure the transaction runs smoothly?

If some of the answers are "NO" or some derivative of "I have a great team that helps me oversee the process that I stay personally involved in, blah, blah, blah...", dig deep, ask more questions, and make sure you know exactly what you're getting yourself into before you lock yourself into a six-month contract.

We all want to work with the best agent for the job. Who doesn't. But now that you know the truth, it’s your responsibility to choose wisely.

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