Evolution of real estate agent business models

When comparing real estate services, it is sometimes difficult to understand operational differences that could impact your transaction. Although the basics of selling real estate have not changed much over the years, the manner of delivery has changed. To understand how an agent’s business model may differ from another’s, let’s look at how several models developed.

Although real estate cycles, technology, and laws have contributed to the evolution of the real estate agent and how they deliver service, the “traditional” real estate agent is still around. The traditional real estate agent typically works solo, focusing on personal service rather than selling a high volume of homes. Since the agent is a solo practitioner, direct access to the agent is expected when issues arise in your transaction. The individual agent has their strengths and weaknesses; their experience and talent can be the difference in any transaction.

In past market surges, many agents found that their time was being stretched thin. To take advantage of the business environment, some agents felt that leveraging their time by hiring an assistant could grow their business. The idea was that the agent could spend more face to face time with clients and potential clients; while the assistant would deal with lower level functions, such as answering the phone and advertising.

Some assistants were licensed agents, so they could work directly with clients by showing homes and writing offers when it was necessary. As the market expanded, real estate assistants were spending more face-to-face time with clients as the lead agent was once again stretched for time. Agents keen on expanding their business, found that they could leverage even more time if they hired more licensed assistants to form a real estate team.

Although the “team” approach became popular about the time when buyer agency was introduced, it did not reach its peak until the boom market in the early to mid 2000’s. Initially, real estate teams were loosely comprised of a lead agent and several buyer agents (and sometimes an unlicensed assistant). The lead agent was focused on face-to-face time with home sellers, while feeding buyer leads to the buyer agents on the team (and of course retaining a part of the buyer agent’s commission). There is no coincidence that the peak of the housing market and this type of team structure coincided. As buyers became scarce, many of these teams contracted until (in many cases) the lead agent reverted once again became a solo practitioner.

To achieve an even higher volume of business, the team approach evolved further to a corporate or bureaucratic structure where licensed agents were hired to deal with specific tasks of the business or transaction (for example, one person would coordinate home inspections, another would coordinate contracts, etc). Various forms of this structure are still used today. The lead agent typically lends their name to the sale while team members conduct the day to day business of interacting with clients.

Like real estate agents, agent business models are not the same; and like individual agents, each real estate team has its own personality. Each model has pros and cons. The most touted benefit of working with a real estate team is that you have the team’s combined experience at your disposal. Conversely, a solo practitioner provides direct communication and typically excels in local real estate knowledge.

By Dan Krell
Copyright © 2011

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.