Finding long-term value in the hard work and sweat of agents’ day-to-day
- Selling your real estate business is still seen as an inexact science, especially in the changing industry, and many agents are looking for answers.
- When asked what they will do with their client database, 31.25 percent of respondents did not have a plan.
- Of those who plan to sell their database or their brokerage, more than 45 percent did not have a partner or buyer in mind.
- Almost half of respondents in the Special Report survey said they were getting no help from their brokerages on transitioning out of the industry to retire.
- If you are going to sell your book of business to another agent, you should have five years of accounts, referrals and profit history — ideally on the ascent.
- Agent businesses built on internet leads are perceived as far less valuable than those with smaller, loyal databases with a history of referrals and transactions over the years.
Real estate agents want their happily ever after: a post-career life with the stability that a bucket of money or residual income can bring. The road to a secure future isn’t clearly marked in real estate, the paths at agents’ disposal more like winding capillaries — a set of sprawled options realized through careful planning, the earlier the better.
With no one-size-fits-all solution, and uncertainty around what brokerages can and will provide, respondents to Inman’s survey for our Special Report on agents’ retirement plans shared their unique methods for valuing their businesses, creating a succession plan and implementing systems that take the long haul into account.*
Timing is important
Business is getting harder to predict, said one Washington, D.C., agent: “I’m working on it but not sure what the business will be like 10 years from now.”
It can be hard to plan too far in advance. “Time will tell. Depending on what is happening in real estate in 10 years, I will make my decision on if my database is worth selling,” said one respondent.
We asked about the biggest threat that a broker trying to sell the business today faces.
Respondents — more than 75 percent of whom were experienced agents or brokers — cited new real estate brokerage models, shrinking profit margins, an aging agent population and a lack of capital as their largest concerns.
Disruption in the real estate business is happening, where technology enables buyers and sellers to more easily transact directly with each other, making agents’ databases less secure, added a rookie agent from Santa Clarita, California.
Other dangers included:
- Waiting too long to “hang up the spurs”
- Ego getting in the way
- Franchises saturating the market
- A lack of diverse revenue streams
- A lack of systems in place to ensure a smooth transition
- Having your reputation damaged after sale
According to one experienced broker, planning to be in the business another 20 years, newer low-cost agencies are a development to be afraid of for business-owners looking to sell in the next few years. “The old model is just too expensive to maintain, and all agents want bigger splits and less from their brokers.”
The values of real estate businesses are not what they were, agreed a South Carolina broker.
“I sold my brokerage, then I bought it back, then I sold it again. The business model has changed quite a bit. The agents get a larger cut and the brokerages are not worth as much as they use to be. That is why I got out of it. I saw that the future of owning brokerage was going down. There are better investments.”
The “lead machines” out there taking people from agents’ existing databases are something agents should be worried about, too, said respondents.
“There are just too many ways for someone in your sphere to be lured away to another agent,” said an experienced Philadelphia broker with 10 to 20 more years to go in the business.
And some things never change. “Clients don’t want to be sold,” said one respondent simply.
“Clients don’t want to be sold.”
No one really “owns” clients or properties in a database; they just own intellectual property, such as photos or listing descriptions, said a New Jersey agent.
“There’s nothing valuable to sell, in my opinion. Current CRM systems don’t enable business intelligence on clients, which might be valuable.”
Confusion reigns on retirement planning
However valuable you perceive your real estate business, for a growing numbers of agents, a retirement plan is becoming top-of-mind — and they have many questions about what they can take away from their real estate careers.
What is clear from this survey is that there is a substantial lack of planning from agents on how they will exit the business profitably, which is concerning when 30 percent of agents are in the 60-plus age bracket, according to the National Association of Realtors.
When asked if they had a plan for what they would do with their client base at retirement, 34.82 percent said they would be keeping it active and sell referrals while 31.25 percent did not have a plan for their client database at all. Another 11.83 percent thought they would be able to sell their business whole.
The reasons agents and brokers are exiting is why most people choose to retire — to spend more time with the grandchildren and to take time to travel.
Our respondents also said they would be leaving the industry due to changes in the business, too much federal regulation, stress, financial unpredictability, declining margins, technology and a lack of respect for the profession.
Of our respondents, 12.3 percent were planning to retire in the next 1 to 4 years, and a further 10.7 percent planning to exit after 5 to 10 years.