How Brokerages Are Tackling ‘Bait-and-Switch’ Recruiting

How Brokerages Are Tackling ‘Bait-andSwitch’ Recruiting and Poaching

By Liz Dominguez

The recruiting game has often been high stakes, with real estate brokerages looking to attract the industry’s top-performing agents and teams in order to build a powerhouse office (or series of offices) that can not only compete with local brokerages, but also communicate the value to consumers.

But what about retention? If brokerages are solely focused on attracting new business, they risk losing the stronghold they worked so hard to build.

“Recruiting has changed in the past 10 years to look more like mergers and acquisitions, with companies acquiring agents with signing bonuses or stock options or things like that,” says Joe Rand, chief creative officer of Howard Hanna | Rand Realty.

But according to Rand, many of these efforts are often temporary if brokers are not mindful of agent satisfaction.

“The problem is that you never actually ‘buy’ an agent’s business, you only ‘rent’ it,” says Rand. “And when that ‘lease’ is up, you leave yourself open to the risk of having to re-lease that agent’s business again or face them going to the highest bidder.”

Poaching or Attracting? Brokerages Straddle the Line Agent attraction strategies have changed drastically, with traditional methods still in use, while a larger focus is on dollar signs. As Rand mentions, brokerages with the available financial backing are offering “easy-cash” incentives such as sign-on bonuses, stock options and atypical commission structures.

Rick Haase, president of United Real Estate, had a front row seat to these recruiting strategies, with Compass laying claim to 15 of his agents after moving into the local marketplace.

“They basically said ‘here’s a sign-on bonus.’ But it’s not a sign-on bonus. It’s structured as cash flow to the agent, but they have to work a number of years to be able to qualify to keep that money,” says Haase.

Michele Harrington, COO of First Team Real Estate, had a similar experience with Compass, and has witnessed other brokerages such as Coldwell Banker implementing comparable strategies.

“When Compass first came into our market, they paid a lot of money to entice some of our top agents to leave,” says Harrington, adding that her agents had to sign longterm contracts when making the move.

“We kept in touch, and most of them feel they were definitely overpromised but did not want to return the money, and had harsh clawback provisions,” adds Harrington. “We did have a team leave that was there for maybe 60 days and was so disenfranchised that they did return all the money and come back,” she says.

Compass, however, pushes back against this notion, holding firm that the brokerage has agent support in mind when implementing its recruitment and retention strategies.

“Agents join Compass because we help them grow their business, serve more clients, save time and stand out as trusted advisors in their markets,” a Compass spokesperson tells RISMedia. “Our agents close an average of 19% more transactions after joining Compass and sell homes in 21% fewer days on average than their peers. This is one of the reasons we have a principal agent retention rate of over 90%.”

As tensions rise amid a difficult

environment, brokerage competition continues to grow fierce, with traditional recruiting battling against more modern strategies that some say cross a line.

Bess Freedman, CEO of Brown Harris Stevens, says she’s seen several brokerages take advantage of the ongoing pandemic, offering flashy onboarding packages during a time when agents are looking for stability and solid financial footing.

“I have never experienced the level of egregious recruiting as I have during these last 18 months,” she says. “As the world navigated COVID, trying to avoid illness and death, other brokerages had full-on recruiting teams calling our agents several times daily to entice them to switch brokerages.”

Freedman says she’s seen everything from six-figure sign-on bonuses to upfront loans paid back through commissions.

“But if you read these contracts all the way through, you realize these terms are fleeting and designed to get you in the door to show scale,” says Freedman.

Are These Strategies Sustainable? Brokers are reporting ongoing churn in the industry, as these increasing financial incentives work to lure agents but may not adequately provide the support they need.

“Most of these agents found this to be a huge turn-off,” Freedman says of the competing recruiting efforts her agents experienced. “Some of my agents were actively mourning loved ones that passed due to COVID, and the onslaught of recruiting texts and phone calls they received was disgusting.”

And though some agents did leave, Freedman had several return to her brokerage citing “promises unfulfilled.”

“Once the agents signed and joined these other brokerages, they were all but ignored,” says Freedman.

And of the 15 agents that left United Real Estate for Compass, 12 returned, two have committed to return, and one has retired out of the business, says Haase.

But if agents don’t end up staying for long, how are these brokerages maintaining profitability?

“It appears that some companies have been in a race to get to the public market, creating a critical mass of agents so they can report top-line revenue growth,” says Haase. “But when companies forget to create a viable, sustainable business model to get there, I think that strategy is bankrupt over time.”

Building a Solid Retention Strategy Regardless of the recruiting strategies being employed, brokers must focus on retention to maintain a loyal agent base, and that begins with honest and upfront education, say experts.

“Our best agent is an educated agent,” says Haase. “We proactively provide for them with the knowledge about what’s out there, how it really functions, what’s a great idea and what’s not a great idea, and we try to dispel the myths.”

“These firms are not only buying you, but your entire book of business,” adds Freedman.

On top of that, Harrington says, is communicating the value of the brokerage to agents.

Candace Adams, president and CEO, Berkshire Hathaway HomeServices New England, Westchester, New York Properties, says agent retention should always be a priority. “Something our company had during COVID was an established company vision and values system,” says Adams. “Our Support Center Team, including myself, remains accessible to all, and we never let up with our agent focus group meetings to keep communication flowing.”

For a long time, says Haase, the industry has over-regulated the behavior and actions of their agents, creating artificially restrictive environments. “As a result, they frequently stifled the entrepreneurial nature and creativity of their agents.”

And so, providing agents with the freedom to choose the tech and marketing platforms that work best for them, is key to ensuring retention.

“We make sure to never limit their business, marketing or business development techniques and tactics,” says Haase.

Freedman reminds brokers that competition comes in various forms, and industry leaders need to be able to provide the tools and resources that allow agents to feel fulfilled, ready to tackle anything.

“The work of real estate agents is being attacked by all sides: listing aggregators, iBuyers, discount brokerages and most recently the Department of Justice,” says Freedman. “Firms need to offer support and access to programs and services that are value-adds.” RE

“I have never experienced the level of egregious recruiting as I have during these last 18 months.”

– BESS FREEDMAN CEO, Brown Harris Stevens

Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.