MU: We’ve been searching for a partner for years, and it’s the right time for us to do it because we now have over 130 offices on a global scale.
We believe that real estate commissions have really condensed, so in order to stay alive as a brokerage firm, you really have to look at different ways of improving the customer service and the customer experience. But you also need to monetize that experience so that you can actually stay profitable, so that you can deliver the experience to the agent, so that the agents can deliver the experience to the consumer, and so that everybody can still have that full-service brokerage.
If you don’t want full-service brokers, there are plenty of companies out there that will give you a different experience, but there are still a lot of consumers out there that want to have that full-service brokerage and full luxury experience. For us to be able to deliver that, we need to be able to support that through various different ancillary businesses.
JA: With agent commissions poised to drop, a recent study showed that many brokerages would not be profitable at lower rates. What types of brokerages do you think are better insulated from a potentially large drop in commissions?
MU: Brokerages that have ancillary businesses and have the ability to create revenue through other resources other than just the brokerage. Given the fact that there’s been such a commission compression between the broker and the agents, the agents have been receiving more and more of the commission than the brokers have.
That’s due to competition, and all of these companies competing for recruitment and really chasing agents. The reality is that the amount of money that the brokers are receiving right now through commissions is not enough to keep them alive. Other sources of revenue are critical for any of our successes. If you take that 3% commission and drop it to 2%, brokerages are already barely surviving. It could be very difficult for brokerage firms to survive without finding other sources of revenue.
JA: On the topic of recruitment and chasing agents, tell me about that effort at The Agency.
MU: We’re recruiting as well, but the truth is that it’s become a cycle that is not healthy for the industry, and it’s not healthy for the brokers. That’s my personal opinion.
There’s 1.5 million real estate professionals in the country. It’s a limited amount. I’m going to say half of those are actually working and making money, so there’s roughly 750,000 real estate professionals that are out there, which is not a lot.
We’re all fighting for those same professionals, and the way we’re fighting for them is by improving their packages, giving them better splits and all of those things. I believe in freedom of competition, but what’s happening is that it’s just a movement of people. Some of us are winning a little bit more, some of us are losing a little bit more. But at the end of the day, it’s just a whole bunch of musical chairs with some losers.
The truth is that it’s sad because the losers in this thing are the smaller independent firms, and the smaller independent firms are the ones that we should be protecting. We’re in a situation where it is important to be a part of a big brand, and to be some part of a brand that has global reach or national reach or amazing technology or the best marketing or network — that’s incredible. We’re seeing that we at The Agency are benefiting from this because we have 130 offices on a global scale. We’re beneficiaries of this and I’m good with it, but I don’t think it’s good for the industry.
JA: Is the recruiting and the competition for agents particularly intense right now?
MU: We never recruited. If you want to be a part of The Agency, it’s because you believe in what we’re doing and you believe that we have something to offer. To defend against the heavy recruiting that has been going on, we now have a very strong recruiting team. Is that a trend? I have no idea. I just know that we have had to do that in order to play chess and defend ourselves against what’s out there.
JA: How is The Agency approaching this brave new world we’re in as a result of the NAR settlement?
MU: There’s a lot of noise happening in the industry, and a lot of changes with the settlement, but at the end of the day, a firm needs to be able to communicate with their agents and educate them properly on how to negotiate these types of things.
If you analyze how a commission is paid, a commission has always been paid by the buyer, not by the seller. The buyers are giving sellers money for that property. That money is coming from somewhere. The seller might be distributing the commission to multiple people, but the commission is still being paid by the buyer.
Commissions have always been negotiable. This idea that there was a standard, I don’t even understand where this came from. I’ve been negotiating commissions for 29 years. I’ve never had a standard commission. I think that was just a faulty defense strategy by the National Association of Realtors. We’ve all paid a bunch of money for something I don’t think we should have paid a bunch of money for, but we did.
Real estate agents that don’t accept this new world are going to be left behind. I just don’t think it’s a big, huge effect at the end of the day for us. I think it’s a lot of noise, and we’re all learning how to deal with it. But the bigger effect is the economy.
JA: As a former fashion brand owner, are there any current fashion trends that you like or find particularly interesting?
MU: I love that question. I’ve gotten into interior design. The Italian interior design and the furniture that’s coming out, it’s so cool. It’s so unique. In terms of actual fashion, I know we all love being in casual clothing, but I’d love for us to see that suit come back.
Also, I like the labels, but I don’t want them to show anymore. Like, let’s get rid of Dior everywhere. I think that we should start getting away from the big labels printed all over the elegant stuff. I think that is the way to go.
JA: I got a new suit I really like and I went to the ballet recently just to wear it. For our next interview, I’ll wear it and you can tell me what you think.
MU: I like that. We can go to the ballet.