FirstTeam’s Michele Harrington on opportunities for independent brokerages

HousingWire

In this episode of the RealTrending Podcast, Michele Harrington, CEO of FirstTeam Real Estate, discusses the evolution of her brokerage, the challenges faced in the current market and the importance of an agent-centric approach. She emphasizes the need for technology and accountability in supporting agents, while also addressing the impact of legal pressures on regional brokers. Michele shares her insights on defining growth in the industry and expresses optimism for the future of real estate as a viable investment for building wealth.   Here’s a glimpse of what you’ll learn:   Michele emphasizes the importance of being agent-centric in real estate.   The past few years have been challenging for many brokerages due to market downturns.   Legal pressures, such as class action lawsuits, significantly impact regional brokers.   Profitability should be prioritized over growth for sustainable success.   Creating value for agents is essential to attract and retain talent.   Technology should enhance agent productivity, but accountability and coaching are crucial.   Regional brokers have a unique opportunity to differentiate themselves in a consolidating market.   The real estate industry offers potential for generational wealth building.   Michele believes that the future of real estate is bright despite current challenges.   Flexibility and creativity are key for adapting to changing market conditions.   Related to this episode:  Michele Harrington's LinkedIn  https://www.linkedin.com/in/michele-williams-harrington  FirstTeam Real Estate  https://firstteam.com/agents/michele-harrington   The RealTrending podcast features conversations with the brightest minds in real estate. Every Monday, brokerage leaders, top agents, team leaders, and industry experts join us to share their secrets to success, trends, and the lessons they’ve learned. Hosted by Tracey Velt and produced by the HousingWire Content Studio.

Transcript

00:11how are you preparing your brokerage for the next iteration of the industry whether it's the housing

00:17market or competition uh today i spoke with michelle harrington she's the ceo of first team

00:24real estate and we covered everything from you know how an independent regional can thrive in

00:32today's mega merger atmosphere and we talked about the nir settlement and the possible unraveling of

00:40it and we touched on a lot of different topics um all that all relate to building a brokerage that

00:48thrives in any market so enjoy the podcast michelle i think this is your first time on the real

00:55trending podcast i don't know why we haven't talked before but welcome i appreciate you coming on thank

01:01you i'm glad to be here yeah so we recently actually had your vp of marketing and strategic initiatives

01:08lauren hens and i kind of want to talk a little bit about that from your perspective um she talked

01:14about shifting from legacy brand messaging to future focused value propositions so how has that

01:21impacted the way you do things as a ceo with first team yeah so we're a 50 year old company

01:29so i think

01:30that a lot of times when you are taking over a company that's as you know has been around for

01:37generations like ours has then you have you know you have to embrace the legacy of the company of course

01:45because it's an amazing company but then you also have to let go of some of the old way of

01:51doing things

01:52and really bring it into the you know the next century and i think that we've done a really good

01:58job

01:58with that and our founder camarage has let me just kind of go with it and transform the company

02:05into something that's a modern agent-centric company and we've always been an agent-centric

02:11company but i think really giving the agents the systems and tools that they need to operate in

02:18today's environment which is a much faster more competitive environment that we've had in the past

02:24so um it's been super exciting for me to be able to take the the keys to that car that

02:30you know classic

02:31amazing car and really kind of put in uh you know an eight cylinder like amazing engine and then make

02:41it run and purr you know so that's been fun yeah so you have a campaign called behind the agent

02:47um

02:48and it was credited with driving like a 98 retention rate and boosting your conversion so as a ceo

02:55how do you think this kind of agent-centric positioning um affects recruitment retention

03:02culture what is your take on that yeah i mean all companies in my opinion real estate companies should

03:09be agent-centric i mean we are here our clients are agents and a lot i think a lot of

03:15companies

03:16especially big companies look at their clients as the consumers and i don't look at it that way

03:20like my agents can worry about the consumers i worry about the agents i take care of my agents i

03:26listen to my agents they are my customers and i think when you have too many um gods or kings

03:33you know like you have a board of directors and you have shareholders and you have you know your

03:38your leadership team and and your consumers and all that then you're not really focused on one thing

03:46and because we're small because we have no board of directors because we have no shareholders

03:49i mean small considering you know when you look at some of the huge mega companies um we are all

03:56we

03:57need to focus on and all we're all we have to focus on is the agents and i think that

04:03just gives us such

04:04a competitive edge when it comes to companies that have many kings they need to serve we only have one

04:11we serve our agents and that's it and so the behind the agent campaign really reflects that

04:16and really lets the community the agents know that we are 100 about them not about our shareholders

04:25not about consumers we're there to make their business into a thriving business so yeah absolutely

04:32i i love the idea of it um i really was impressed with the whole campaign and how you know

04:40how that

04:40was implemented and and so i wish you the best of luck with with all of that and i'm excited

04:47to meet

04:47you in person at the gathering where you'll be a speaker um on kind of real estate trends the nar

04:53settlement and you did not mince words about the nar settlement at a realty alliance um event and so i

05:00wanted you also said it was um the last few years have been the hardest in your brokerages history

05:06so what specifically has made this period so challenging which i know but for independent

05:12and regional brokers in addition you know let's talk about the settlement but in addition to the

05:17settlement yeah i mean obviously the real estate market has been not great you know the past couple

05:23years and so we have a market where all the agents are you know mostly down i mean we actually

05:29grew

05:29in the past three years based on basically just like grinding and recruiting and making things

05:36happen but it's been a tough three years just because the market's been down so you know the

05:41market gets down 20 percent one year and then another 20 percent the next year you're down 40 percent

05:45you know in the market and then you have to combat that and dig yourself back out of that hole

05:51by you know making your agents more productive and recruiting more agents and we've done a really good

05:57job of that but it's been a tough couple years it's been a tough couple years for our agents

06:01and then you layer on top of that these lawsuits these class actions and the fact that nar did not

06:08even though they said they were going to fight and defend us most people don't know that there's

06:13between 80 and 90 brokers large brokers that they left out of that settlement when they settled it

06:19they were like you know you're on your own and you know we pay our dues just like everybody else

06:26pays their dues and we really got screwed in that and i don't mince words about it any um any

06:32our

06:32leadership knows how i feel about it um they they act like oh we didn't realize there were so many

06:39of

06:39you guys there even if there was one of us they shouldn't have left us out so i think that

06:45they they blew

06:46it with that they blew it with us i think there will be repercussions because of that and um but

06:52yeah

06:53it's been a tough couple years and for our agents for our brokerage we've done a great job of combating

06:59it and bringing ourselves up out of it but um that's that's grit that's perseverance and that's

07:05what makes good companies great companies so i'm always happy to have the challenges um but it'd be it'd

07:12be nice now if we can just ride a little bit of a wave of a good market i'm really

07:17looking forward to

07:18that yeah absolutely yeah and we do have um real transverified brokerage rankings where you could

07:25see what who those brokers might have been um through the settlement so so there is information

07:31out there so what changes are you seeing inside brokerages right now that real estate leaders need

07:37to be paying attention to well i think you know i hate to talk too much about technology because

07:43technology is like a double-edged sword mostly agents don't use technology at all you know so

07:48you have your you you spend a lot of time and money developing technology that most of your agents

07:53are never going to use but i think it's important to and we revamped our tech stack um to really

08:00look

08:01at revamping your tech stack on an ai platform so that your you know um that you can that your

08:07ai will

08:08learn and will get better and better and better over time so i think we are revamping our tech stack

08:15we did most of it and now we're kind of revamping our central hub on an ai platform so that

08:20it can learn

08:21everything that our agents need to know and i think that's important but not the only thing i think

08:27that doesn't really drive production i think what the most the biggest thing that drives production

08:34is accountability and coaching of the agents and sometimes companies get too big to do that

08:40and that's where i think the companies fail the agents it's a very lonely business you know you're

08:47an entrepreneur you're an independent contractor there's not a lot of people saying hey come into

08:52the office that this time make your calls at this time and a lot of agents really need that and

08:58want

08:58that so if you can provide and i think it gets overlooked because we're so obsessed with technology

09:03you know but if you can provide accountability and training and coaching so your agents are

09:09constantly evolving and growing and learning then you're going to be that sticky company that you know

09:15your agents come to they see the growth of the agents that are there and then they stay with because

09:21they're like i'm doing better here than i was ever doing anywhere else yeah absolutely and now what ai

09:27platform are you are you looking at for for technology and for your tech stack so we basically

09:33revamped our tech stack to have um follow-up boss luxury presence and real scout as our three main

09:40platforms okay what we're doing right now is taking our hub which is our single sign-on hub and building

09:47that from scratch on an ai platform so normally we buy tech we don't build tech but on this the

09:56platform

09:56that houses all of our tech will be built by us and a company we're outsourcing with and um so

10:03that'll be

10:03really amazing sky slope is another one and it'll all integrate with everything sky slope follow-up boss

10:09luxury presence real scout um it's really important to kind of have those things you know integrated into

10:15a a single place where agents can go and see like their whole business and that's been like i've been

10:22pushing for that for the past couple years and we finally had a point where we're we're about six months

10:27away from launching it okay well great excited to hear more about that once it's once it's together

10:32um and you know i want to go kind of back to the commission lawsuit settlement and the broader legal

10:38pressure on brokerages and you know obviously there's also the suit that could derail the nar

10:45settlement possibly i mean there's a lot of what-ifs out there in the industry right now so why do

10:51you

10:52think the impact on regional brokers hasn't been fully understood or told well the thing is is that

10:58regional brokers that's real money that's like our money when we get sued or we have a class action

11:04lawsuit that comes out of cam's pocket you know when you have a you know a compass or anywhere or

11:10you know a vc back company i kind of look at that i mean i know it's real money but

11:14it's not really it's

11:15not their money you know what i mean they have shareholders they have stock prices it's totally

11:20different you know when so regional brokers when you have these stupid lawsuits where nobody is

11:27benefiting but the lawyers nobody you know nobody nothing changed because of that class action lawsuit

11:33it was just a huge money grab on a corrupt system that should never have gone through and then you're

11:40taking money out of small businesses and medium-sized businesses pockets and it's it's a terrible

11:47situation it shouldn't be even this isn't what class action lawsuits were meant to be for class action

11:53lawsuits were meant where somebody got injured or or a company was poisoning the water you know like

11:59that's what when there's real damage that's what class action lawsuits and somehow in this country

12:04we let the lawyers run wild and so they can um fly around in their g5 so you know what

12:11i mean and

12:11that's that's not good for anybody so it there really needs to be some serious re-looking at our

12:19legislative you know system when it comes to how these lawsuits are filed and because you you could

12:26put companies out of business i mean we're lucky that we are backed by a man who has done really

12:32well

12:33in the real estate industry you know he's an immigrant that came here from iran and um his family

12:39started hot pockets i mean they've done well in business and and i'm i'm super grateful and lucky

12:45that he owns our company and he can afford to get these dings every once in a while but you

12:53know those

12:53dings eventually those small brokers those regional brokers are going to be like i made i made you know

13:00this amount of money and then i just gave it all back you know what am i doing this for

13:05why am i

13:05working so hard so you you have to give incentives for businesses because you don't want every business

13:12to be a compass that's not good for anybody you have to have competition so you have to have these

13:17regional brokers you should it's better for the ecosystem and you you can't just keep you know

13:23like taking from them with taxes regulations lawsuits i mean you got you got to give them a break so

13:30that's my soapbox right there i'm still trying to figure out with home price appreciation how buyers

13:38or sellers were harmed in the in the whole nobody was harmed right um so yeah so it really i

13:49and all the

13:50all the studies show that there really haven't been many changes i mean yes you now have a buyer

13:57representation agreement that needs to get signed and um you know you're negotiating directly with

14:02the buyer about the commission they might have to pay or the seller might have to pay or who knows

14:07who's going to pay it um have you reinforced uh any of your buyer representation agreements i know a lot

14:14of brokers are are you know taking advantage of that arbitration clause when they um you know are

14:20breached we did create our own buyer representation agreement more of like a a simple one you know

14:27more simplified than what car came up with but um i think that really nothing's really changed the it

14:33actually has made it a lot less transparent you don't know you know what what you know as an agent

14:40what you're going to get how you're going to have to negotiate you know nobody knows you know i mean

14:45the

14:45buyer knows what they might have to pay but they don't know if they're going to have to pay so

14:51it's more

14:51complicated less transparent it it and and it does nothing commissions haven't gone down you know

14:57it's you know so nobody really benefited except for the lawyers they're the ones that benefited of course

15:04yeah and there's still a lot of things unsettled at this point a lot of lawsuits unsettled that could

15:10have an effect on the industry um you know i'll be really curious about whether this nar settlement

15:15reversal um what happens with that with that lawsuit i don't think they could really undo

15:21what's already been done but it'll be interesting if any practice changes come out of it or who knows

15:27yeah yeah so looking ahead what do you believe regional and independent brokerages must independent

15:34brokerages should do to remain competitive at scale um as compliance and capital costs continue to rise

15:42well i think we have you know regional and independent brokers have a really really amazing opportunity

15:49right now with the compass anywhere merger because when two big companies two of the biggest companies

15:55in the world merge you know the reason that people do this is because of the economies of scale so

16:03eventually they're all going to have the same tech stack they're all going to have the same marketing

16:08they're all going to have the same leadership they're all going to have the same everything

16:11so if 60 of the agents are all the same same then the regionals the independents are the ones that

16:20can differentiate themselves can stand out can do things differently can be nimble and fast and quick

16:27and you know so i think regionals and independents really need to look at it as what an amazing

16:34opportunity we have because eventually the cobalt banker agent that's competing with the compass agent using

16:40the exact same stuff they're going to get frustrated and they're going to say why am i competing with

16:46with my same company i need to be somewhere where i can be differentiated and that's where we stand out

16:51so it's a really great opportunity and i think you know sometimes i hear a lot of fear on behalf

16:57of

16:57the regionals and independents maybe about like private listings and and etc but i think you know we

17:04we as as a brokerage are the largest listing brokerage in our area so we don't you know have

17:11to worry about anybody hoarding the listings um so we're kind of lucky in that way but i think you

17:17know

17:17you can't necessarily do anything about that because you can't change except grow you can't change what

17:25anybody else is doing but you can look at yourself and how can i be competitively different and i think

17:31there's a lot of opportunities for that right now so um grow and become the number one listing broker

17:38in your area and then you don't have to worry about private listings and how that's going to affect i

17:42mean just grind it out yeah it's really interesting because um you know with so many companies under one

17:51umbrella and so many agents there's going to be some cannibalization you know coldwell going to uh

17:58sotheby's or you know a coldwell going to a christy's whatever um so the opportunity for

18:05independence and regional brokers to kind of have a value proposition that's different to convince those

18:14you know companies or agents or teams whatever to come to them makes a lot of sense i hear that

18:21from

18:21a lot of brokers that they're actually looking forward to the competition but not only that they feel like

18:26it makes them better you're more honed in you're you know honing your message you're really um you

18:34know focusing on the things you need to focus on in order to get the agents or teams or you

18:39know new

18:39offices so so yeah it'll it'll be interesting once their integration goes through um you know how it all

18:46plays out i mean i think they're going to be successful don't get me wrong i just feel like

18:51there's a lot of opportunity out there too yeah for sure yeah absolutely um so growth doesn't always

18:58mean getting bigger um how do you think brokerage leaders should be defining growth in this next phase

19:03of the industry yeah so you know when i was i had my own company before i i joined first

19:08team first

19:09team bought my company that's how i ended up here and when i had my own company and i was

19:13younger i used

19:14to just think i wanted to be like the largest you know regional player and and i was all about

19:19growth and

19:20i really forgot about profitability as if the profits would just come magically and they did

19:27come magically until like 2008 and then they magically stopped coming so i really think you know um when

19:36you're building your company growing is awesome but not just for growth sake profitability is king i mean

19:44you have to maintain your margins you have to look for more ways to be profitable and make sure you're

19:51putting away away for another 2008 or like the last couple years we've had you know and in those years

19:57where the market's down are perfect opportunities to acquire and grow in a profitable way so um i think

20:06that we really need to make sure we're focusing on the bottom line and really being careful about our

20:11margins very low margin business you know it's we don't make a lot of i mean even our agents think

20:17we make a ton of money you know but we really the margins are tiny and i think that it

20:22gets they can

20:23get squeezed really fast so looking at your your margins making sure you're profitable as you grow

20:29um don't give away the store don't race to the bottom you know if you have value agents will come

20:36and work for you and and pay a split you don't have to cap it you don't have to make

20:41it 500 a

20:42transaction you can if you offer true value then you know you'll be able to attract the agents that

20:48really want to work and really want to grow and those are the kind of agents you want you don't

20:53want

20:53an agent that's like i'm not paying more than this i mean you know like that's not the kind of

20:57person

20:57you want working for you you want the person who's dedicated to their profession who's dedicated to

21:02getting better and that's the kind of agents that we attract and if you can make that kind of value

21:09proposition for yourself then you don't have to race to the bottom and give away the store just make

21:13it valuable yeah absolutely um so let's zoom out um five years and what do you think the brokerage

21:19landscape looks like for firms that survive and adapt versus those that don't yeah it's kind of an

21:26obvious question but like what will allow them to survive and adapt i think you know creativity

21:32looking at things in a different way we're growing outside of the state of california in a different

21:36way than than we've grown historically you know not not saying you know we've always done this this way

21:43so it doesn't work any other way you know there's there's all kinds of ways to grow and to attract

21:51and

21:51to build a great entrepreneurial business you have to kind of think of things in a different light you

21:57can't be you can't worry about your sunk costs you know we i talk about this a lot when sunk

22:02costs like

22:02you you've put so much into a certain way or a certain area or certain thing that now you you

22:09know

22:09it's not working but you've put so much into it that you don't want to give it up you have

22:14to be you

22:15know nimble and quick and decisive and really you know look at the landscape and i think that

22:23you know in i think the regionals and the independents are going to have an amazing next

22:29five to ten years you know i think we're going to thrive i think we're going to grow and i

22:34think that

22:35the consolidation of the industry is going to help us do that you know we're going to be better off

22:42because of that so um i'm very very optimistic about the next five years i i think first team as

22:48a

22:48company i think we'll double the volume that we have we're about six billion right now i think we'll

22:54be 10 to 12 billion in four to five years and um i i just i can see how powerful

23:03our brand has become

23:06especially with the consolidations yeah yeah that's amazing all right we're going to do a lightning

23:11round this is kind of the first answer that comes to your mind um so one industry trend that um

23:18agents brokers are underestimating right now i think we're underestimating ai i i think that

23:25people just don't understand what it can do and i think it will take jobs um and but better than

23:31it

23:31taking jobs is it's going to make us so much more efficient if you use it right and you use

23:38it well

23:38it's going to make you more efficient look for how to use that the right way okay um the hardest

23:44leadership lesson you've learned over the past couple of years um don't expect loyalty you know

23:51unfortunately in this business like you your heart will break and you will you will um cry and i've

23:58cried many times because i thought that there was loyalty and there wasn't and um i think that just

24:04don't expect it you know there you know you have to kind of build around it and hope for loyalty

24:11but just build something that people will be attracted to and they'll stay with but don't

24:16expect it yeah absolutely um one thing brokers should stop assuming we'll go back to normal

24:24i think that um you know the race to the bottom the is is not going to get any better

24:30you know the the

24:31brokers that are rent a broker you know and are you know that's that's not going to get any better

24:37and so really it's not about lowering your price lowering your price lowering your price

24:43it's about creating value creating value creating value and um i think otherwise the industry isn't

24:51going to look the same if we all just kind of race each other to the bottom yeah absolutely um

24:58the

24:58biggest misconception about regional brokerages um i think that a lot of people think that if you're

25:04independent and regional that you don't have the tech and the backing and the systems that a big

25:10broker shop has but technology has gotten really cheap you know when i first got into the business

25:16it was really expensive to build a tech stack i mean it was you you would have to have uh

25:21venture capital

25:22or you know um be on the stock exchange in order to build a great tech stack now you don't

25:28so regional

25:29brokers can be just as competitive as big brokers when it comes to technology you have to be smart

25:35about who you affiliate with and you don't have to build it you can buy it and that's way more

25:41cost effective and um i think that that's one one thing that people assume that regional brokers

25:48don't have that we have yeah yeah um my last question is what gives you optimism about the future

25:54of real estate well real estate in my mind is like the best investment a person can have it is

26:02the only investment where you can really leverage your money and get into an investment for 10 percent

26:1020 percent down three three five percent down zero down as a veteran and you can get into an investment

26:16you're paying and instead of paying rent you're paying yourself you're paying interest of course

26:22but um but it it's generational wealth that it builds and i i cringe when i think about the

26:30younger generation saying that they want to stay renting i i cringe at that they'll never build wealth

26:36the wealthiest people in the world built their wealth in real estate and it you need to get into it

26:44hook or crook you know you need to buy a condo buy a buy the cheapest condo in the cheapest

26:49area that

26:49you could possibly get into and eventually you'll sell that and buy something else i'm very optimistic

26:56about real estate it's never going away it's not like a company where it can just all of a sudden

27:01close their doors and the stock that you own on that company is worthless i mean unless it's like

27:06you know burns down and even if it does you still have the land so um very optimistic about real

27:13real estate and the industry i think that we um it's a it's an amazing industry to be in it's

27:20amazing

27:21because entrepreneurs can get into a business that they don't need a whole lot of capital to get into

27:26and build themselves a thriving career with you know very little overhead so you know the investment

27:34is amazing the industry is amazing i am very excited about younger people that get into this industry as a

27:40first career because it is an amazing career and you can build build you know start as an agent build

27:47a team create a company build a brokerage there's so many things you can do and just really thrive

27:54so i'm very excited about those two things yeah that's great um very optimistic i love that um michelle

28:02thanks so much for joining the real trending podcast i look forward to seeing you at the gathering and

28:07um i'm moderating your panel so i will be there with you we'll have a prep call and that's in

28:15april so

28:15thanks so much for joining me thank you thanks for asking me

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