The culture factor: Why a California broker fired half his agents

Broker-owner Sammer Mudawar likes to joke that he hires millennial real estate agents because he knows they’ll be alive in 10 years.

In his mid-30s himself, this straight-talking broker-owner of the Re/Max Prestige office in Orange County — which he runs with managing partner Jay O’Brien — has a distinctly entrepreneurial approach to real estate that he thinks appeals to agents of his generation.

Though the former appraiser took the independent brokerage route earlier in his career, he went to Re/Max in 2010 because, as he puts it, the industry was going through huge financial upheaval, and he was under 30.

“I was in an old game, and credibility was a concern, and I wanted a brand name behind me,” he explained.

But he is chipping away at changing this old game. He added: “We didn’t stick with the traditional Re/Max model.”

Thinning the herd

At the end of 2015, with around 35 agents, he and O’Brien fired nearly 50 percent of their agents, bringing the number down to 18.

The reasoning?

“They didn’t fit the culture, they didn’t have the right attitudes or professional work habits or ethics. Some of them actually were productive agents, but we didn’t want anyone in the office that would taint the culture and work environment.”

He and O’Brien explained their decision to the agents who remained.

“We thanked them for their loyalty and hard work and explained we were making changes to the personnel and compensation structures in order to create a more positive and productive work environment. We asked for feedback as well and encouraged questions about those who we fired.

“They felt they were a part of the solution, and it definitely gave them more pride and sense of ownership in the office.”

The Re/Max Prestige business model is all about productivity per agent, said Mudawar.

The Re/Max model is typically a high percentage split and the agents pay for everything, he said.

But Re/Max Prestige adopted an all-inclusive model that takes care of all of the agents’ marketing expenses, and the business hired two people who act as assistants, transaction coordinators and marketing assistants.

“Since we only retain productive and hard-working people, we are able to justify the additional spend, which then increases their productivity. They don’t have to worry about managing details and can focus on prospecting,” said Mudawar.

Last year, almost 40 percent of his agents made more than $100,000, and the rest are making good money, the broker said.

Over the next five years he plans to be operating with 15 to 20 additional agents with a minimum productivity per agent of $100,000 gross commission income.

The sales volume in 2016 for the business was $70 million, and it is on track to be $100 million this year.

Old-fashioned marketing approaches

The Costa Mesa-based broker, in the business for 15 years, has little time for experienced agents who don’t bother to keep up with the latest trends and ways of the industry.

They have sometimes fallen into bad habits and don’t necessarily know the rules of the MLS or the National Association of Realtors (NAR) code of ethics, says Mudawar, who sits on the professional standards committee at his local association.

To accentuate his point, he added: “Someone who been in the business for 30 years, in some cases, is doing the opposite of what they should be doing.”

They may be doing their marketing wrong, he explained.

Their idea of farming, for instance, “is spending thousands of dollars by blanketing neighborhoods with mailers that end up in the trash.

“They may be making a lot of money now because they have built a book of business and are marketing to a demographic that is at the end of their real estate consumer life cycle and is used to these outdated methods of marketing.”

But although — for now — a baby boomer may like to receive a postcard from the neighborhood Realtor, their kids will do their research online and with friends via social media before ever contacting an agent, the California broker said.

“If the more traditional agent started today, they would not be in the business in five years’ time,” said Mudawar. “They’d go broke spending money on farming before having a chance.”

It is not surprising, then, that the average age in his SoCal office is 30 — although a few more mature agents are thriving as well.

“The seasoned agents we have are amazing, not only at their profession but with their adaptation to tech and the younger generation,” the broker said.

How to attract your millennial

To attract millennial agents, a brokerage has to have the right attributes, said Mudawar, including the right leadership, training and culture in place.

If you don’t have that, you are not attracting the people you want, he added.

Millennials are facing a lack of opportunity in the overall job market due to competition with baby boomers who won’t retire, said Mudawar.

“Many of them come from unhealthy corporate America and are just desperate to find somewhere they can make a difference and enjoy their job as well as where they work.”

He recently trademarked “Love Where You Work” for the real estate industry because this is how they want their agents to feel when they are at Re/Max Prestige.

“It makes a difference in the office and to the clients when people love where they work. You don’t even have to say it; you can feel it,” said Mudawar.

Giving this generation an opportunity to make more money than someone who went to graduate school, work somewhere they love and do something with a positive impact is a “no-brainer,” he said.

How to train your millennial

Mudawar’s attitude towards training is heavy on mentoring. His training sessions tend to focus on one part of the transaction so the agent takes it in.

He may work with an agent for two hours on a topic, but in the beginning it’s important — there is a lot to understand — and it works.

Mudawar decries classroom-based training. Training methods are not adapted fast enough; they are outdated, he said.

“Our training is on-the-job. We will talk about: ‘These are the questions you are going to be asked — how’s the market? Is it a good time to buy or sell? What if the rates are going up?'”

If you don’t know how to answer those questions, you have lost your lead.

Training should start with prospecting, he said.

“There is only one way to learn real estate, and that is to get your first deal, which means you have to get your first interview, which means you need to prospect. No one likes to prospect.”

Mudawar tells new agents it’s all about work habit, environment and focusing on the long-term.

“If you come in every day and treat real estate like an 8-to-5 job, find a great leader, prospect consistently, surround yourself with motivated and successful professionals and plan to build the foundation in year one, then you will be in business year five.”

Most of the people he hires have zero experience and are trained from the ground up, said the broker.

“We look for a specific personality type — a positive attitude, someone who is resilient. They listen; they are willing to do what we say, and they have faith in the leadership.

“We have never had someone who came with an open mind, a positive attitude, did what we said, and not survived.”

Mudawar can point to a certain amount of success in his training technique. His first agent is now his business partner, Jay O’Brien, who was named in NAR’s 30 under 30 in 2015.

Teams and employee-based models the future

The Orange County business owner believes the way ahead for brokerages will be teams run by good agents, but with many members of the team being employed staff.

One of the problems dogging the real estate industry is that because agents are independent contractors, you can’t guarantee consistency to clients, he said.

“I think large teams or employee-based models will become more common as the consumer demands a higher level of service at competitive rates.”

The millennial is excited about the change coming to the industry through technological innovation. He is currently working with a developer on some proprietary tech for Re/Max Prestige.

“We need to make the changes to deliver a better customer experience,” he said. They are hoping to launch this in six months time.

Mudawar also has his own tech startup with O’Brien and another business partner, called Buy With A Buddy.

Buy with a Buddy teaches renters and investors how to creatively purchase property by teaming up with a buddy, significant other, roommate or friend.

It gives them the basics of home purchasing and finance and then teams them up with an experienced real estate and mortgage professional who understand the concept so they can buy and invest in real estate with confidence.

“The generation coming up are often living in a home paying $3,000 rent with other people — if you are three people each making $50,000 to $60,000, you can buy a house and rent it out with your buddy and get a tax benefit,” said Mudawar.

Big brokerage owners against change — but it’ll happen anyway

Impatient for modernization of the real estate industry, Mudawar doesn’t think the people in charge of the big established brokerages have the incentive to change the system it so badly needs — but it’s going to happen anyway, he argues.

What is it going to take?

“It’s already happening. With younger agents entering the business and seeing all the obvious problems, millennials are starting to buy and sell their first homes and seeing how backwards the industry and technology are.

“Entrepreneurs are identifying huge opportunity in the tech (real estate) space, it’s just a matter of time before the business changes overnight.”

The commission structure will not last as it is today, he predicts.

“The commission structures will continue to be attacked by new business models and technology, which will eventually drive fees lower over time. This will happen naturally over the next decade as tech and millennials take larger portions of the market,” Mudawar said with confidence.

Email Gill South.