Real Estate Brokerage "Churn and Burn"
Here is an example of why you must be selective in choosing a first real estate broker. Some brokers set up a trap for new salespeople called the "churn and burn," a painful process of weeding out salespeople after their initial productive period, not unlike competitive college majors.
To illustrate: imagine getting your undergraduate degree was from the University of Washington, an institution renowned for its pre-med program. The freshman pre-med classes are always stuffed with hundreds of hopeful doctors, half of whom are so driven by zeal and freshness that they do quite well. As the quarters pass, class sizes shrink dramatically as greater numbers of students become discouraged and drop out of the program. Is anyone alarmed at this trend? No, because the system for both competitive college majors and competitive brokerages is designed so only the strong survive.
Like the wide-eyed freshmen, salespeople generally shine during their first six months as they do business with their relatives, friends and associates. If salespeople perform three to six transactions, that can mean $20,000 of commission for the broker. After the new salespeople have exhausted their immediate circle, their productivity is generally low for the next one to two years.
Brokers know this pattern and some will hire lots of agents to cash in on their productive start. Then as business slows down, they will pressure the salespeople to continue to produce or force them to leave. This practice is looked down upon, but there are some brokers that have no qualms about it. The good news is that you can figure this out easily if you take the time to talk to brokers and salespeople in the office. Ask what percentage of salespeople is still around after three years and whether they have a mentoring system to train new employees. Also, if brokerages seem too curious about your social connections during your interview, this is a red flag to stay away.
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