Behind the broker churn: Lead-gen firms march on, while mom-&-pops fight for survival

In early March, John Reinhardt was poring over agent retention data at his firm. Only three years ago, his brokerage Fillmore Real Estate was the second biggest in Brooklyn. But over the course of 2018, Fillmore had lost almost 100 agents and hired just 43, leaving the firm down an overall 23 percent.

“The agents that are leaving are agents that are requesting 80 to 90 percent splits. For us, in a traditional model, we couldn’t afford to do that,” Reinhardt, Fillmore’s president and CEO, said.

Fillmore closed several of its Brooklyn offices, and scaled back and slowed down the hiring process. “Now that we’re consolidating, we can afford to pay higher splits,” Reinhardt said. “We’re a lot more selective on who comes in now.”

As he grapples with industry headwinds that have greatly pressured margins and ultimately put some firms out of business, Reinhardt says he still has one big advantage over competitors: a deep roster of veterans. Fifty-six of the firm’s 179 agents have been at the company for more than 15 years. He questioned whether newer and bigger companies would be able to say the same.

“How can some of these companies still have the glue to keep so many?” Reinhardt said, “We’ve been doing it for 50 years.”

Smaller traditional brokerages — like Fillmore — and franchise firms have faced a year of ferocious competition from big players like Douglas Elliman and the Corcoran Group, which continue to expand in the outer boroughs. And at the same time, newer technology-driven firms like Nooklyn and Compass continued to grab market share from established local brokerages.

To understand the effect of all these changes, The Real Deal analyzed big swings in agent count at smaller firms during the market tumult of 2018. We analyzed franchise firms, traditional companies in the outer boroughs, as well as upstart lead-generation brokerages.

To quantify the biggest changes in agent numbers, TRD compared licensing data from the Department of State’s Division of Licensing Services from the fourth quarter of 2017 to the same time period in 2018, across all five boroughs. (These numbers show how many agents are licensed at each individual firm, but not whether those agents are actively doing deals.) We focused on firms with net changes that accounted for at least 15 percent of the firm’s agents.

Risers in the outer boroughs

In Brooklyn and Queens, technology-focused firms saw sizable growth in agent count last year.

At the high end of the scale, lead-generation firm Nooklyn grew by 40 percent, with 163 agents joining the firm, and 67 departing, leaving them with a total of 336 agents. Originally Brooklyn-based, the brokerage opened their first Manhattan office on the Lower East Side in March 2018.

Nooklyn’s founder and CEO Harley Courts attributed the firm’s growth to its technology and engineering-focus and its non-traditional office culture.

“Our culture is not a real estate culture at all,” he added, pointing out that unlike at a traditional brokerage, agents do not have an assigned desk or manager, “Everyone uses our software to complete deals. Basically, the software is the manager, not people.”

Because all agents use Nooklyn’s technology, the company is able to track multiple data points about agents, including the number of deals they close, the number of leads they generate, and the number of leads the company generates for them.

They can also track which agents are active by how often they log in to Nooklyn’s platform, and use this to put underperforming agents on suspension for three months before terminating them. “We terminated a bunch of people who were just stagnant,” Courts said.

In Queens, E Realty International, a Flushing-based residential sales brokerage, saw a 59 percent churn rate, hiring 202 agents and losing 45 between the end of 2017 and the end of 2018. The firm’s founder Shirley Yang did not return a request for comment.

New agent leads

Tech-enabled lead-generation firms continued to grow across the city in 2018.

LG Fairmont, a startup lead-generation firm that bases its business off buying leads from Realtor.com and other websites (though no longer StreetEasy), closed the year 16 percent up in agent count, with 109 agents leaving the firm and 154 joining.

Triplemint grew even more rapidly, ending the year almost with a total growth of 41 percent, with 107 agents up from 67.

“We could have grown a lot more,” said David Walker, Triplemint’s co-founder and CEO, “We have a lot more agents applying to work here than we have space to hire.” Walker attributed part of his firm’s growth to its investment in data and engineering, particularly their technology, called “Black Diamond” that he says uses machine learning to predict when people may sell their homes.

“The future of our industry is answering the question: how will companies, agents, embrace the data that’s out there?” Walker said, “How do we leverage this data?”

Like Nooklyn, Triplemint is able to track their agent’s interaction with the firm’s digital tools and assess their performance. “When someone’s really not engaged, it’s typically not going to work long-term,” Walker said. “Triplemint is not going to be the best match for every agent.”

Franchise reset

Franchise-model brokerages in New York faced distinct challenges in 2018 as the market dipped, perhaps none more than Keller Williams NYC. Keller Williams recruited heavily during the height of the condo boom, reaching 900 agents across two Manhattan offices in 2015.

Ilan Bracha, co-founder of Keller Williams NYC, said that its business strategy had to change as the market slowed.

“Before we just went on volume, and were recruiting as many as we can. People were knocking on our doors who wanted to join,” he said. “The market changed. You have to adapt to that. Now, we’re smarter about it. And we’re going to grow. But we want to grow with the right agents, and the ones who commit.”

Over the course of 2018, Bracha’s Midtown offices lost a total of 264 agents, falling from 778 agents at the end of 2017 to 514 at the end of 2018, a total decline of 16 percent. It coincided with significant managerial upheaval — Keller Williams Midtown had three CEOs in just over a year.

Bracha said the firm cut loose brokers who weren’t producing. To determine who was doing business, they measured the volume of agents’ closed deals.

“Some people are just getting a license and then don’t do much,” he said. The Midtown office’s recruiting strategy has also changed, Bracha says, and the firm will now meet with agents multiple times before hiring them.

“It takes longer to hire, but faster to fire,” Bracha says.