Occasionally I am asked, (mostly by potential sellers here at Lake Martin) “Why aren’t you with ReMax, Century 21, ERA, Keller Williams, RealtySouth, (fill in the blank with a franchise).”

Really, it is another way of asking, “How can a little local operation like you sell my Lake Martin real estate as effectively as the big national guys?”

My answer – “National brands don’t sell real estate.  People do.”

This is no knock against my many, many friends here at Lake Martin and abroad that work at franchise brokerages.  But- if you ask any one of them, I guarantee they will agree – the engine to sales is the agent, not the logo on their business card.

Think about it… we all are members of the same MLS. We all have access to the same internet.  We all advertise in the same magazines, road signs, and restaurants.

The Myth of the Nationwide Network

The only thing the franchisers can lay claim to, and they all do it, is this mysterious “nationwide network of agents.” They are talking about their fellow franchisees, all over the country.  They infer that, one and all, from the mountains, to the prairies, to the oceans white with foam, they are searching high and low for buyers of your specific Lake Martin home, ready to refer them in an instant to your agent.  Really? Ask the same agent when the last time they worked on selling a home in Albuquerque or Albany.

Think about if from the buyer’s end. Let’s say you live in Birmingham, Alabama, and are thinking about retiring to Folsom Lake, California.  You heard about it from a friend, or saw it on the news or something.

Now I want you to think very hard about this next question, because it is so critical. It is where sales are gained or lost….

What is your VERY first step?

Will you look in Birmingham’s yellow pages book under “real estate” – then call the most recognizable franchise logo, then ask whatever lucky person that answers the phone to help you with Folsom Lake?  Of course not.

Will you be driving down the road, clueless of how to get information, but you see an ad of a big balloon, and decide that is your best source of Folsom Lake info?  Not likely.

Will you be watching TV, aimlessly flipping channels on the hopes that you will randomly stumble across a show about Folsom Lake, but you see a Century 21 ad touting their national website, and pin your hopes on that?  Silly, right?

I can tell you what your first step will be.  You will go to the web and search something like “folsom lake california real estate.”  That will be your VERY FIRST step.  The internet has changed real estate referrals forever.  Pretty much eliminated them.

You say, “Yeah, but I’m special.  The average person won’t do that.”

Incorrect.  According to the latest National Association of Realtors survey, 90% of home buyers research on the internet before ever talking to a Realtor.

Also, the same survey tells us that only 5% of closings happen through agent to agent referrals.

Only 5%.

There you go.  Franchisers don’t dispute these numbers.  In fact, they publish many other parts of this survey in their ads.  But they don’t talk about the lack of success of referrals as a sales plan because it doesn’t play well with the “nationwide network of agents” part of their pitch to you.

More Mythbusting

I think we can break that 5% down even more.  I would be willing to bet, if everyone would lay their cards on the table, that about half of those 5% referred to an agent that they already knew.

You can’t count that as a pure “network” referral.

Also, what about “network leakage?” What about when a franchise member from another town refers a buyer to someone like me, even though they have a fellow agent at the same franchise in my market? If the nationwide network is so great and so efficient, then why break ranks and refer to me?

Simple answer: they didn’t personally know anyone but me and they didn’t want to trust their friend and client to someone they didn’t know, just because they’re a member of the same franchise.

The Numbers Don’t Add Up

Looking back over the years, about 10% of my sales (or DOUBLE the national average) are referrals.  Why? Because agents that I don’t know can find me more easily on the web than other agents.  Agents that I do know can be assured that I will treat their friends fairly, they won’t be embarrassed to refer to some yokel that they don’t know (as opposed to me, a yokel that they do know 🙂 ).

OK, then.  I hear your next question: why are some agents at franchises, and paying (in some cases) 7% of their commissions to get referral leads that only account for 2.5% of their sales? I can’t tell you.  I have no clue.  I think the franchisers do a good job glossing over the myth and selling them on other “technologies” and training.  Again, look out on the web for 10 seconds and you can find plenty of awesome free training and also the best real estate conferences cost about $150.

Back To The Seller

But as a someone who might be selling their Lake Martin waterfront property, do you really care about all of this?  No.  The only thing you care about is lead generation – getting A person to buy your ONE property, here at Lake Martin.

There are other great agents here at Lake Martin that work at franchises.  I can think of reasons why you might choose them, instead of a private company like me.

Just don’t choose them based on the myth of the referral, because you’re betting on a long, long long shot.

Other Agents Please Read This Before You React

Most of the agents (at Lake Martin and abroad) that I admire, follow, and receive advice from are members of franchise brokerages, so don’t say I am a hater.

Don’t think for one second that I am downing the whole business model, because I am not. I can think of plenty of reasons why you might join a franchise: work with people you trust, great location, great mentors, just to name a few.  But all of these reasons are locally based, not nationwide.

I recently referred a seller to a Century 21 agent in Tallahassee, not because of his affiliation with the national brand, but because I read his blog obsessively.  I believe him to be a knowledgeable, high energy, high protein Realtor in the residential side of that market. (Here’s the best commercial real estate broker in Tallahassee, also a member of a franchise.)

I am a firm believer that this little thing called the internet has changed the way we shop for real estate forever.  It has underscored the concept that all real estate is local.  That is why I cannot justify paying for leads and training that don’t make economic sense.

It doesn’t make sense for me, right now, in this market.  For other people, in different times, or in different markets, I can totally see why they would work for a franchise.

Who knows, maybe one day that will change for me, too.  But if I make that decision, it will be based on the question:

Will this help me help more people, more than it will cost me to do it?