A little history is needed to better understand this question. In the mid to late 1800’s there were less rules and regulations as they related to a real estate transaction compared to today. One rule that has carried through to today ~ the Broker of the real estate company is the person responsible.
Any and all clients of the real estate brokerage were the Brokers. He or she was responsible for all activities relating to their home buying and/or selling. The Broker approved the advertising, paid for the office and was in charge of the daily business activities. One of the main activities is to act as an escrow agent and have an escrow account set up for the deposit money that was agreed to by the buyer and seller.
If the Broker obtained many clients there was a need for assistance. This was in the form of office managers, support staff and licensed real estate agents. The agents became an extension of the Broker. The Broker was still responsible for any and all activities between the firm and the clients. Only the Broker or licensed personnel were able to speak with the clients about issues relating to the real estate transaction.
In most cases the Broker supplied office space to the agents and employees. The agents were paid out of the commission that was earned by the Broker. In those days it was as low as 10% to 25% of the gross commissions earned from a transaction.
Around 1970. There were about 300+/- Brokers and Agents in the real estate business in Berks County. The larger firms had 30 or 40 licensees. Many of these firms had multiple Brokers with one Broker of Record. Competition for the firms to start acquiring new agents started to grow at a modest pace. The firms were very choosy about who they added to their roster. They wanted the most skilled people to serve their clientele.
Fast forward to 2003. The real estate market was exploding everywhere. Firms started to build megalithic 40,000 square foot office buildings to house 150 to 200 agents plus. By 2006 there were around 1,200 agents in Berks County. This created an aggressive paradigm shift. More agents were desired and, in some cases, it did not matter what their skill set was, just that they were licensed.
In 2007 Berks County and most other real estate firms started to see a downturn in business due to the economy. Some agents could not make ends meet and started exiting the business. The Brokers and managers now had to be concerned with filling space to pay for these large offices. Recruiting new agents and retaining existing agents is one of the top priorities of many real estate offices today.
It is now 2013 and there are around 700 Brokers and Agents in Berks County. Firms do whatever they logically can to entice agents to join. Instead of the Broker creating the business, knowing the customers they represent and paying the agent a percentage of the commission for assisting in the transaction (sometimes as much as 80%) they offer agents a flat fee. This means if the agent sells no houses they still owe the firm the agreed upon fee. If the agent sells 20 homes they owe no more than the fee they agreed to pay.
In my opinion, this has turned the Brokers and Owners of some real estate firms into Landlords. The agents are the tenants and thus become the customers of the Brokerage firm.
Agents deal directly with the buyers and sellers. The Broker of record rarely knows anything about the transactions taking place. There are situations where the Broker of record does not even work in the same office. It is virtually impossible for a Broker to oversee 100+ agents and all their dealings in a competent manner.
This situation also creates a unique dynamic within these firms. They say they and their agents are a team. That statement may be a stretch. Take 100+ agents and rent them all space at the same rate. They all become their own business. This create an issue known as in house competition.
The firm I have started at Weichert Realtors Neighborhood One is an effort to going back to the way things were. No competition for business between agents or Broker. We call it a specialty real estate boutique where all customers are serviced by the firm, not a single agent. This allows us to share ideas with each other so to advance our practice in the art of real estate service.
It worked in the past it can work now.