The Rise of the Mercenary Real-Estate Agent

Forget sports. The hottest free agents this season are real-estate agents. In pursuit of more deals and commissions, real-estate agents—most of whom are independent contractors—are increasingly switching brokerage firms. And just like in the big leagues, when these players move, egos can clash. “There’s not a lot of brand loyalty,” said Billy Rose, an agent and co-founder of the Agency in Beverly Hills, Calif. “A lot of times they become mercenaries,” he said about agents, because they’re getting recruitment offers all the time. Jen Winston left Hilton & Hyland last October to join the Agency. For her, one of the biggest factors was marketing support. Whereas many brokerages may have one or two dedicated marketing people, the Agency has a team of 20 to do everything from posting listing photos online to sending branded bottles of Pinot Noir to clients—all of which frees agents to close more deals. Ms. Winston, 30, entered real estate in 2012. She said she appreciates the culture at the firm, where agents are collaborative and share commissions. “A little bit of something is better than all of nothing,” she said. Before the move, she said she earned “just under six figures” as an assistant to more senior agents. Now, with an estimated annual sales volume of $25 million, she says she will triple her income. Hilton & Hyland declined to comment. In a 2014 survey of 6,750 members of the National Association of Realtors, a national trade organization, 30% of agents said they have been with their firm for a year or less, a jump from 18% the previous year. Turnover hasn’t been this high since 1987, when 32% of respondents reported the same. Adam DeSanctis, a spokesman for NAR, said the rise is partly due to newly minted agents, but also reflects agents switching firms. (News Corp, which owns The Wall Street Journal, also owns Realtor.com, the listing website of the National Association of Realtors.) A number of forces are driving the moves. First, inventory is low in some hot markets, forcing agents to compete for fewer listings. Often, firms that offer a technical edge or more marketing support attract top talent. Second, the way agents get paid is changing. The average commission has fallen nearly every year since 1991, when agents scored an average 6.1% of the sale, according to real-estate analytics company Real Trends. In 2014, commissions had fallen to an average 5.2%. New agents might be left with less than half that after splitting the proceeds with their brokerage and other parties. Experienced agents have pushed for better splits—sometimes keeping 80% to 90% of a similar commission. In some cases, especially with deals involving star agents, the firm is actually losing money on a transaction, said New York-based appraiser Jonathan Miller. This is because top agents command the lion’s share of a commission and may also charge the company for marketing fees. But the firm uses big-name agents to attract new business. In June, Jeff Wilson went from an associate at Washington Fine Properties, where he had worked for four years, to senior vice president at TTR Sotheby’s in Washington, D.C. It’s a nice title, Mr. Wilson said, but his biggest reason for moving was to have more control over his luxury-listings website called LifeAtTheTop.com. The website, which he spent $250,000 over five years to build, is a boon for business, he said, because it appears high in Google searches and generates leads. Mr. Wilson, 51, credits his former brokerage for his success in D.C., but decided to leave when his new brokerage offered additional tech support and allowed him to promote it prominently. It’s paying off, he said, noting that he has already exceeded last year’s sales volume of $56 million. Washington Fine Properties declined to comment. That is hardly the norm, said Brian Buffini, a luxury real-estate coach and consultant in San Diego who worked with Mr. Wilson. He tells most clients not to switch brokers, because the disruption typically costs agents 20% of their sales volume in the first year. A more likely reason for some departures: “They’re getting their ego stroked somewhere else,” Mr. Buffini said. Moving can also be awkward—especially when lawyers get involved. In March, major New York brokerage firm, the Corcoran Group, sued relative newcomer Compass, as well as several former agents, for a “concerted, unrelenting effort to damage Corcoran’s flagship offices,” the suit claimed. The litigation, which sought undisclosed damages and a temporary restraining order on a former agent, followed the departure of nearly 30 Corcoran agents amid allegations that they took trade secrets and client leads with them. The parties settled for an undisclosed amount in August. “We felt there were issues here that needed to be addressed, and they have been,” said Corcoran CEO and President Pamela Liebman. In a statement, Compass denied any wrongdoing in the case. Howard Spiegelman, 52, a former Corcoran agent who joined Compass in November, wasn’t named in the lawsuit, but said he felt the chill. When he moved to Compass, at least one of the deals he initiated at his former brokerage got caught in limbo. Homeowner Ruby Stander was working with him when he made the transition. Ms. Stander, 65, said she received calls from Corcoran pressuring her to switch to another agent, or else face possible litigation. “You know what? I ain’t got time for this,” Ms. Stander remembers thinking, and took her $765,000 New York condo listing off the market. She waited about three months before going back to Mr. Spiegelman, now at Compass, but she says the delay forced her to take a $20,000 price cut. The delay also meant she missed out on buying a San Diego home, she said. “Unfortunately, collateral damage occurred,” said Mr. Spiegelman, who supports Ms. Stander’s story. “I don’t think we unduly pressure anyone,” said Ms. Liebman, noting that Ms. Stander’s exclusive contract—and commission—was signed with Corcoran, not a particular agent. In time, most of the big deals will be driven by brokers, not their brokerages, said Paul Habibi, a professor at the Ziman Center for Real Estate at the University of California, Los Angeles. “The brand used to belong to the agency—now it belongs to the agent,” he said. Write to Stefanos Chen at stefanos.chen@wsj.com This article originally appeared in The Wall Street Journal.