81426 Episode

Hey folks, welcome to this episode of Brokers Uncensored. I am here with Steve Zaras, managing broker with RE/MAX Alliance Group, Becky Dewey, managing broker with RE/MAX Alliance Group. I am Shadd Boucher, also managing broker with RE/MAX Alliance Group. Today, we have decided to talk about something that we all find very frustrating in this industry: zombie agents. Those that are licensed, they're listed nowhere, they're going nowhere, and they literally just hold a license to do maybe one deal a year, if not two deals a year. But yet they're out there and they're competing with those of us that do this as a living. And we thought we'd cover some things today like. You know, why would brokers want these agents? Why do they exist? What's the, what's the downside to joining one of these offices? You know, because honestly, the majority of agents last year, I believe the number was, and you guys correct me if I'm wrong, feel free to jump in on this, but 71% of the licensees in the state of Florida didn't do one transaction last year.

It was huge. Yeah.

Not even one. So what's the point? Why would, why would a brokerage want to be full of zombie agents, you know, paper agents.

They make money.

Okay, how do they make money?

Well, they charge desk fees, number one, and then there's a transaction fee. So if it's 100%, uh, uh, broker but you're paying them a desk fee, uh, you multiply that by, I don't know, 100 agents, let's say, and they're all paying $100 desk fee. That's a lot of money.

Can be. Absolutely. So, you know, and that's, that's one of those things. And, and, and it's interesting because I think to some point a lot of agents get roped in to going to these places because they ultimately, oh, they have a huge office, they have 400 agents. Well, yeah, but are you going there to make money or save money? You know, and, and I think it's also that, that, that tactic of eating the elephant, right? It's not, it's, it's just one, it's, oh, it's only $35 a month. Well, yeah, okay, great. But if you're not earning any money, if you're never doing one deal, what's that $35 a month?

Well, I think it comes down to— if I could jump in here.

Go for it.

Are you looking to hang your license someplace?

Yep.

Or are you looking to use your license to build a profitable business for yourself?

Right.

So if you're going to hang your license someplace, then yeah, you could pay a fee. We talked earlier about one for $35, whatever the fee is on a monthly basis for your desk fee. And then you could pay the transaction fee on each deal. But if you're doing 2 deals a year, they're not making much money off of that transaction fee. But if they got 100 realtors and they all average 2 deals a year, now they're making some money. So, it's all about being a profit center instead of a company that is focused on success in the sense of each individual agent is reaching their capacity of success and their level of greatness.

Right.

I, I agree with you. I think they're, they're basically just— it's body count.

Yes.

They make all their money on— they don't even care if these agents do any deals a year, you know. They just want the body count because each body is a desk fee.

It's risk-free, right?

It's, it's literally free money for them. In fact, in fact, I would even argue— and you guys tell me if you disagree with this— I would argue that they don't want the agents doing any business. Because it lowers their liability.

Yes.

Well, and I think it is a risky position to be in. You know, if they're, you know, we use this term masses of asses, you know, you can't, you know, you got 500, 600 agents under you. There's no one-on-one communications with these agents. You don't know these agents. You don't know where they're at. You don't know what they're doing. You're not training them. You know, they're probably, I'm going to venture to say they're new agents, so they have no experience. So that risk is even more because they're inexperienced. They don't know contracts. They don't know rules. They don't. So to me, I think that's a huge risk.

Yeah. I mean, the question becomes, are they, are they just hoping that the E&O insurance is going to protect them if one of these agents does something horribly wrong?

And the broker of record, they're responsible for each agent. Yep. You know, that's— look, we're managing brokers. So our job is to protect our broker of record by making sure that everybody is in compliance.

Yep.

How do you manage that number of people? Well, it's easy. They're not doing any business.

Right, right. Well, that's— and that's what your hope is. I mean, at one point, at one point, uh, a couple of years ago, I was approached by eXp to be one of, one of 3 managing brokers for the state of Florida. And at that time, they were telling me that I was going to be responsible for 9,500 licensees. You can't do that. There's no way.

No.

There's, there's no physical way, which is why I think you and I would both agree, Steve, you know, Becky, chime in on this. When we talk to these agents that come from these situations, they'll tell you that they tried to contact their broker and didn't hear something for a week.

Yes. Yes.

Oh yeah.

If they hear from them at all.

Right.

That's after they figure out who they're supposed to call in the first place.

We've got agents that recently came on board, I want to say about 6 months ago, and they are amazed that every time they call me, I'm either available or I call them back right away. They come to my mastermind meetings and they see the value in having an active managing broker.

Right.

Well, and on that, on that same thing too, is let's talk about the desk fee. If you're just looking to hang your license somewhere for that odd 1 deal a year or 2 deals a year, there's other options. You know, most, most companies have a referral company.

Yes.

That exists, that it's virtually free to belong to. And, you know, if you belong, you know, if you belong to one of these companies with a desk fee, okay, that's great, right? That's, that's awesome. But if you're only going to do 2 deals a year, you know, the one thing we didn't even talk about was how much of that, how much of that commission dollar gets eaten up by your dues to the board, your MLS, your, you know, your key. You know, all of those—

that is it really beneficial to do 1 or 2 deals a year when you got You're paying $30, you know, I'm throwing that you mentioned the $35 a month, you know, that's several hundred bucks. Then you got at least a couple thousand bucks to be a member of the board in the MLS. I mean, what is— what are you doing? You know, I mean, and then your continuing education, which you should do anyway. But, you know, I mean, all these fees that start accumulating, and does it make— does it make really sense?

I don't know.

I mean, I probably wouldn't do it.

Then the question is, how good are you at your job and how well-rounded are you? How knowledgeable are you? How effective are you? The list goes on. It's like, well, wait a second. Are you going to dive in off the high dive or are you just going to dip your toe in?

Right. Well, and who really benefits from this? I mean, I would argue to say it's the zombie broker that benefits because he doesn't care. Like, again, I'm going to go back to this. He doesn't care if you do zero deals a year.

He's still getting his money.

He still gets his money or she gets her money and they just go there and So you're in this position of, you know, yeah, you're not paying a lot, but you're also not making a lot. And there's nobody to actually help you make a lot.

Yes.

Like, there's nobody to teach. There's nobody to, to educate, to strategize with. There's no— there's not a lot of really, you know, high-functioning agents to be around to help you do that.

Mm-hmm.

So, you know, I think, you know, in some positions, I'm even gonna play a little bit devil's advocate here. In some positions, zombie Companies, you know, they have a role. If I was in the last 2 years of my real estate career, maybe, maybe I'm just going to go there because I don't, I don't really want to do a lot and I don't want, you know, I'm going to lower my fees as much as I can. You know, I'm really kind of doing this. But, but if you're doing this to actually say, I'm getting into the business to do this actively, you know, I would say that a lot of these zombie brokerages, that's what pushes agents into doing it part-time.

Yes.

Having a full-time job. It's because there's nobody there to actually teach them how to build a business.

No, right?

You know, but and the funny part about it is, you know, I think all of us will will can speak on this. How many of these zombie brokerages do you know of right now?

Several. Yeah, several.

Yeah. Yeah, there's quite a few. I can probably name about twenty because I get I I literally get emails from them every week. Yeah, every week I get emails from them. You know, oh. You're only, you're only going to pay, you know, $20 a month or $50 a month. Come here. And I'm like, yeah, we have everything where, you know, we have, you know, you get 100% of your commission. Well, yeah, well, nobody's teaching me how to make any money, so of course you're going to give me—

And that, that would be attractive also. And I could see where it would be attractive to newly licensed agents because they're getting in this business, they don't know what they don't know, and they're thinking, obviously, they're— they don't, you know, they're— they got to get up and running, so they want the least amount as possible. So they're kind of throwing them into the lion's den, so to speak, you know. I mean, they're, they're on their own.

And those are the folks that really need structure.

Yeah.

Such as what we offer. It's, uh, look, I, I don't understand why you would be in this business if you're not focused on, uh, doing at least a deal a month, right? Why are you here, right?

Well, this business, let's be honest, this business, like a lot of small businesses, is not is nowhere for anybody that's going to do it halfway.

Mm-hmm.

This is, this is not for anybody that's not going to do it halfway. I mean, you're not, you're not going to be a part-time agent and make money. It's, it's just not happening. And, you know, and that's— and I think that's the biggest problem is a lot of people just don't want to commit. And again, I go back to what I was told when I first started in this business, that there are 2 mindsets you can have. You're either in the business to make money or save money, and the ones that are in the business to save money don't make money.

Nope.

So, you know, they, they end up being risk-averse. They don't want to take risk. They don't, you know, so they're just, they're just turtled up and they don't go anywhere.

I've met agents that came in this business so they can do their own personal deal, and that's all they did.

Yeah, right, right.

And I think it's even a bigger risk Because you're a licensed agent, so you have even more liability on you should something go.

Absolutely. Well, and it's really funny. I I have a former agent. She had to get out of the business for some different reasons, but I have a former agent that the house she lives in right now, she bought from an agent that did what you're talking about, Steve. Got her license to sell her own home. Yeah. And I'm going to tell you right now, my agent. Got the greatest deal on the planet Earth on this house. This woman negotiated against herself. The seller negotiated against herself, had no idea of what was going. It was, it was just, it was sad. And you know that that nobody came to look at the house because the pictures had, you know, I don't know what she had on the lens of her iPhone at the time, but it was like grease. The pictures were blurry, like it. Like, it was, it was, it was priced like $50 grand over where it should have been. It was just, it was a nightmare. And my agent went in after she had been on the market like 120 days when things were selling in like 20 days or less and got a great deal out of her. And she literally defaulted to my agent every time. Well, is this the way we do it? Is this the way we do it?

And that's dangerous.

100%. You know, my agent treated her fairly, but you know, in the negotiation, yeah. And it was it was interesting because she even got this woman to throw in all of her Christmas decorations. Like it was it was insane. So you know, you look at that kind of stuff and yeah, it's great. Go go get a commission. But really, did you save any money? Did you? You know, yeah. I think that's one one of the things. And and it's also you know as as three of us that do have done this professionally for a long time. It also hurts the industry. It hurts the industry for the 1 to 2 people that these agents do deal with.

Yes.

Every year. You know, these are the deals that we, you know, that we find horrible. You know, I had one of these the other day. We have an agent that is currently working on post-closing occupancy.

Okay.

The seller needed 1 day of post-closing occupancy. Occupancy one day. Their agent, who has done 2 transactions in the last 12 months, comes back and writes up a 6-page post-closing occupancy agreement.

The agent wrote it?

And they're not an— let me guess, they're not an attorney.

That's dangerous.

Yeah, they're not an attorney.

That's the word of the day, dangerous.

Exactly. No, exactly. So where did they get this thing from? Where do you think?

ChatGPT.

ChatGPT. ChatGPT.

That's funny. I just did a ChatGPT. I've been doing hands-on ChatGPT classes and I'm like, listen to me when I tell you, do not go in ChatGPT and start writing clauses for your contract. You are not an attorney.

Yep.

Although sometimes they do a great job. Oh yeah. However.

Oh yeah.

Well, and, and we're, and we're, we're lucky whenever, whenever I've done that.

Mm-hmm.

And I think you and I both would agree with this, Becky. We, we run it by our freaking attorney.

Yeah, yeah, because guess what? If it goes sideways, I need to know that he has my back at the end.

So I, I've— I have done that before to save him time. Yeah, he has tweaked some of it. He's actually said this is actually pretty good and given it his blessing, but we have an attorney.

Right.

I'm, I'm not out there just doing this as a cowboy. This thing was 6 pages.

Yeah, that's—

And here's what happened. He shoots it over. Our agent gives it to the buyer real quick and says, I do not recommend you sign this, just FYI, but read it. Buyer comes back and goes, not only am I not signing it, but I don't want to give— I don't want to give post-closing occupancy anymore.

It is a risky thing because now you turn into a landlord, and if they don't do what they say, what, how they're supposed to leave and whatever they're supposed to do, now you got to start— now that could be an expensive— yeah, I mean, there's different ways you can do to protect yourself.

So for one day, what am I missing here? Can't they just change the closing date one day?

That would have made more sense.

Well, okay, so here's the interesting part. No. Because the seller is buying a property.

And they need the money to—

And they need the money to buy the property.

So the rippling effect. Okay.

So it's a rippling effect.

Yeah.

And then they need one day because once they buy the property, there's something that was happening with the wood floors in the house. They were getting treated or something with a hardener or a polycoat or something. And it takes one day to dry. So they needed one day to not to stay in the house. Okay.

So the agent, from being inexperienced, correct blew up the whole situation.

Has blown has blown up. Well, the outcome right now is currently our attorney is writing a post-closing occupancy agreement for one day, and. The buyer is being quite harsh with the terms. He wants a $5,000 escrow holdback.

That's right.

They don't— if they don't get out, he, he wants them to have liability insurance for the one day. I mean, it's, it's, it's—

Well, he needs to protect himself. I mean, you can only hope that they do what they say they're going to do. Correct.

And I don't, I don't see a problem with it.

Look, the agent for the seller could just say, hey, I'll put you up in a hotel for the one night, load up the truck.

No, that's exactly what we've all said. Get an Airbnb, go to a hotel, whatever.

I mean, it's, it's, it's an easy solution, right?

And the, the, the buyer's agent was like, well, where's their stuff supposed to go? And I'm like, tell the truck to take it to the depot. They have a yard. They have a chain-link fenced yard. I said they will hold the stuff for 1 day. Yes, it's going to cost you money, 1,000%, but they'll hold it.

And they're used to that anyway.

Right, exactly. This is the problem. He doesn't— this buyer's agent doesn't know what he doesn't know.

Yeah.

And so if I, if I had to guess, is the, is the seller even being consulted on any of this?

No, it doesn't sound like it. No, not reasonably, at least.

No.

But here you go. Inexperience.

Inexperience.

Limited production.

Correct.

Listen, we've all probably came up with some really creative ideas to get things done. Yeah, extremely unconventional.

Right.

And whatever it takes to get it to work.

But— And we pay money for that.

Yeah. Yeah.

Right. But it— but then we also understand and we have the blessing of the fact that We don't practice law. So if it's not, if it's not a Florida Association of Realtors written form, then I go to our attorney.

Yeah.

Even if, even if I know for a fact, and let's be honest, between the three of us, we are smart enough to write this language.

Mm-hmm.

But we don't have the right to.

Right.

Which is why we have an attorney. Mm-hmm. And that's You know, that's part of this. And it's really interesting. Like, I don't know if you guys noticed that they've gotten rid of the blank addenda. Like, it doesn't exist anymore.

Yeah. Good. And it should be an amendment.

Yeah, correct. Correct. But, but it's gone. You know, you used to be able to have it out there and just fill in the blanks and, and, and, you know, it's gone now. But yes, this is, this is what these agents don't understand. And there's so much liability in doing this. So much, you know, and here you are practicing law through an AI, right? And, and I'll be honest with you, you didn't even know enough to, to prompt the AI correctly, right? You know, so, oh yeah, I mean, our— my agent came to me with like, this thing's 6 pages. I'm like, holy crap.

Yeah.

And, and I found, I found 20 red flags in it when I reviewed the document. Like it was a nightmare. So yeah, I mean, this is the problem with a lot of these agents is this is not a business for a halfway person. No, it just isn't. But they're out there and they exist.

And they will continue because the state makes a ton of money off licensing. The schools are making a ton of money.

Yeah.

Associations are making a ton of money.

And the brokers are making— the brokers are making a ton of money, ton of money through body count.

Yes.

Yeah.

Yeah. And, and they're gonna continue. So, you know, I guess, you know, where we're going with all of this, for anybody that's watching this, by the way, we have a new subscriber. Woo-hoo!

We're going viral.

We're going viral.

We're awesome.

Yeah.

Um, part of this is if you're an agent looking to join one of these companies, ask the questions, you know?

Yeah.

You have 400 people on your roster. What's your production level as a, as a company?

Yeah, especially the average. What's the average per agent? Yeah. Yeah.

And if you're going to do this full time, you need to know that. Second of all, if you're going to employ one of these agents, I don't want to tell you to not use somebody that, you know, that has low production, but take, you know, take heed. Take heed. Because there's a lot that changes in this business left, right, and sideways.

And well, my post today on my, uh, business page was about, you know, make sure you're, you know, AI can answer some questions, but, uh, but a local professional and expert is the best bet. So.

Yeah, it, it absolutely is. And, and well, and you know, we had, we had one of these companies, one of these, you know, we have a million people on roster companies. Um, another thing I dealt with yesterday. I saw a buyer brokerage agreement come across my desk. My agent was flummoxed. It was written in Colorado.

Are we not in Florida?

Last time I checked, I think we are.

Yeah.

Yeah. It was written by—

I'm pretty sure by the weather outside we're in Florida.

It was written by an attorney in Colorado. Okay. Now you're going to love this. So we use buyer brokerage agreements, right? No worries. This one says, this one says that if you want to cancel the agreement, the broker has to agree. It must be mutually agreed by both parties to cancel the buyer brokerage agreement. Then even after the buyer brokerage agreement is canceled, If you, anyone who is related to you, any entity where you have an interest, or any trust that you control buys any property during the protection period, you owe the broker A commission.

He sounds like a chain letter to me.

Well, let me ask you, why are they providing a buyer broker agreement from Colorado when we clearly have one?

Because they're one of these— they're one of these national zombie agencies.

Oh, gotcha.

And they have—

but that's probably where their broker's at, correct?

But, but interestingly enough, it says on the bottom that it was written by a Colorado attorney. Okay, but it also says it's not approved by the Colorado Association of Realtors.

Well, I would have put a big X on it and sent it back to them and said, no bueno.

Try again. Well, this gentleman who came to us and wants our representation has already signed it.

Wow.

So he came to us and said, what do I do?

Wouldn't that not be valid in Florida? I mean, that's not a valid form.

I mean, it's— I mean, it's as valid as any form written by any other attorney.

Yeah, that this becomes a legal issue now.

Right now. Now, is it predatory? I could think you could make an argument.

Yeah. Mm-hmm.

Because the protection period doesn't say that, that if you buy a house that the agent showed you, you owe them a commission. It says if you buy any house. It also says if you buy any house, if a family member of yours buys any house, if an LLC you control or have an interest in buys a house. Or a trust where you are a trustee buys it, you owe them a commission.

So that I could understand. But the family member, that's a little ridiculous.

100%. But, but if you think about it, all of ours say that if it was a home that was brought to your attention by the broker.

Yes.

This is, this is the procuring cause.

Yeah.

You go buy a house in the Keys. You know, where this broker doesn't even practice, you owe this guy a commission. And I mean, I, I argue, you know, and maybe I'm incorrect and it's my opinion completely, but the thing's predatory.

Yeah.

Well, and just FYI, guess what he filled out when, when in the section that says the area that the customer's looking?

Florida.

Correct. Correct.

How would I know that?

Yeah, exactly. So this whole document's predatory. Oh, and not—I forgot to tell you—not only does it say it's not valid in in Colorado where it was written, it also says it's not valid in Wisconsin, Kansas, or Missouri.

Well, then how is it valid in Florida? Don't know.

Don't know.

Yeah, I'd be arguing that fact.

I'd be like, oh, 100%. So what we told what we told this buyer was we we apologize deeply. We cannot help you till the 5th of October. And it's really the 1st of October, but I wanted to pad it by 4 days so that there was no way they could say anything. I said, we can help you by the 5th of October, or you can seek legal representation.

Or they can seek the modification just saying this expires, that you're moving up the expiration date.

Well, it expires on the 31st, but remember, any changes or cancellation have to be mutually Agreed to. Agreed upon. So it's not like our document that says you just have to give us written notice to cancel. Yeah.

And I'm going to venture to say they're not going to. Yeah, I'm pretty sure they're not going to mutually agree.

They're not going to mutually agree. No. And actually, so it's that mutual agreement piece that I would also say is predatory. And why are they not going to mutually agree? Because of the protection clause that's overly Strict, right? Yeah, 1,000%. And, and he's looking to buy a $500,000 house. So yeah, the broker's going to go after the $15,000 commission for sure. Yeah, for sure. So yeah, I, I, I'm— and again, these— this document came from one of these zombie agents. Looked him up, looked him up. He did 2 deals last year. He's done 1 this year so far.

I may have the ultimate zombie agent story.

Go for it.

I received a contract a couple years back, uh, that had initials and signatures on it. That's it. And the agent didn't know how to fill it out and asked me if I could fill it out. And I said, heck no, I'm not going to be liable for your, your customer.

Oh, she had no idea how to fill out a blank check.

It is like signing a blank check. So he, he had his customer initial and sign a completely blank FARBAR contract. Yep.

And sent it to me and asked me to fill it out. I said no.

Well, that would have been— that would have been— well, and it wouldn't have mattered because I'd have called the zombie broker, but the zombie broker wouldn't have cared. But that would have been— that would have been a phone call of, hey, might want to be careful.

Yeah. Wow.

That poor buyer. I mean, good Lord.

Exactly. And this is, and this is what really bothers me, is that's one of the reasons that the industry gets the bad name it gets, is from these agents that, that just don't understand, don't, you know, don't get it. And, and, and honestly, ultimately, it could harm both of them. It could harm the agent and the buyer. Yeah, yeah, you know, could harm the agent and the buyer. And and I don't think the agents even understand where the liability and the harm could be. And this is the scary part.

I mean, I think our our contracts are and maybe and maybe I'm saying this because I've been in the business for so long and I'm familiar with them. But to me, I feel like our contracts are extremely simple. Yes. I mean, they're literally fill in the blank. They say what they mean and they mean what they say. So if If you're willing to sit down and read it, yep, I don't understand why you can't fill it out. Like, that doesn't make any sense.

And what about taking a class that explains it? I mean, you know, come on, this is your business.

That's a good concept.

Like, like what I'm about, like what I'm living on the edge now. As soon as we're done with this podcast, I'm teaching an addenda today. Yeah, that's, that's what I'm doing now. You know, that's, that's the sad part. But yeah, you're— but Let's be honest. I think reading has become a superpower.

Yeah.

Oh, for sure. Oh, for sure. Yeah. I think reading has become a superpower. And, you know, and that's, and that's part of the big deal. But, you know, I think, I think ultimately, you know, to kind of wrap this all up, if you're really looking to do this business, being at a zombie brokerage is not where you need to be. No, it's, it's not. And I'm not saying you need to be a RE/MAX agent. I'm just saying if you're looking to do this, This is not where you're going to get your launch. No one, no one is an island in this business. I would say no one has just come out of here and just, you know, magically become the greatest agent on the planet Earth just by their own bootstraps. So it's, you know, again, I'm going to just be very blatant. You're either in this business to make money or save money, and you've got to decide which mindset you're going to.

Yeah. Yep. I agree.

And if not, if not, you know, if you're not in the business of making money and you're in the business of saving money, okay, you get what you get. But I don't understand with the liability that exists in this business why you would even do it.

Listen, I've been a qualifying broker. That's a scary seat to be in. I've had many sleepless nights. Yep. I've had— the joke was I'm going to real estate prison, you know? I mean, because it's— you're literally responsible for every breath your agents take.

Yes. Well, and worse, worse, you're responsible But yet you can't hold them to standards because they're 1099 contractors. Yes. You're responsible for supervising 1099 contractors. So if you do supervise them, you've broken the veil of 1099. If you don't, you're going to jail.

That's great. And then some days it sounded kind of nice, by the way. Right? Right.

Well, and I joke with people all the time that— and I tell this to people because We've all gotten these agents that get to the point, well, I'm going to open my own brokerage. You do realize broke is in the title, right? Yep. Like, it's right there.

It always looks easier from the other side. Yep. Yeah, it always looks easier from the other side.

In fact, in fact, you know, I've, I've got a gentleman that, that, you know, that I, that I, I help. Um, eventually I think he's gonna give up. You know, because he's, he's a few years in right now and it's just not what he thought it was going to be. So yeah, it's a thing. It's, it's definitely a thing. But all right, well, I guess that's our opinion today. Is there anything else you guys want to add before we wrap this up?

Nope.

I would like—

yeah, I would just like to add it for those watching, you know, think of the reason you got into this business. Yeah. And if you got into this business to make money and build a business for yourself, Uh, and, and to just be in a people business, then, you know, get with the right company that's going to give you the tools and the support system that you need. If you're in here to save money, like Shad said, look, you know, do your one deal, get in a referral network, and just, you know, let others take, take over.

Absolutely. Let them take the liability for sure. Yeah, absolutely. So, all right guys, well, thank you very much today. If you enjoyed what we said, to the, to the 10 of you that watch us, Like and subscribe. Leave comments down below. We would love to have more interaction with the people that are watching this stuff. Again, this was Brokers Uncensored. At the very end of this video will be all of our contact information. We're always here to help anybody that's out there. Look forward to seeing you at the next one.

Have a good one. Bye now.