Is there a way to do Real Estate in Spain, Better?
I became an ex Spanish estate agent in 2018 having done my 15 years of Spanish property service. I’m glad to be out, it is a tough business. We sold 365 million euro worth of Spanish property over the years and when I left the company two years ago all was well in the sector.
Fast forward to 2020 and the CoronaVirus Pandemic is only trumped by the Chaos that Brexit will bring to the UK over the next 24 months or so.
Many tens of thousands of British people will want to move to Spain over the years to come, can we accommodate them? Agents need to survive the next few months or they will not be here to help the new wave of buyers who are on the way in 2021.
It is a worrying time to be a Spanish estate agent. There is always a different way to look at a “problem” and if done right, great inventions are born. Inventions such as The Post It Note, honestly!
A very short history of The Post-It note.
Spencer Silver was trying to develop a superstrong adhesive for 3M laboratories in 1968 and couldn’t quite get it right. Rather than come up with a superglue he “invented” an adhesive that stuck to objects but could be easily lifted off. It was effectively, just bad glue. A problem.
Silver worked on potential uses of his new, not-so-sticky glue around 3M for years, but nobody thought it was a good idea. Finally, a colleague saw a use where no one else did. He used this note for holding his page in his hymnbook because the bookmarks kept falling out.
The Post-it Note was born.
I am not saying that we need to reinvent the wheel but I recently read a book that got me thinking maybe there is another way to do it. It is based on the American idea of Brokerage. Most of the steps are here :
The Millionaire Real Estate Agent
by Gary Keller.
I stole a load of his ideas. Hey, Spencer Silver didn’t invent glue or paper- He just put them together, that’s what I’m thinking out loud about here.
How can you manage and thrive in this era of shrinking commissions and a shrinking pool of buyers?
Maybe you should open a Spanish property brokerage?
Before you invent your own Post-It note, let’s see if there is a problem in the sector.
The Problem for many Spanish estate agents.
Numbers of buyers are down in Spain.
Office rents remain largely the same as pre-Brexit/COVID 19.
Whether or not you are selling houses, you’re still paying electricity, Wifi, water, cleaning, repairs and maintenance of the office.
Many of the offices are not really well located, especially the ones run by a sole trader, smaller agents so walk-ins are virtually non-existent.
Some top agents are stuck working in a larger agency, knowing they could do it better themselves, but they are reluctant to take such a big step as opening their own office.
Marketing is not cheap- I know one agent who was paying 10,000 PM on portals like Kyero, Think Spain, Right move and others.
Agents miss opportunities because in the unlikely event there is a walk-in client and they are out listing a property for sale, the potential buyer is lost.
Lawyers are not known for their forward-thinking. In many cases, estate agents end up having to do a load of the work to make sure the deal actually gets to the notary, meaning they get paid.
There are so many jobs that get ignored; blogging, better photographs, follow up on leads, prospecting for new clients etc. This is due to the fact the estate agent is so busy trying to do everything.
Banks and builders do not offer these agents good deals compared to what the larger agents are getting.
Add on sales are being lost. Insurance, funeral plans, currency are all profitable for the smaller estate agent, but she doesn’t have the time to up-sell as she simply can’t do it all.
The property buyer loses. If these agents start to close down their offices, it means less competition for the clients to choose from which will result in higher commissions and lower level of service and care.
What if a number of Spanish estate agents got together and formed an American style Brokerage firm, all legal and legit- Almost an agency of agents.
So, find the best location on the Cabo Roig strip for example. You’d need, maybe 150 m2 with ten agents, one reception/office manager (which will become the core of the business) and other desks providing services for the clients such as Insurance, Legal, tax advice etc.
The location. With a good location, you’ll achieve walk-in trade. There will be exposure of everyone’s listings on that window, think of the signage you’ll get up, the positive feeling so many of us get from a busy office!
What I’d do if I was thinking of getting back into the property in Spain is, I’d find 10 agents with a good reputation. (you know the ones who other agents like and trust, this would have to be a cowboy free zone!). You can have an agent who specialises in high-end stuff; a company like my old office which concentrated on the lower end of the price scale; a bespoke builder; French speakers; Russian speaker ….whatever way you want to mix it up. Maybe you can get a rental agency too.
All 10 of these guys can rent a desk from you for say 250 pm. You’d also charge 10 euro for wifi, 10 euro for cleaning, 10 euro for the coffee machine, whatever- 300 euro total. Almost nothing for them, look at how much they save compared to renting an individual office.
In exchange, they get a desk, reception, phone number, wifi, light and heat.
Let me explain:
Instead of paying 1,000 pm for a poorly located office in the sticks, they have a desk on the high street: the strip of Cabo Roig or Malaga, the marina in Alicante or the Rambla in Murcia.
Their costs and risks are reduced by 80%.
Following on the Keller Williams format then, the small agent suddenly has access to the ten other agents’ properties and vice versa. Everyone is selling everyone’s properties as they are all the company’s listings. No agent is allowed to do solo runs- they are “all in” all the time. Once everything is properly registered on the company CRM by the front desk person, there is no arguing over clients.
We can get deals from accountants, lawyers etc who are representing the actual agents. Effectively, we can manage the administration side of their business leaving them to do what they do best- sell.
Now, as part of this bigger group, smaller agents can afford real, trusted advice and they no longer wonder who to ask about legal issues. We have a lawyer we work with on occasion who told me, a little tongue in cheek, that his no1 job is keeping estate agents out of jail- a noble profession! I hope he was joking.
How do you divide up clients?
If agent A sells his buyer a property belonging to Agent B there is one commission split; as if Agent C, Sells a property listed by Agent B, to a buyer who had called in to see Agent A, who was unfortunately out with another buyer at that exact time, there is a different commission etc.
Once an agent has reached a certain amount of deals closed, the office no longer charges them the monthly fees or reduces the commission they pay. The more agents sell the better the deal for them.
It is a formula created by Remax and Century 21, but really polished by Gary Keller to ensure everyone is selling more, the client is getting a better deal and everyone is winning.
We could create bargaining power; The estate agents get all their listings on Kyero RightMove and “A Place in the Sun” for 200 pm as opposed to 1200 pm.
Builders and developers will give all our agents a higher % of commission if we negotiate as a group and agree to promote new build properties.
It will be easier for agents to get listings once owners know that they are part of this big network.
They can use another agent from another desk to close their clients if they are not free to do it and likewise they can close other agents’ clients if they are needed.
Management can help agents with negotiation/closing if they are struggling. Some people just don’t like closing, and don’t even like the expression “Closing the client” others live for it!
What’s in it for us?
So much of the business is based on trust but legal contracts are a major help too!
Spanish Solutions can sort out all of the conveyancing; (more to come on this later) Currency Exchange deals with currency; Mick the Builder helps the clients with the building work, tiling and other services they need; “Spanish Mortgages” help with the financing; Bankia does us a deal for the bank accounts etc.
The clients all get a reliable service from all of these providers.
The company could have a full-time photographer/videographer who will do a special deal for all our sellers. There are so many other services that clients need and we can provide at a reduced price.
Why Spanish Solutions?
Well, really it can be any trusted law office, but Spanish Solutions is the one I know best. A key part of the brokerage company is transparency. The office gets a % of all deals closed, just like Keller Williams do. You need one law office managing all the deals and all the conveyancing. There must be a standard that doesn’t drop and this can happen if the agents can pick and choose what firm takes care of the conveyancing. It’ll all fall apart if agents are not getting paid because deals don’t make it to the notary and clients are sure to lose out because the legal firm is incapable of doing the deals.
Equally important, cutting corners on the conveyancing is a terrible idea for the client. (both buyer and seller). Everyone’s reputation suffers if a client who bought through the “Trusted United Estate Agents of Spain” (I should copyright the name, TUEAS!). The law of unintended consequences tells me that suddenly the estate finds himself with more time to list properties, chase up old leads and close more deals. Why? Simply because he can trust the closing pipeline to get the property purchases done.
Spanish Solutions are doing the change of contract for electricity, and water, they are setting up direct debits and registering the sale in the Land Registry- that is what they do and they do it better than an estate agent who tries to do it all herself.
What if the individual estate agent is not performing?
There are certain KPIs every month that must be achieved by each agent, even though they are all self-employed, independent business owners. We need the agents at their desk for a certain number of hours pm, we need a certain number of sellable listings (that means keys, paperwork, owners details etc). If you want to kick them out because they are not following the rules, just like in Keller Williams, it’s easy and you only kick out the non-performers. If the agent is not performing because they don’t know how (so many estate agents in Spain just don’t understand how it works) you can train them to make them better. The more the individual agent sells, the more TUEAS earns. I’m starting to like the name TUEAS!
Agents must register all their leads with Tracie on the front desk. If a client is not registered, anyone can deal with him. If the agent has registered the client, he becomes his buying agent. If a buyer or a seller walks in (and they will) who is not registered on the system, each agent gets a client in turn. Car dealership style.
TUEAS, charge the agents say 20% of the closed amount. Keller Williams starts at 30% cut for them, on a sliding scale all the way down to 0%.
Because Spanish Solutions or another trusted law office is doing all the deals there is total transparency- Everything gets declared, and there are no surprises.
If some agents do something to break the terms and conditions, they don’t get paid on deals that are in the pipeline. That is the insurance for the other 9 agents- Everyone is playing with the same simple rules.
Will it work for the estate agent?
I think it will. All we need to do is to find someone willing to set up the Brokerage- I feel it might be a way for estate agents to survive, clients to get better service and of course, the Broker (maybe you!) is going to earn a very attractive profit too. Who says win/win deals don’t exist in Spain anymore.
If you’d like to get my thoughts on this, please let me know. Spanish Solutions will not be involved in the property selling side of things but I can help with the ideas, organisation, structure etc.
We love to help clients, estate agents, business owners and everyone else!