Top 5 Reasons Most Real Estate Teams Fail Within First 5 Years

The real estate business is tougher and more competitive than ever, with many real estate teams failing within their first five years, and usually for some very specific reasons.

According to Bradley Pounds, the president and chief operating officer of Watters International Realty, an Austin-based international real estate firm, there are a few common mistakes that greener real estate teams make. Watters International Realty was founded as a single entity in 2010 and opened other locations using a similar model for years before establishing its FDD in 2017.

In an interview with 1851 Franchise, Pounds shared his top five reasons why so many real estate firms fail within their first five years.

Lack of a clear-cut plan

Real estate firms that proceed without having a clear direction are doomed to fail, Pounds said. A common example he gave is when a high-producing agent hires an assistant or buyer agent to help with a burdensome workload but does not provide proper training and leaves responsibilities ambiguous at best. By not articulating what the assistant needs to do from the beginning, the agent risks having to clean up messes later.

“They don't have a plan,” Pounds said. “They do all the wrong things, or just as bad, they do the right things in all the wrong order. Things just sort of unfold organically.”

No identity

Real estate firms need to communicate what makes them unique, Pounds said. With so much competition, real estate teams need to differentiate themselves from the rest - and make sure their customers are aware of it. A team owner, for example, may know what makes their group unique, but that won’t help if they do not communicate that information to the customers or internally.

“People come to us for help in building teams and often the first place we have to start is in helping the team owner figure out what makes their operation special,” he said.

They stop growing

A major problem in the real estate industry, Pounds said, is that once brokers begin to deliver results, they become risk-averse.

“Brokers operate from this scarcity mindset and don't invest much into R&D to grow their businesses,” he said. “So agents stumble upon something that delivers results and they hold right there, afraid to lose money by trying anything new.”

Lack of specialization

Pounds cautions against having every team member do a little bit of everything, as this can lead to vastly different real estate experiences within the same organization. Instead, he suggests that real estate firms should hire people who are experts in their specific area and play on those strengths.

“A team of one-man-band agents, each doing everything from marketing to converting leads to contract compliance --- that's not a team at all, it's a free-for-all and it's created incredibly uneven client experiences in our industry,” he said.

Not asking for help

A little guidance can go a long way for young real estate teams, especially when it comes to advice on how to spend money. By getting advice from an industry veteran who’s been there and done that, greener real estate firm owners can get valuable advice on where to put their focus.

“As someone who knows first-hand what works and what doesn't, it's incredibly frustrating to watch a newbie team owner struggle to build a sustainable business with no mentorship,” Pounds said.

Real estate teams that are looking to get off the ground and get support are encouraged to reach out to Watters International Realty. Watters is open to discussing franchising opportunities in Texas and beyond.