The rise, fall and rise of REMAX – Michael Davoren

Reputed to be the world’s largest real estate company, REMAX is a very new company in world terms. It’s been around for 44 years now, but in Australia, about 20 years.  When it first started, it really did take off and that was very quickly followed by the GFC, and that smashed it for a while.  Michael Davoren from REMAX tells the story of its recovery.
Transcript : 
Kevin:  Michael Davoren is with me in the studio. Michael is the managing director for RE/MAX Australia and New Zealand.
Tell us the history of RE/MAX into Australia.
Michael:  RE/MAX generally is only a very, very new company in world terms as well. It’s only been around for 44 years now, but in Australia, about 20 years. You know, you hear the football commentator say “It was a game of two halves.” Well, RE/MAX’s story has been a game of three thirds, really.
When it first started, as you know with other companies, it really did take off. It took off immeasurably. It was very strong. A lot of the established agents joined. And then all of a sudden, whilst it was very fast growth, it was very quickly followed by the GFC, and that smashed it for a while.
Kevin:  Explain the business model for those who don’t know.
Michael:  The pure RE/MAX model is a model where good agents are paid a very high split of the commission. They run their own businesses. We have what we call conjunctional agents now. We don’t use the term because it’s nothing like an independent contractor anymore. We have changed all of that. But it really is people owning and running their own businesses within businesses.
Kevin:  Yes, the consumer generally wouldn’t see the difference, but internally, the difference is quite massive, isn’t it, because RE/MAX gave agents the opportunity to truly run a business within a business for the first time.
Michael:  Absolutely. And where a lot of the growth for RE/MAX in Australia has come from as well is they’ve grown businesses within businesses, and then eventually the right ones – and that would still be a small percentage of agents who are appropriate to – go out and have their own business.
There has been some good growth, but the numbers did fall away after the GFC there for a while, and when we took over about five years ago, we had to turn that around, and we have turned that around. We’ve now got good growth, but the models have changed.
There’s a lot more variation in the models now, not just one RE/MAX model. There are all sorts of models. We have totally traditional offices out there. The bigger agencies now concentrating on conjunctional agents.
Kevin:  Interesting, too, because the introduction of RE/MAX actually brought about a number of changes in existing operations. Some of the major franchise groups have diversified as well. They have similar models inside their model.
The commissions for the consumer haven’t changed, so therefore they don’t perceive a difference. But as I was saying earlier, the difference internally is quite large. It gave good agents the opportunity to start to run their own business and earn more of the commission.
Michael:  Yes. But it has also given them the opportunity to build their own brand, to create their own environment, to employ their own staff. There are a lot of advantages to it. The real estate industry has seen an increase in competition. I think the consumers have seen some benefit in that.
I think when the consumer is looking for – and this is a hard thing for them to do – the right agent, I don’t think it should only be based around what the fee is. I think that it’s really important that sometimes the cheapest agent can be the most expensive when it comes to ability to negotiate and the prices that are achieved.
I think, overall, the industry has become far more professional than what it used to be, but I think that there has been some evolution, and I think that that’s one of the things that’s going to stand very strongly for the real estate industry as the different models come in, all that sort of stuff. I think that we have evolved as an industry.
Kevin:  Will there be a change in the models, do you think?
Michael:  Yes. There will always be new models come in, but the traditional model will stead fast for I think a fair time to come. But it’s very important that the real estate agent doesn’t get so wrapped up in technology that they forget that it’s a relationship business.
I can remember when I first started my real estate career many decades ago. I started with my father on the Gold Coast, and he used to make me walk with him to the post office every morning. It used to drive me crazy to be honest, because it used to take so long. But it was all about people wanting to talk to him and him wanting to talk to people.
That has to come back into the real estate business. I think we got a bit carried away with who can build the biggest database. Yes, you have to have a good database, but you have to have people out there who really do know you, not just know of you.
Kevin:  That’s a great lesson, not only for real estate agents but for all businesses, because they talk about how big their database is, but how well are they interacting with that database?
Michael:  Yes, and how many of the people on that database are actually advocates for them? As a topic of discussion, real estate is probably one of the most popular discussions. Even in a social atmosphere, people want to talk about real estate. And if people are talking about real estate, a good real estate agent is the one whose name has to pop up, and they’re the ones who will really survive and thrive in the real estate business in the future.
Kevin:  Yes, it’s a very interesting topic, and I can imagine… I know we have a lot of agents who listen to this who hopefully are getting the message that so many agents have got good databases, they just don’t know how to communicate with them, so they just simply push out their listings – “This is my latest listing,” or “Here are all my listings” – thinking that that’s actually what consumers want.
But it’s not. They actually need information. They need “Tell me how to get through this transaction when it’s time for me to do it.”
Michael:  Yes, and it’s the same with all sorts of stuff that real estate agents have been doing, be it door knocking, be it letterbox dropping. They have to understand that people will put their properties on the market when they’re ready, not just because a real estate agent needs a listing.
It’s the communication that goes on right throughout that period of time until that time comes when they do want to think about selling, and that agent’s name has to be the one that comes up in their thinking, in their discussions on who they’re going to use.
Kevin:  Yes. This has been the big change, and you touched on it, that the move from the agent being transactional to being relationship and understanding that the houses are inanimate, they just stay there; it’s the people who move in and out of those houses who are the real customers.
Michael:  Absolutely, and a good agent’s strengths are in the marketing of that. You have to be able to talk about the asset itself, but you have to be able to understand that the buyers who are there are eventually going to be sellers, and so the relationships have to start there and have to be genuine.
And the same with the sellers. We are appointed by the sellers. I’ve met thousands of real estate agents over my years in real estate, and I think the vast majority of them genuinely do want to try and do the right thing by their sellers and buyers.
Kevin:  Absolutely. Michael, all the best. Michael of course from RE/MAX. Thank you very much.

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