The Accidental Millionare, Pt 2

In my last email (“Happy Father’s Day”),  I talked briefly about how my parents were always self-employed — or “independently self-unemployed” as I like to say.

The thing I noticed about my parents’ businesses was that they were both trading time for money. This is a classic situation for most professionals and people who act as “consultants” of any kind, including real estate professionals.

If you fit into this category, you’re not building up any kind of asset base on which to retire or leave to your heirs.  My mom managed to save a lot. My dad was forever complaining that he never had any money.  But that changed.

My dad became what I’d call an “accidental millionaire”.  Here’s what led up to that.

For baseball fans, if that first article describes ”the wind-up”,  this one describes “the pitch”.  The next one will describe “the call”.

After being part of several businesses that had employees, my dad swore off ever wanting to deal with another employee.  So he got his real estate license in 1973, and took a job “sitting on homes” for a real estate developer.  That is, he was the office staff in the model homes.

That was back when you could  buy a new 3/2 home for the princely sum of $40,000.  (Gawd, that makes me feel OLD!)

His strategy was simply to stick it out long enough so he could get his Broker’s license and go out on his own.  In 1976 he passed his Broker’s exam, left the place he was working, and started his own firm.  It was just he and his wife.

One day a friend called him up and asked to meet him for lunch. This was a guy he used to work withat one of his earlier businesses.
They met and the friend brought a couple other people with him.  The gist of things was that they had been working with another broker and felt they were way over-worked and under-paid.  One thing led to another, and they asked if they could “hang their license” with my dad for “a little while” — just until they figured out what they wanted to do.

Mainly, they wanted to get out from under their current broker’s thumb.

My dad agreed, and within a week he had three new agents in his “firm”.  His only condition was that he didn’t have to do anything — they were entirely on their own, and they had to cover their costs.

Within a few weeks, all nine of the agents working with that other broker had moved their licenses over to my dad’s firm.  My dad didn’t pay much attention to this, but from time to time one of the guys (Duane) would ask him if it would be ok for someone else to “hang their license” there as well. He was quite agreeable, but really didn’t care since they were not creating any problems.

After about six months, Duane sat down with my dadand had a heart-to-heart talk with him.  Duane pointed out that there were now about 50 agents “hanging their license” at the firm, and Duane was spending most of his time dealing with them rather than selling real estate himself.

He said something had to be done: either turn this into a business, or cut these people loose. Being the Broker of Record, my dad’s only real concern wasthe legal liabilities that he incurred.  Beyond that, he didn’t want to be bothered.

Duane didn’t seem to mind dealing with things, so they decided to simply charge a fixed amount per contract to cover their time and expenses.  He also observed that lots of people weren’t really doing much, and thought it might be a good idea to charge a monthly fee regardless of whether anybody sold anything or not.

They set up a fee schedule where the agents earned 100% commissions on their sales, but were charged $25-$50 each month; a fixed fee pertransaction; and had to pay the variousexpenses that they incurred.

Thus was born what was arguably the first ”100% commission” real estate firm in the USA. It was about the same time that Realty Executives was born, although they could not be more different.  Re-Ex positioned itself as a premium brokerage for top sales agents to work where they could keep a larger portion of their commissions.  Back then, sellinga million dollars of homes meant something.  At $50k per sale, that was at least 20 salesa year.  Today, it’s just three or four.

My dad’s company became a place where agents could simply “hang their license”.  This was at a time when most brokers didn’t want to deal with so-called “part-timers” and others who didn’t take real estate “seriously”.

We’re talking about people who were school teachers who wanted to sell homes over the summer break; police officers and fire fighters who wanted something to do on the side; and stay-at-home moms who wanted a way to get out of the house and make some extra money.

My dad and Duane didn’t think much about this silly notion of “part-timers” in real estate.” After all”, he’d point out, “most commercial agents are lucky to make one sale a year.  What makes them different than a school teacher who sells a couple homes over the summer break?”

Aside from the fact they get bigger commission checks and have to put up with martini lunches and lots of schmoozing with corporate big-wigs, he couldn’t see much difference.

Within six months, they had 50 agents, and ina year they had around 100.

Play around with the numbers on that, and in the next installment I’ll tell you how my dad ended up becoming an Accidental Millionaire.

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In the mean time, if you’re looking for a great tool to help you write and “spin” articles, check out my own ArticleTwister-2 software.  Another cool app I wrote that’s similar is called TurboReviewWriter.  It helps you write reviews about all sorts of things, and includes many of the “twisting” features found originally in ArticleTwister.

-David