How To Choose a Real Estate Brokerage
Find The Best Real Estate Brokerage for Your Business
How To Select The Perfect Real Estate Brokerage as a Licensed REALTOR®
Wait! I know what you are thinking... here comes an ad for Renzo Real Estate. Not so quick - let’s start by saying that this is certainly not a promotion for Renzo Real Estate. In this guide, we will analyze a number of different brokerage models, structures, and fee schedules.
First off, there is no one size fits all - nor should there be. Each REALTOR® will be looking for a certain set of services or value from their brokerage. New REALTORS® may be focused on training and lead gen, while more experienced agents may be drawn to technology tools and a competitive fee structure. There is no right or wrong when selecting a brokerage, just different value propositions.
If you are searching for a brokerage, chances are you have your real estate licence or you are working toward your licensing. The best piece of advice at this stage is to meet with various brokerages in your city. Don’t limit your search to one real estate office. If you only meet with one brokerage, you could end up with buyer’s regret. REALTORS® of all people should know about this since it is part of our everyday life. When we have a buyer and they buy the first home they see, what is our main issue? What if they regret their decision? Exactly! So, we should follow our own advice.
If you are new to the industry, start visiting brokerages before you have your licence. Some brokerages may allow you to attend a meeting or training session. If you are experienced, make sure you spend time chatting with the broker and office staff. They are going to be your first point of contact when a question arises, so be sure you see eye to eye.
No point in putting off the big question that most agents have! Brokerage fees are important but they are not everything. The main element to keep in mind when breaking down your brokerage fees is one simple concept: value. We can easily compare this to a consumer selecting a REALTOR® to sell their home. Understanding value is crucial in this industry and it plays into your brokerage selection as well.
If the value is equal, the consumer (buyer/seller/REALTOR®) will choose the lowest price. If the value proposition is different, then selecting the lowest price doesn’t always make the most sense.
This is a fairly straightforward concept, but an important one to keep in mind when selling real estate as well! If you are looking at buying a new computer from one store for $1,200 and the exact same computer can be purchased for $1,000 from the next store, which one do you choose? Now if the $1,200 computer has more features, we start the value conversation.
Let’s look at a few brokerage fee structures:
A percentage of your commission goes to the agent and a percentage goes to the brokerage. For example and 80/20 means 80% to the agent and 20% to the brokerage. These splits can vary greatly depending on the services offered. Some brokerages will start new REALTORS® on a 50/50 and move them up after a few deals. Others will start you right at a 95/5, however, your services and training will likely be greatly reduced. Some split structures will also have a cap. For example, once you pay in $15,000, there is just a small deal fee.
- Usually low or no monthly fee to be part of the brokerage
- Brokerage only makes money if the REALTOR® makes money
- Low-risk model since you do not usually have high fees if you do not produce
- Splits can add up quickly if you are producing.
- Chances are, you will pay more than in a flat fee structure if you are producing (not guaranteed, but likely if you are doing a fair number of deals)
Who are these best for?
- Newer agents that do not want high monthly fees
- Part-time agents that do a limited number of deals per year
How does it normally look?
- Vary greatly: Usually 50/50 and up
- Example: 80/20 with potentially a small monthly fee for technology products, etc (around $100/month)
DESK FEE STRUCTURE
These models are basically the exact opposite of split structures. Here you will pay a high monthly fee amount but a low amount per deal. For example, you may have a desk fee of $1,500+ per month, but your deal fee is only 1% of your commission. Training and services can vary with these structures.
- Few limits on your take-home income
- Usually, have a high level of services and/or name recognition
- Monthly fees can be a large hindrance during slow months
- Challenging for new agents to become profitable unless they are producing at a relatively high level.
Who are these best for?
- Experienced agents that use the services offer or are looking for a national brand
How does it normally look?
- Vary greatly. Example: $1,500/month and 1% of gross commission per deal
FLAT FEE STRUCTURE (HYBRID)
An exact amount regardless of the commission amount is due for each deal. For example, $1000 per deal regardless if your cheque is $2,000 or $20,000. There are usually monthly fees associated with these structures as the profitability can be limited (depending on a number of factors).
- Typically less overall fees if you are doing a fair number of transactions
- Relatively low-risk
- Brokerage still likely only makes a profit when REALTORS® are producing
- Monthly fees are usually part of the game (although they can vary)
- Services may be limited since split models typically net the brokerage a higher amount
Who are these best for?
- Newer agents that are ready to hit the ground running and start doing deals
- Experienced agents that are not wanting the split but still would like brokerage services
How does it normally look?
- Vary greatly. Example: around $500/deal + a monthly fee of $100-$1000
Ultimately, there are various models to choose from and some brokerages may have a few structures to choose from. So, do your homework, know your anticipated deal count, and look for value!
Big Name vs Independent
Being an independent brokerage, we are biased, however, we will remain as objective in explaining each structure.
Going back a few short years, big name franchises had the majority of the REALTORS®, however, as of recently, independent brokerages have popped up in large cities and small centres alike.
Big name brokerages are highly recognizable names in most cities. For example, Keller Williams, RE/MAX, Century 21, Royal LePage, and Coldwell Banker. Some of these brands have been around for decades and have national and international marketing campaigns. Most will have franchise-wide technology and back-end systems. As mentioned, they are franchises, so there can be variation between each office, however, the name will likely be one of the largest value propositions. Pairing with a recognizable brand has some great perks including acceptance from the consumer, big-budget tech products, and national conferences/referral opportunities. Some of the complaints can be the fee structures are usually higher, and oftentimes, there are strict marketing guidelines to adhere to.
Independent brokerages can be defined by a number of different structures, however, typically, they are local companies that are not franchise models. Independent does not necessarily mean smaller by agent count or by production. There are independent brokerages that have the majority of market share in certain cities and have very high production. However, with most independents, the consumer may not be familiar with the brokerage name, so some explaining might be required. With independents, the company usually has more marketing freedom to approach real estate in a different way (as a whole) and their fees can be more competitive, although not always. The independent models can be more nimble and adaptive to change since they are usually smaller than national brands. Some of the complaints can be name recognition and fewer large technology services.
It’s very important to note that the description of big name brokerages and independent brokerages are generalizations and there are many variations out there.
With new tech products being released daily in real estate, it’s important to select a brokerage where the technology services are aligned with your business model. That is not to say that more technology is always better, actually, there are many cases where technology offerings can be a drawback (crazy, but read on).
Whether you are brand new or an experienced agent, you need to know what the brokerage is offering from a tech standpoint. Most will offer certain services that may be of use, but you will likely need to find some specific tech products that jive with your exact business model.
If you are experienced or you do not wish to use the services offered by the brokerage, then the tech products might be a drawback. This is because these products do need to be paid for somehow, so whether you are directly or indirectly paying for the products, they do need accounting for. One of the main challenges in real estate is differentiating yourself as a REALTOR®, so if you use the same services as everyone else, then you may appear the same as everyone else.
Here are a few technology products to look for:
Website: Some brokerages will have full websites for their agents. Some will have pages on their website dedicated to the agent. Some will have discounts for web providers, and some will have no website option.
Pros - If your brokerage has a website option, there is usually quick and easy set up for you to hit the ground running.
Cons - If you would like to differentiate yourself, then the brokerage website might not be the best option. Also, customization is usually very limited.
CRM: There are offices that have their own built-in CRMs to their backend of agent websites or their brokerage portals. A CRM is this day and age is absolutely necessary for real estate, however, each CRM will have different functionality.
Pros - You can start working on your database right away and most will integrate with your work email nicely.
Cons - You don’t get to select a CRM based on the features you are looking for.
Other notable products that the brokerage may have: digital signing software, virtual training, deal submission software, market intelligence products, and many more.
How marketing is handled at brokerages can vary greatly. It is crucial to know if there is a marketing department and how they handle REALTOR® marketing. Having a department is great, but there can be direct and/or indirect costs to this and you may need to stay strictly on brand with the brokerage if you use their department. There can be full on marketing teams or there can be marketing programs for use.
Before narrowing down if this is a perk for you, it’s best to look at your business plan and how you plan on approaching marketing in your business.
Usually, quick and easy way to get your marketing items and printing completed.
Higher brokerage fees or costs for the service. Also, very strict guidelines required to stay within when using the office’s marketing department leaves little room for differentiation.
Training and Mentorship
The first piece of advice around this is asking for the brokerage to show you the training platforms and schedule. Why? Because there can be many undelivered promises when it comes to training and mentorship.
Training should be on the top of your list if you are a new agent. The industry is challenging and at times you can feel like there is little support out there. As you are building your business, there will be endless questions and you need to know so much more than is taught in the course. Although in most jurisdictions you can’t legally advise on some of these topics, having a general working knowledge of the following is essential: sales, communication, construction, legal, marketing, data analysis, community knowledge, design, renovations, relationship building, and so so so much more.
If you are an experienced REALTOR® don’t think you are off the hook! The industry is constantly changing and how we generate leads is changing too. As an experienced agent, if you are not staying current and always improving, you may see your production dwindle as the years go on.
Companies will vary greatly in how they approach training but here are a few styles to watch for.
Virtual Training: Brokerages many have a database of training material for agents (new and experienced). This is great for those that need a quick boost and it can be awesome for new agents as long as there is a structure to the training.
In-Class Training: Determine what the brokerage has for in-class/in-person training and support. With the rise of technology, some brokerages are moving away from in-person training, however, there can be immense value to REALTORS® that attend in-class training events. New products and sales strategies can be discussed. Furthermore, changes to the rules are usually on the schedule as well. In most offices, there is a direct correlation between production and those that attend in-class/in-person training
Assignment Based Training: This can work in conjunction with other training platforms, however, it differs in that there are assignments to be completed or worked on. This can include practice CMAs, offers, and listings. If you are a newer agent, make sure there are assignment based training platforms for you to learn the industry. It is best to learn the skills before you have your hands on your first deal.
Mentorship: This training may be in place for everyone at the brokerage or it may be limited to new agents. If you are new, it is very highly recommended that you select a brokerage that will pair you with a mentor. In most other professional industries, there is an apprenticeship period. This is not the case in real estate. You get your license and you are free to get out there and sell homes. Even if you are confident in your knowledge, actually selling real estate is much different than learning about it.
People and Company Culture
Don’t forget company culture when you are on the hunt for a real estate brokerage! There is a lot of power in knowing your colleagues. Yes, there is an inherent level of competition in the real estate industry, but sharing your success and questions with others will make you a better REALTOR®. Some brokerages will host agent and/or client events that can serve as a great opportunity for you to connect with your database and fellow REALTORS®. Ask anyone in the industry and they will say that deals will go more smoothly when you know the agent on the other side, therefore, there is even value to your client in you having a number of connections in your industry.
There is also the office staff and broker. Chances are you will be in contact with these folks regularly and making sure that they are people you want to associate with is vital. When you are meeting with the brokerage ask for a tour and a few introductions to agents and office staff. We all know that first impressions go a long way, so make sure you have a good feeling about your co-workers. When choosing a broker, it’s important he/she is knowledgeable and approachable. This person will be the one helping you through those tough deals and answering your questions, so make sure they have the answers you need and they are a pleasure to be around.
Everyone’s definition of the perfect brokerage will differ depending on your needs as an agent. You may be looking for marketing freedom and low fees, or you may wish to pair with a big name with a split model. There are endless variations to the real estate brokerage model and each REALTOR® should analyze what they are looking for in a brokerage. Furthermore, make sure you run the numbers based on your anticipated production and your business model. Finally, nothing is set in stone, so if you make the wrong choice, no worries, switching can be a pretty straightforward process.