Choosing A New Real Esate Brokerage - 10 Criteria
Many REALTORS have been working at the brokerage where they began their career in real estate. When faced with the prospect of changing real estate companies, most REALTORS, probably haven’t given the first thought to making a move, let alone how or why. This article is designed to provide some insight to REALTORS who are thinking about a career move.
Typically, REALTORS do not change brokers unless they’re furious about some event or personality at their current brokerage. This article is not meant to encourage agents to leave their current brokerage. Instead, it is designed for the agent who has decided to leave, but doesn’t know how to compare alternative brokerages.
This list is not provided in order of priority. It is up to each agent to decide which criteria is most important.
* Does the broker list and sell? When the broker lists and sells, agents are always distrustful that the broker is taking leads that might otherwise filter to the agents. Some brokers actually practice this way. Nothing threatens the trust between agents and their broker more than the inherent suspicion that arises when the broker lists and sells real estate.
* National name recognition. If you’re a new agent, it is definitely helpful to have that big name next to yours. If you’re a "seasoned agent," and you haven’t made your own name brand the first priority, then you had better start working on that now. Most agents don’t look at it this way, but - every time your broker places an advertisement without your name on it, you’re competing with your broker for a lead. If your broker gets the lead and refers it to you, you’ll likely have to pay a referral fee to your broker. Your name is most important.
The second pitfall for national name recognition is cost. The costs of national advertising expenses are borne by the agents. It’s important to determine whether a) the national name recognition creates leads for you; and b) whether its worth the cost that you pay for the national name recognition. (For more on cost/benefit analysis, click here.)
* Administrative fee. The justification that most brokers use for charging the fee is "everybody else charges it." That’s just not true. There are some real estate brokerages that do not charge an administrative fee. The fee is legal only if brokers are doing something above and beyond the typical responsibilities and obligations required by the real estate commission. "File storage" is not a sufficient reason. "Technological costs" is not a sufficient reason. This issue boils down to whether you feel comfortable charging your clients an additional sum of money for an imaginary reason concocted by your broker.
* Administrative support. These days, every real estate agent should have immediate access to a real estate lawyer for advice and practical tips. Some brokerages have marketing departments. This can be helpful, but you should determine whether the costs (in terms of fees or reduced commissions) justifies the benefit.
* Commission splits. Commission splits vary from one real estate brokerage to the next. The most important consideration is to determine whether you are absolutely crystal clear about how your commission is calculated. If you can’t wrap your mind around a brokerage’s commission structure in two minutes, you should be suspicious that the brokerage does not want you to understand their commission structure.
* Fees. Many high commission companies come with a "hitch" - fees. The presumption is that if the fees are fixed, an agent ought to net an increasingly higher percentage of income as their volume of business increases. Two cautions when it comes to fees: First, ask the brokerage for copies of their bills for the last twelve months to determine whether the fees have decreased, leveled or increased. Furthermore, if the broker has promised to fix the fees for a certain time frame, you can determine whether the broker has kept their promise by analyzing the bills. Second, before you elect the fee structure, think about your business during the winter months. Determine whether you can afford to pay the fees during those months when the real estate cycle slows down. There’s nothing worse than owing months of unpaid fees to the brokerage for those months when you had no closings.
* Commission rollbacks. Somebody forgot to tell brokers that rollbacks died with the dinosaurs. Rollbacks are a gimmick designed to benefit the broker. Why should you make less on a deal because you closed it in January versus closing it in December? Instead, pick a certain percentage and stick with it.
* Leads. An agent who needs company-generated leads is an agent who doesn’t have a viable career. That being said, if company-generated leads are important, then ask the recruiter how many leads came in and how they were distributed. If you can’t get a straight answer in two minutes, this should raise red flags.
* Statistics. This is how to determine where the prospective brokerage is in their business life. A healthy real estate brokerage is one that is growing at a regular pace. Questions to ask the recruiter should include: a) how many agents were on your roster this time last year versus how many agents are on your roster now; and b) who has joined the company in the last six months and who has left the company in the last six months and when did the last recruit join the company.
* Demographics. If the prospective brokerage hires new or newer agents, this is a warning sign. First, very rarely does the experienced agent want to work alongside a lot of new people. New agents tend to come and go like the wind and experienced agents quickly tire of answering the same questions from many different people. Second, new agents are a huge cost to real estate brokerages. They require office space, trainers and support staff. The problem is that the money needed to pay for the increased overhead is collected from the experienced agents. Determine whether the costs (typically absorbed in the commission structure) is worth working alonside new agents.
Another note about new agents. There are several national franchises that purport to work exclusively with experienced, successful agents. Remember, each of these franchises are independently owned an operated. When these franchisees start hiring brand new or newer agents, the franchisees are violating the mission of the franchisor and harming the brand. This should raise red flags.
Hopefully, this article has provided you with some insights for choosing a new brokerage. I welcome any questions or comments you may have. Best of luck in making the biggest decision for the rest of your career.