The traditional real estate brokerage model has been upended — and it’s not only because of iBuyers.
The race to technological efficiency, a Sisyphean battle for talent, and a highly informed consumer marketplace are merely a few of the factors that have industry leaders — and outside industrialists — pushing innovation like never before.
So how do you, the everyday real estate agent, determine which brand, business model, tech and commission split is best? It used to be so simple. And what about the fresh licensee? Where you choose to land can make a tremendous difference in your career longevity. Consider that choice as crucial as your very decision to enter the industry.
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How much of the deal you take home varies widely throughout the industry, and you should always push to base it on the value you’re going to bring to the brokerage.
Even before you get into the weeds on splits and payout structure, know what that potential brokerage typically charges for a listing (understanding that it’s never a hard cost) and how often they’ve been on the wrong end of a renegotiation of that fee. Commission disputes and challenges are common, and you want an office leader with a track record of going to bat for their agents.
Know that independent brokerages are typically more flexible with easier-to-understand pay models because they don’t have corporate-established standards to abide by or esoteric financial goals to reach. (Obviously they’ll have annual revenue goals and standard business obligations.)
However, not every big name sets its pay structures at the national level, either. In those cases, know that the local broker knows what it takes for his or her office to make money, so expect to be met with some pushback if you ask for a break on desk fees, better split or something your new colleagues didn’t receive when they started.
Earnings can get downright confusing under some franchises, especially if they employ annual caps (the maximum level of money that goes to your broker) that move over time, tenure-based tiers and other nonstatic factors that influence what you take home.
Salaries and 100 percent commission arrangements tend to sound great in pitches, but make sure you demand a penny-by-penny comparison with more traditional pay models. You may not make more money in a 100 percent agreement.
New agents will almost never be offered a significant signing bonus, and likely none at all. The tactic is gaining steam for career agents looking to move. Know that signing bonuses are not always looked upon as ethical because they can create an unfair and erratic recruiting environment. But, like all things in real estate, if it’s disclosed in writing and agreed to by all licensed parties, it’s (usually) good to go.
But don’t count on a signing bonus. Instead, look for passive income opportunities, such as profit (money after expenses) and revenue (money before expenses) sharing. A number of brands offer them, but the totals vary. Ask to see recent payout figures. Find out how a broker handles seller-paid bonuses. Some may split it; others let you keep the total.
If you’re being actively recruited, use that to your advantage, and demand a clear picture of what you’ll earn on a median sale for your market. Don’t be distracted from the pay discussion by red herrings concerning websites, business cards or provided leads — those things should be a given.
Those new to the business have less room to negotiate on pay structure, but if you possess unique professional skills or expertise (built and sold a business, strong history in sales, etc.) see where it can take you.
New agents need to grasp quickly that your pay is not going to be consistent, and that you’ll be quite surprised at the final outcome printed on your check. That’s the nature of the industry and why alternative pay models exist.
To reiterate, 100 percent-commission brokerages and salaried positions are designed to attract new agents. You should still benchmark the comfort they provide with the longer-term earning potential of a traditional pay model.
Some brokerages offer mentorship plans specifically for new agents, and these will deal with how to manage money and best understand the financial ups and downs of being a real estate agent.
If you’ve succeeded in another industry before making the switch and have an economic cushion to sustain your first year or two, that will put you at an advantage, reducing the strain of having to chase every possible lead to get by.
Use your position to focus on creating work systems and learning the market. Advocate for yourself, and don’t move until you are 100 percent certain of your earning potential.
Inman Ambassador, prop tech entrepreneur and industry coach Jeff Lobb assembled a comprehensive, evergreen breakdown of what’s offered by the industry’s major franchises, titled “The Guide to Finding the Best Brokerage for You.” We highly recommend reviewing it alongside this handbook.
Terms to know:
- 100 percent commission: A pay structure in which the broker takes no split from the agent’s transaction commission.
- Cap: The limit in total fees and splits an agent has to pay to their broker; usually based on annual sales, resetting each year.
- Seller-paid bonus: An additional, disclosed fee a seller is willing to pay to incentivize a quick or clean sale.
- Split: The percentage of the total commission received by a broker to their agent as part of a listing fee or as representative of the buyer.
Even if you’re bringing over a healthy database of contacts, most agents depend on their broker for new business.
Sources of new business come in countless forms, but may include paid portal advertising, print marketing and postcards, email marketing, Google PPC, designated floor hours, community event sponsorships, Facebook (social media) advertising, a led-gen focused custom website, and through various combinations of all of the above.
It’s important for the agent to know what percentage of that new business ends up in your database and how viable it is when it gets there. Not all leads are created equal, meaning there is no industry standard for what defines a qualified lead. Some may believe a “saved search” indicates a ready buyer or a newsletter sign-up means a person wants to list.
There’s a great deal of subjectivity underlying lead generation, so try to arrive at some sort of discernible baseline with your broker, such as you’re looking for leads who can prove buying power or have clearly stated interest in needing an agent.
Agents should be quick to equate a brokerage’s local brand with its ability to land business and let that factor into their decision to join.
If it’s an upstart indie looking to make waves, what evidence do you have that shows it can? If it’s a major franchise, will you be shadowed by its visibility and entrenched top producers? Do you risk becoming a small name under a big yard sign?
Brand marketing needs to matter to you when looking to choose or switch brokerages; it’s what knocks on the door, makes the introduction and gets you invited inside. The broker relies on you for the closing. In short, hold the broker accountable for their provided lead sources, but be sure they overlap with how you have historically done business.
Questioning brokers on how they source revenue is going to lead into granular topics like the company website, ad creative, public partnerships and the like. Is there an in-house marketing team handling it? Is the company blog outsourced to someone’s nephew?
Examine how a broker’s marketing and lead-gen efforts react to the competition and overall consumer trends. The results count. Know, too, which leads you own and which ones are “rented.” Brokerage-paid leads don’t always belong to the agent who worked them and, therefore, aren’t yours to take should the new relationship not work out.
Upon coming aboard, let your broker or team leader know what or who you’re bringing to the table. Your sphere of influence is of value to the people whose pockets you’re going to fatten, so be clear with colleagues when someone in your circle (or within its orbit) becomes a client.
You may also want to consider leveraging your contacts in your split negotiation, asking for a better cut in transactions you bring to the brokerage.
Brokers want new agents because of the business they generate. If you’re entering a workplace that in any way stifles your proven sales and marketing systems, you become less valuable to everyone — most importantly, to yourself.
Brand new licensees should pay careful attention to the lead service’s competing brokers offer, as they’re likely going to be the primary source of your business early on in your tenure.
Know that the industry is littered with the expired real estate licenses of people who were confident they could succeed with the business generated by “friends and family” they bring with them into the industry. Sadly, it takes only a few months to learn that the people in your book club or your fellow hockey parents “totally forgot you started in real estate” or “already have an agent.”
Look for those brokers who can show how and where leads are originating, but remember too that you’re not likely to earn leads in the higher ends of the market. Leads are an investment, and brokers want returns on them. You’ll learn by working leads that aren’t as far down the path. They’ll annoy you, abandon you and, thankfully, surprise you.
The better you handle that rollercoaster, the sooner you’ll earn the better-quality prospects, and the deeper and more valuable your own database will become.
Kari Chalstrom is an agent in Truckee, California, a now very popular pandemic relocation destination for Bay Area homebuyers. After almost three years at her old brokerage, Chalstrom recently switched to Compass to join its Squaw Valley office with team leader Kristina Bergstrand.
“I was attracted to the tech initially,” she told me in a text message. But then it became more than that, such as working with people she knew and the lifestyle, ski-resort focus, which has long been part of Chalstrom’s personal brand.
“It’s one of those things, you don’t know what you’re missing, lacking, until you start exploring what else is out there,” she added. “I thought I was fine where I was, until I learned more.”
In the same way that commission splits shouldn’t alone be why you change brokerages, nor should the technology they offer, as Chalstrom indicated. But it sure is important.
For decades, websites and a local multiple listing service defined the typical brokerage tech stack. Maybe you were given a branded template to customize, with no support for professional copywriting, image-editing or even a blog. Databases thrived in Excel, desktop Rolodexes, and maybe Salesforce and earlier iterations of Act.
Then brokerages started to change things. Gary Keller went so far as to say his eponymous brand is a “technology company.” Compass rose to prominence on its promise to offer best-of-breed technologies. Coldwell Banker, eXp and Redfin all followed suit, finding ways to leverage web-based efficiencies to better in-house productivity and how they met the challenges of consumers.
As of 2021, there’s little debate that today’s tech, ranging from multi-lens smartphone cameras and digital tours to remote online notarization and street-specific, map-based list-building, has fundamentally changed how the real estate industry finds and conducts business, a fact made even more evident by a tragic, economy-altering virus.
Agents are working in a period of rapid technological advancement, making their brokerage decisions all the more challenging. Overlapping with our previous chapter, technology plays a big role in a brokerage’s lead generation strategies, as well as its day-to-day operations.
Recent licensees should know that most brokerages have partnered with nationally reputable tech vendors to offer agents the latest in lead generation and nurture, listing marketing, customer oversight, transaction management, and virtually every other aspect of running your business.
However, the trend of proprietary, brokerage-developed enterprise software is not slowing down. Major franchises are often leading off recruiting pitches with their very own software products, many of which are as technically sophisticated and business-comprehensive as what’s found in the open market.
Expect to be offered use of a CRM solution, which will likely include lead generation tools, email marketing, listing promotion and long-term lead nurture campaigns. Added value will come in the form of online advertising capabilities, individual listing and agent profile pages, and maybe virtual home tour tools.
In short, what you’ll be offered is not what was offered to agents even five years ago. Know that today’s software-driven efficiencies are powerful ways to empower your business. Honing your sales and prospecting skills should be paramount, but know that the faster you embrace the technology you’re offered, the faster you’ll reach self-sufficiency.
Agents looking to switch shouldn’t expect a brokerage to cover the costs of personally preferred tech you want to carry over, such as calendar apps, video-editing software or online tour vendors. If it’s specialized to you, it’s likely on you to pay for it.
Otherwise, you’ll have to adopt to the broker’s existing partnerships. However, switching CRMs is no longer the massive data haul it once was. Most of today’s vendors will gladly handle that for their users. You’ll have to train on the new solution, of course.
Remember, brokers invest a great deal of time and internal energy to determine what products will work best for their business. It stands to reason that your new broker sees their technology investment as a reflection of their culture and would expect new agents to embrace it with that in mind. In terms of brokerage-provided tech, look for the following basics in your due diligence:
- A flagship CRM or contact management solution.
- Social and other forms of digital brand and listing advertising.
- A comprehensive, modern and consumer-focused website experience.
- Web-based print marketing solutions.
- Digital transaction management.
- Email marketing accounts (often part of your CRM as well).
Test your potential new brokers for their commitment to technology. Are they offering (i.e. reselling) you all kinds of CRM and marketing options, or are they dedicated to one — maybe two — CRM solutions? This matters a great deal, as does how they integrate their agents into technology decisions.
In the same way some offices perpetuate the antiquated but nonetheless successful “butts-in-seats” profitability model, it’s not unheard of for brokers to leverage wholesale pricing for software and sell it to their agents at retail, essentially using software as another profit center.
This is good for only one person — the broker. Not only is it myopic leadership, it demonstrates a lack of dedication to technology, results in widely varied levels of user success and encourages agents to always consider what’s next.
Tech-savvy brokers seek partnerships that support their culture and the way they want their business to run. They involve agents in needs determination, talk to buyers and sellers, and understand that innovation is always happening.
There’s also no reason a modern broker should not have a clean, strategically driven website. Much of this starts with a tight, marketable URL, easy-to-find agent pages, smart search functionality, CRM-connected calls to action and complete mobile functionality.
If you find at least a single, contemporary CRM and appealing web presence, know that your next brokerage is at least aware of what it takes to compete. If you find some of the following value-adds, even better:
One caveat: don’t allow technology to overwhelm you, in either the decision-making process or, once on board, your workday. Tech is there to support your business, not run it for you.
Terms to know:
- CRM: customer relationship management, will be used as short-hand for software that supports it. It often includes capabilities beyond CRM, such as new lead capture, long-term marketing, website creation, etc.
- Back-office: term for the business end of the business, such as accounting, finance, commission distribution, expense management, hiring, etc.
- CMA: comparative market analysis, a general term for determining a home’s value to the market. It’s now offered by multiple software companies as integrations with listing presentations, website front-ends, etc.
- Enterprise software: a solution installed to power, support an entire organization, usually a centerpiece competitive advantage used for multiple business functions.
This should be a priority for new and experienced agents alike. A lack of training is not the sole reason agents drop out of the business, but more of it sure would reduce churn. And it all starts from Day 1.
An attentive, preferably online solution for onboarding is a great tool for brokers to deploy. It smooths out a typically stressful, task-intensive process that no one likes nor should go through anymore. Look for systems that connect bank accounts, collect personal data and a bio for the website, and clearly lay out what you should expect as a member of the team.
Look also for regular sales meetings, which will likely be online right now. Enterprise technology solutions for regular training and performance grading are becoming more common and increasingly important as the industry evolves. Agents should leverage such tools to the fullest extent for both justification of your sales should they need to be defended and, of course, so you know where and how to improve.
Never overlook the little things, such as filling out listing agreements, buyer offers and the ever-shifting library of addenda. One missed check box can turn a deal south, so never underestimate the power of a dotted i.
All national franchises offer training webinars, conferences, books and YouTube channels on how to be a successful real estate agent.
Some training programs are indeed better than others, and the bad ones can be spotted by the recency of their information and infrequency. Are trainings espousing sales tactics and industry ethics from 10 years ago? How about five? You should make sure the skills and tips you’re digesting for the long-term health of your career overlaps with where you want to take it.
New agents should expect their licensing class to be up to date on recommendations regarding lead generation, client management and at least, the basics in one-on-one sales tactics. For example, if a brokerage recruiter visits a class and espouses the benefits of their office’s door-knocking plans and grocery cart signage campaigns over digital display advertising and virtual tours, it would be safe to consider them slightly behind the curve.
In short, new agents need to use their best judgement when it comes to assessing how well you’ll be supported, given your lack of precedent. You can certainly inquire to speak to any agents who have started and remain at a particular company about their mentorship experience.
Brokers have to make themselves available to you for general questions and, of course, critical deal situations. Ask them to provide sample scenarios where their involvement would be needed, and if a legal issue ever rises, what can you hope to rely on besides errors-and-omissions insurance?
Inquire about mentorship programs, and it never hurts to ask around about helpful office mates and top producers who like to share wisdom. All the seminars, invited speakers and coaches can’t replace actual experience, so get yourself out there and make some mistakes (legal ones, of course).
Support also manifests itself in the staff your brokerage employs to assist its revenue producers. Marketing managers and creative staff are a sure sign of a smart, market-savvy broker. An active, tight relationship with an outsourced partner is also a good sign.
You may also find that some companies provide financial services and tax planning assistance. In some cases, they’ll provide software that can assist or at least connect you to preferred partners.
Transaction coordinators can be invaluable business assets to real estate agents and should be treated as such, even if an ample software solution is in place to facilitate transactions. General administrative staff, ranging from team assistants to an intern program are also sure signs of a brokerage that wants its agents to focus on revenue generation, not getting on their feet.
Overall, and despite the independent nature of the real estate profession, the culture of brokerage can mean a lot to your success. It can range from creative and accepting of new ideas to overly rigid and corporate. Many approaches work, but always know what it is you’re walking into before you agree to hang your license with a brand.
New agents especially need to grasp the critical nature of landing in the right place. You will be plied with pitches about mentorship, technology and aggressive income potential — none of which matters if the environment isn’t a match.
Real estate does not require a boiler room mentality; it’s not a place defined by crass, cash-driven competition or shark-and-minnow business ethics. Leave those ideas to the movies about Wall Street.
Whether under the banner of a national franchise or a 10-person family indie, the best brokers look to cultivate an environment of collaboration and service, a place where new and established agents alike can dispense as much expertise as they witness.
Look for offices that hold regular company events, show encouragement of new ideas and celebrate agent success. In general, are people happy when they’re working? Is it a positive place?
However, know that the agents have to be on board with a broker’s efforts to bring people together. If a few agents tend to make the workplace (virtual or otherwise) unpleasant, take that as a sign to reconsider, or at least look deeper to determine if their behavior is deeply entrenched or an anomaly.
It’s likely you’ll know someone at each of the offices you’re considering, so rely on their feedback on what it’s like to work under the brand and brokerage.
New agents should ask about how often agents have left and about ongoing retention efforts, such as milestone-based bonuses, increased splits or similar incentives for agents. How brokers keep their agents in place will tell you a lot about a work environment. Also, specifically ask less-experienced agents what their first year was like and if their career goals include remaining with the same brokerage.
Inman Contributor and San Diego-based Compass agent Jason Cassity wrote that the first two years of an agent’s career are when they learn to either “sink or swim,” and who they choose to work for can make all the difference.
“When you’re ready to start working, make sure you interview with at least two or three different brokerages,” he wrote. “Unlike a traditional job environment, where the employer is interviewing you to see if you’re a good fit for them, you should be interviewing the brokerage to see if it’s a good fit for you.”
One advantage to the major franchise brands is that it’s easy to uncover their work ethic, business principles, websites, social media and reaction to nationally attended events.
“Working with a national brand will also give you some great name recognition that you need because you will not have any experience to lean on,” Cassity wrote.
Smaller, independent brokerages offer a shorter distance between new agents and top producers, providing more opportunities to learn.
“Generally, you’re going to be working directly with the broker and all of the experienced agents, Cassity wrote about independents. “The level of hands-on, on-the-job training is what will stand out. Because there are fewer agents around, you’ll have a shot at more of the office leads generated, as well.”
Yet, it’s understandable that a smaller, more personable office may not be what makes you productive. You can be good at real estate and a little introverted, despite what industry norms suggest.
The key is to find a place that compliments your approach to business and has the tools and people in place to stimulate progress.
Don’t look for reasons to justify a culture you’re not convinced is the best option for your long-term needs. Never enter a work situation thinking it will be “temporary” or a stopgap — you’ll only suffer under a lack of commitment and lose valuable growth opportunities.
It’s easy to determine ahead of time if a brokerage you’re considering encourages teams. In fact, it’s often the success of a specific team that pulls new agents into a brokerage.
If you have your eye on a team, your best path to joining it is to reach out to the leader first. If after a few meetings they think you’re a good recruit, they’ll likely lead the way for you to join the brokerage.
Teams have risen to power in the past few years, commanding exceptional market share and earning their parent brokerage a great deal of money. Some of them make their own technology and marketing decisions, develop proprietary lead generation tactics and essentially function as their own franchise within a brokerage.
Perhaps the most prominent drawback is that most new members to established teams end up having to earn their way into a position of authority, and it can be hard at times to balance applying your expertise in a tight-knit group. Rest assured though, play your cards right, pay your dues, and you’ll likely become a top earner quickly.
Changing brokerages can be a big deal for some agents. Others can do it like changing socks. The key is to make sure your decision isn’t made on whim or comes as the result of an assertive recruiter.
You can ultimately rest assured if your reason for switching was yours and if your decision was made for the good of your career. This takes careful due diligence, introspection and the wisdom of people you trust. Good luck out there.
Craig C. Rowe started in commercial real estate at the dawn of the dot-com boom, helping an array of commercial real estate companies fortify their online presence and analyze internal software decisions. He now helps agents with technology decisions and marketing through reviewing software and tech for Inman.