How to Pick the Right Real Estate Brokerage for Your Business
One of the most important decisions you will make as a real estate agent is deciding which brokerage to hang your license at. First, because it’s illegal to sell property without being sponsored. So, unless you are trying to find a way to get thrown in jail or love paying thousands of dollars in fines, joining a brokerage is probably a good idea. Second, because what your brokerage offers (or doesn’t offer) will either set you up for success or hold you back from achieving it.
The thing is, not all brokerages are created equal. Even brokerages under the same company name can be very different. For example, my first brokerage offered zero education for new agents. When the brokerage was closing, I moved to another one under the same name (same owner as well), and it offered education regularly (only for veteran agents, unfortunately). At the same time, brokerages can offer different commission plans and have different fees as well.
While you need to get as much information on each brokerage you are considering as possible, the two main things I want to focus on are education and commissions. Knowing what fees you have to pay is important, and I don’t want to overlook them, but most of the fees brokerages charge fall into a handful of categories. If you want to learn more about what fees to be aware of, check out my blog How Much Does it Cost to be a Real Estate Agent? HERE.
Education
I wanted to start with education because I believe it is the most important benefit a brokerage offers its agents. It is why when I decided to open a brokerage, the first thing I did was put together all of the education we were going to offer, especially for new agents, as that was our focus. It is also the benefit I have seen so many brokerages overlook or think they are offering enough when they truly aren’t. Plus, if you have no idea how to generate business and close sales, it doesn’t matter what your commission plan is, since you won’t be getting paid anyway!
When it comes to education, there are two things I really want you to focus on in your interviews: what mentorship and regular training they offer.
Mentorship
I cannot stress this enough: if a brokerage doesn’t offer mentorship, run the other direction as fast as you can. Not having someone to guide you is like putting an IKEA desk together without the directions. Sure, you could probably figure out how a few pieces fit, but the chances of you building it correctly are as high as MySpace making a comeback.
I owe a lot of my early learning to the mentorship I received from my cousin and then my second brokerage’s Managing Broker, whom I would meet with every other week, and who was also willing to help me when I had questions. When you are interviewing at brokerages, make sure you ask the person you are interviewing with, make sure you get as much information as possible to make the best decision for you.
What to ask about
Who would be your mentor, and can you speak to them before joining?
How often do you meet with the mentor?
Is the mentor available to help you on demand when you need it, or only when you meet?
Is the mentorship personalized, or does it follow a set plan?
Ideally, you want personalized mentorship since your needs are going to be different from other agents.
Knowing what I know now, if I were starting again and choosing between two brokerages, I would choose the one that offered the best mentorship, even if it meant taking a lower commission split. Why? Because I would speed up my learning curve and start producing quickly. This way, I would have leverage to ask for more of a split than what I was going to get when I started. FYI, most brokerages typically start new agents at around 50% splits.
Training
The other thing you want to ask about is what training they offer. I mentioned earlier how my first brokerage didn’t offer, and my second one did. When I switched, I signed up for every training they offered. Even though almost all of it was for veteran agents, I was able to gain a lot of knowledge that I would use later in my career. Most brokerages offer training; it is really about finding out what type of training they offer and how often.
What to ask about
Do they offer training?
If so, do they offer any for new agents?
Ask if you could see a training schedule to get an idea of what they offer. If a brokerage offers training, they should be able to show you what they have scheduled.
Who conducts the training? Is there a trainer, or do veteran agents run it? From my experience, it is better if veteran agents run it because then you will be learning from people with specific knowledge on the topic and not someone who is trying to cover everything but doesn’t have a deep knowledge on everything
FYI, most brokerages do not offer a lot (or any) training for new agents, so do not be surprised if what you hear about is for the veteran agents. Why? Because brokerages typically make their money from the percentage of agents’ commissions they collect. So it makes sense for them to focus on the agents that are producing to get them to produce more, so they make more money.
Commission Plans
In a previous blog, How Do Real Estate Agents Get Paid (which you can read HERE), I explained how the payment process works when you receive a commission check, so I am not going to go into that here. Instead, I want to talk about the typical commission plans you will likely hear about when interviewing. There are a few main ones I will focus on, but there is no standard brokerage use (brokerages can offer whatever they want), so be aware that you might hear about something outside of these.
Set Commission Plan
Of all the commission plans, set commission plans tend to be the ones most offered. A set commission plan is pretty straightforward. The brokerage will offer you a percentage, and this is the amount you will receive on every transaction you do. As I mentioned earlier, most new agents are typically offered around 50% so you would get half of every dollar you make (minus all of the brokerage fees). So, for example, if your commission check after fees are taken out is $5,000, you would see a deposit of $2,500 in your account. I know, very challenging math there, right?
Here’s the thing about set commission plans you need to be aware of. Many brokerages will want to keep you at your lower split as long as possible. As you start selling, they make more money, so for them, the lower your cut, the better. It will be up to you to ask for a higher split. It is not often that brokerages will raise your split automatically. Which is why it is so important that you create leverage, as I mentioned earlier, so you have grounds to fight for the higher split.
FYI, at my brokerage, we started every new agent at 60% to them, 40% to the brokerage, and once they reached a certain amount of production in a calendar year, we increased their split. We found this to be the most effective method to motivate agents and be fair, so if you find a brokerage that does the same, take them into serious consideration, as it is rare.
Capping Plan
Capping plans tend to be more complicated (and, for the record, I do not like these plans since I believe they take advantage of agents, but that’s just my opinion). With this plan, you will start the year at a lower split, say 60%, then once you generate a certain amount of income for the brokerage, they will raise your split to the maximum amount for the remainder of the year. So, for example, if you need to generate $20,000 in income for the brokerage to raise your split, you will need to sell around $2 million in real estate before they increase it. This doesn’t sound like a lot right? But there are a few catches you need to be aware of.
As a new agent, it can take a while to hit the cap in your first few years, and if you do, often it will be near the end of the year when the market is slower, so you won’t be able to enjoy the higher split.
The plans reset every year. So at the beginning of the year, your split goes back to the lower amount automatically, and you have to start all over again.
Capping plans are typically best for veteran agents who have consistent business since they know they will likely cap early and be able to enjoy the higher split for more of the year.
If you want to understand how commissions work and play around with a commission calculator, check out the New Agent Resources page HERE.
Transaction Fee Plan
The other plan to be aware of, the transaction fee plan, is similar to a capping plan. The difference is that, instead of capping off commissions, it is based on transaction fees. For example, if your brokerage charges $500 per transaction and your cap is set at, say $5,000, you would need to close 10 sales before your commission would be increased to whatever the max amount is.
These are not as common but have been becoming more popular, so they are definitely something to keep an eye out for.
Whatever you do, make sure you take your time before deciding what brokerage to join. Interview with any you think would be a good fit. Ask a million questions. Compare them and then decide. This decision is too important to just join the first one you speak to (a mistake so many agents I have spoken to say is one of their biggest regrets).
If you want more information on how to choose the right brokerage and commission plans, pick up my books, The Education of a Real Estate Agent and The Education of a Real Estate Agent Workbook HERE. The workbook also has a section about what questions to ask when interviewing at brokerages to help you out!
“First we make our choices. Then our choices make us.” —Anne Frank
If you are considering getting started in real estate and want to create leverage quickly, check out my coaching program called License to Legend, which is specifically designed to help people looking to enter the real estate industry. The program is designed to help you avoid the frustrations I and so many other agents felt when entering the industry, struggling to survive while clinging to the belief we will succeed. It is completely based on proven results from my experience as a top-producing agent, owning a brokerage for almost a decade (where I helped agents average 2x4 times the amount of sales and income), and from spending over 25,000 hours learning from history’s most legendary people! If this sounds like something that would benefit you, please click HERE to set up a FREE 30 Minute Virtual Call to learn more about how I can help you