Launching your real estate career is a major decision – and for any major change, you need the right team supporting you. Choosing a real estate brokerage is an extremely important decision during the licensing process. After all, this partnership will be instrumental in your success – or failure – as a real estate agent.
The simple truth is that not all brokerages are alike and finding the right match for you can take time. Invest in yourself and take the initiative to interview different brokerages. This will allow you to get a feel for all of the options available to you.
When you’re interviewing a brokerage, it is easy to get swept away by the presentation. Some of the biggest details you will want to understand are often the ones overlooked. That’s why it’s important for you as an entrepreneur to have a plan and understanding of what you are searching for in a potential partnership.
What is a real estate brokerage?
A brokerage is an agency of real estate agents headed by a broker or multiple brokers. A brokerage can be as small as just one broker or it can be a large company or international franchise.
A broker manages the agency, oversees deals, trains agents and staff and maintains errors and omissions insurance. Brokers earn a percentage of each agent’s commission in return for these services.
Brokers in Iowa are required to work for two years as a licensed real estate agent, complete 72 hours of broker courses and pass the broker’s exam to earn their license.
Why do you need to commit to a brokerage?
You must be working for a brokerage in order to get your real estate license. Real estate agents cannot work solely for themselves without the oversight a broker provides. Broker oversight can include, but is not limited to, ensuring agents meet continued licensing requirements, training agents on best practices and legal regulations and monitoring agent behavior and legal compliance.
Every state requires agents to work under the guidance of a broker, otherwise known as “hanging” your license in a brokerage. However, you will find that most agents work independently with the freedom and flexibility that entails.
Once you’ve found a brokerage you want to work for, the managing broker will have to sign off on your license application so that Iowa Professional Licensing Bureau knows who you are working for.
How do you find a brokerage?
Use your network! Talk to friends, family and anyone you know who’s bought or sold real estate lately. Do a comprehensive search to see which brokerages are operating in your area or the area you want to work in. Think about the last time you bought or sold real estate- who did you work with? Most agents start working with the brokerages that are closest to where they live or brokerages with agents they’ve worked with in the past.
These are some questions to ask about the brokerages in your area:
- Who has the best reputation?
- Who is growing and expanding?
- Who is advertising effectively?
At this point, you should already have talked to current agents about life in real estate. What brokerages did they recommend? Current agents will have insight into the process and can share their experiences looking for the right brokerage to work for.
Check out what these current agents had to say about choosing a real estate brokerage to work for:
When should you start interviewing brokers?
It is highly recommended that you start interviewing brokers at the beginning of the licensing process. It takes time to find brokerages you’re interested in, set up meetings with the managing brokers and decide which one is the best fit for you. It is in your best interest to have a brokerage selected by the time you finish the licensing exam and education requirements.
How much do I pay to a brokerage?
No matter which brokerage you choose to work for, you will have to pay fees and split commission with the managing broker. Each brokerage is different in what they offer, what you will have to pay for out of pocket and what the commission split percentages are.
How often do I pay a fee? Some brokerages will charge you a monthly fee to cover costs and some will give you one annual fee to pay upfront. Many agents are enticed by brokerages that offer a low annual fee but come to find the brokerages that offer this usually don’t provide any additional services except at a high cost to the agent.
What does my fee cover? It depends on your brokerage. In addition to the management services mentioned before, some brokerages will include extra services and perks. These are some of the services a broker can provide:
- Office space
- Support staff
- Continued education
- Customer relationship management tools
- Lead generation and marketing systems
- Marketing materials
- Team meetings and training
- Networking opportunities locally & nationally
- Financial support services
- E&O insurance
- MLS fees
- Other tools of the trade
Some brokerages will cover these costs for you and charge you a higher fee upfront. Other brokerages will offer these services at additional cost to you and some brokerages will have a mix of both. In addition, there are some brokerages who do not offer any of these services but will have very low fees as a result. It’s up to you to get all cost information from a brokerage during interviews so you can decide what you need as a new agent.
What are my commission splits? A commission split is a ratio that determines how a commission from a real estate transaction is split between the agent and his or her managing broker. The most common splits for new agents are 50/50, 60/40 or 70/30, with the majority going to the real estate agent. This can vary by brokerage however, so always get this information upfront. At many brokerages, your splits can increase as you sell more so you will earn more money from transactions over time.
Some brokerages will entice you to commit to them by offering you low up-front costs and high commission splits so it seems like more money is going into your pocket rather than the brokers. Many real estate agents will tell you not to just chase the money when it comes to choosing a brokerage. It’s important to get all the facts upfront and decide what you need a broker to provide. There is also more about a brokerage to evaluate than just the financial aspects of it- such as culture, training and brand.
Here at CENTURY 21 Signature Real Estate, we believe in complete transparency when it comes to our compensation plans. Click the button below to learn more about our comp plans so you’ll know exactly how much you can make as a C21® agent.
The Different Types of Real Estate Brokerages
You will quickly discover that no two brokerages are alike. Each one is different, not only in the cost structures, but in what they offer in support, development, training and education. You’ll usually encounter these four broker types:
What is a Franchise Brokerage?
A franchise brokerage is the most common type of real estate brokerage. All of the real estate names you are familiar with are franchises: Century 21, Keller Williams, RE/MAX, Coldwell Banker and Berkshire Hathaway HomeServices, just to name a few. Many of these are national and international franchises but you’ll encounter plenty of franchise brokerages that only operate at the state level, such as Iowa Realty.
Pros of a Franchise Brokerage
A franchise brokerage is appealing to many agents for a few reasons:
- Name recognition. One of the biggest benefits of working for a franchise brokerage is the clout that comes from brand awareness. National franchises are well-known everywhere and when you introduce yourself as one of their agents, your clients will know right away what kind of reputation your firm has- which can be a huge advantage!
- Resources. Franchises tend to have more resources for you to use to make your clients happy from state-of-the-art databases, tech support, marketing tools and sales training.
- Training and education. Some franchises have training programs to pair you with an experienced agent to shadow, education programs to guide you through the first year and continued education opportunities for license renewal and professional development. Not all franchises offer this however, so you should always ask about it during your interviews.
- Network. Becoming a member of a franchise brokerage puts you in touch with a wide network of agents across your state and possibly the country. You have access to a wide support system that can provide insight into the real estate market and help make you a better agent.
Cons of a Franchise Brokerage
You may experience some challenges as an agent with a franchise brokerage:
- Individuality. As an agent with a large franchise, you may see the long roster of agents and think you’ll just be another number to the managing brokers. While some brokerages may have a hard time expressing individuality, there are franchises that encourage and develop creativity and entrepreneurship in their agents.
- Competing brand identities. As an agent, you’re building yourself up as a business owner. You are your own brand! When you join a franchise, you may be wondering if your personal brand will be overshadowed by the franchise’s brand recognition. A good franchise will understand the benefits of empowering agents to build their own individual brands.
- Cost. It can cost more in fees to be an agent with a franchise brokerage and when you’re a new agent, your commission splits are usually lower. That’s why it can seem enticing to leave a franchise brokerage for a smaller independent agency that offers lower fees. Keep in mind that higher fees at a franchise brokerage cover more services and tools that you use every day to be successful as an agent.
What is an Independent Brokerage?
An independent brokerage, or a boutique brokerage, is exactly what it sounds like- a brokerage that is not part of a larger chain of franchised brokerages. Independent brokerages tend to be pretty localized, i.e. they only operate in the area in which they’re based.
Pros of a Independent Brokerage
There are a few advantages to joining a boutique brokerage:
- Local recognition. Independent brokerages are very knowledgeable about the market they operate in. They tend to be very plugged in to the local community which gives you an advantage with local clients.
- Education. Smaller independent brokerages can’t always offer in-house education opportunities and teachers. So they usually send their agents to the local REALTOR® organizations which means you get continued education from the leading authorities in real estate.
- Individuality. One of the biggest draws for an independent brokerage is the idea that you have the flexibility and freedom to work independently as your own person. Boutique brokerages typically encourage autonomy and let you focus on building your business.
- Cost. Boutique brokerages typically charge less in fees and may offer you higher commission splits right off the bat. This is appealing to many agents who balk at the idea of paying high fees at franchise brokerages.
Cons of a Independent Brokerage
While an independent brokerage is appealing to many agents, there are a few drawbacks:
- Fewer resources. Boutique brokerages can’t typically match the wealth of resources a large franchise can. This includes a lack of support staff, marketing materials and structured training for new agents. This means you’ll spend more time covering administrative tasks, creating your own marketing materials and learning on your feet- rather than working for your clients.
- Lack of training for new agents. Small independent brokerages typically don’t offer the structured training and mentorship that is available to you at a large franchise. The first year or two as a new agent is crucial for building your network so this may not be the best type of brokerage for an agent just starting out.
- Cost. While boutique brokerages charge less in fees, this doesn’t mean that the difference stays in your pocket. If a boutique brokerage can’t provide administrative support, marketing services, office space, education or errors and omissions insurance, that means you pay for all of it out of pocket. The money you keep after lower fees will soon be spent on these services that are already provided for you at a franchise.
What is a Hybrid Brokerage?
Hybrid brokerages are becoming more common as real estate agents blend traditional brokerage practices and modern technology. A hybrid brokerage differs from a franchise or independent broker in what it offers an agent. Instead of paying an annual fee and splitting a commission with a managing broker, a hybrid brokerage takes a more a la carte approach. The brokerage will provide some mainstays of the business like negotiating sales but additional services are charged as separate line items to the agent. Basically, you pay for what you want. Some, but not all hybrid brokerages have a local office for agents and clients to use.
There is no set standard for what makes a hybrid brokerage so you’ll find it varies by business. A well-known example of a hybrid brokerage is Redfin.
Pros of a Hybrid Brokerage
There are some unique advantages that come with using a hybrid brokerage:
- Flexibility. Experienced agents with solid networks may not need the supervision that a traditional brokerage offers. A hybrid brokerage offers the flexibility for seasoned vets to only pay for the services they need.
- Technology. Many hybrid brokerages do not have a physical office in town and instead use all digital tools to connect and build the business. This includes features like instant booking for showings and apps for browsing inventory and messaging clients.
- Pay. Some hybrid brokerages take an unusual approach to how real estate agents are paid. Redfin is a hybrid brokerage that pays its agents an hourly wage- something you never see in real estate. Not all hybrid brokerages offer a wage but many are appealing to agents because of the low cost of joining and minimal fees.
Cons of a Hybrid Brokerage
Hybrid brokerages are not ideal for everyone for a few reasons:
- Lack of support. For new agents or anyone who benefits from the support and structure of a traditional brokerage, a hybrid brokerage may be too hands-off. There may not always be a local office to gather with other agents and basic support services will come at cost to you.
- No local connection. Not all hybrid brokerages have a local office for you to set up a desk or meet clients. Agents work remotely and stay connected through digital tools which means you don’t have access to the local network that a localized brokerage would offer.
- Lack of development. Traditional brokerages can offer continuing education classes, professional development opportunities and a strong network- often in-house. Hybrid brokerages are more hands-off so training, educational courses and finding professional organizations are completely up to you.
- Quantity over quality. Part of hybrid brokerage’s selling points to their consumers is a low commission rate- only 1-2 percent compared to a typical 6 percent. That means agents receive lower commissions on every sale and have to make up the difference in volume. This makes it easy for your clients to become numbers rather than relationships.
What is a Virtual/Cloud Brokerage?
A virtual (or cloud) brokerage takes a hybrid brokerage to the next level. A virtual brokerage is a digital-only agency with no physical offices. Virtual brokerages are still somewhat new to the industry and there are only a few operating in the market. Virtual brokerages use cloud-based technology to connect to agents and are usually inexpensive to join. These types of brokerages are appealing to agents who live in remote areas with few brokerages in town, established agents who prefer to work independently and agents who prefer a virtual workspace to a traditional office setting.
One example of a virtual brokerage is eXp Realty. They’ve taken the concept of a virtual brokerage a little further by creating a simulated office. Agents can log in to their platform online and see themselves as virtual characters interacting with other agents in a virtual reality world.
Pros of a Virtual Brokerage
Virtual and cloud-based brokerages appeal to some agents for a number of reasons:
- Low cost. Virtual brokerages are inexpensive to join. They usually charge a low fee to join, a monthly fee to access the cloud systems and a small broker fee per transaction. This is appealing to agents who are tired of paying out tens of thousands of dollars a year to traditional brokerages.
- Independence. A virtual brokerage is as hands-off as you can get in real estate. Experienced agents who don’t need broker assistance, have strong local networks and don’t need to shadow other agents may thrive with the limited oversight of a virtual brokerage.
- Flexibility in workspace. Virtual brokerages are exactly that- completely virtual. A cloud-based workplace means an agent can work from literally anywhere and still close transactions. Work from home, work from the local coffee shop, work in the car on a road trip- it doesn’t matter! Cloud-based brokerages are accessible anywhere you have WiFi.
- Digital tools. Tech-savvy agents may enjoy a workplace that is completely digital. Virtual brokerages are completely paperless and every tool and system is cloud-based. Anyone who thrives in a digital world and can move quickly may enjoy the freedom a virtual brokerage offers.
Cons of a Virtual Brokerage
This type of brokerage isn’t for everyone and has its own set of cons:
- No in-person connections. You are literally working alone if you work for a virtual brokerage. There is no office, no meeting place for team members, no in-person check-ins and it’s up to you to make connections to anyone else who may be local- if there are local agents in your area who also work for the brokerage. If you’re a social person who enjoys working collaboratively, this may be a lonely way to work.
- Must be tech-savvy. It’s 2020 and we’re assuming just about everyone is tech-savvy by now. However, a virtual brokerage is completely online. There are no physical copies of anything, all of your systems and tools are cloud-based and even your team meetings (if any) will be virtual meet-ups over the Internet. Agents who prefer to work in-person with other people may not enjoy spending all of their time online and if for some reason you don’t have access to WiFi, you’ll find it hard to get anything accomplished.
- Harder for new agents to develop. If you’re new to the industry or just starting out, a virtual brokerage will not give you a local support system to tap into. You will be left completely on your own to create a network and there won’t be any experienced agents to shadow day-to-day.
- Quantity over quality. Virtual brokerages are like hybrid brokerages in offering low commission rates to clients. Even if a virtual brokerage offers 100 percent commission to the agents, an agent would still have to choose volume over selection in order to make more. These current agents had a lot to say about the payment plans different brokerages can offer. “Anyone can pay you more, but if you don’t know what you’re doing, it’s hard to make more,” said Renee Dunkel, a licensed real estate agent since 2016.
What to Look For in a Brokerage
Think of your relationship with a brokerage as a partnership, rather than an employee-employer dynamic. It’s in the best interest of the brokerage to support you and you want to find a brokerage that will develop you as a business owner. Don’t forget, you’re an entrepreneur looking for the right partnership to help you succeed.
These are some of the topics to consider when interviewing brokerages:
- Coaching and training
- Support services
- Market share
Coaching and training- You will need a comprehensive training program for your first year as a new agent. A good brokerage will help you learn the ins and outs of the business by offering an education plan, facilitating mentoring or shadowing opportunities with experienced agents, offering support during your first few transactions and checking in with you throughout the first year or two to help you meet your goals.
Support services- Some brokerages provide end-to-end support and solutions, while some offer a pay-as-you-go approach and still, others offer only limited virtual support. You have to decide how much help you need to flourish.
Market share- Bigger is not necessarily better, but it’s important to know and understand a brokerage’s footprint in the local market. You want to ensure the brokerage you select has a strong understanding of local communities and the housing markets.
Reputation– What is a brokerage’s reputation? This question is better answered by friends, family and industry professionals like agents and lenders who have worked with different brokerages and can offer insight into their reputation in the community.
Culture– The culture of a brokerage (even a virtual one) will have a big impact on your work. Evaluate their vision and mission, what team members are like and if the company personality is one you enjoy.
Reach out to brokerages in your area and set up interviews with the managing brokers. This will be your opportunity to get answers to all of your questions.
What questions should you ask when interviewing a brokerage?
Walk into your meetings ready to dig deep into the topics mentioned above. This is your chance to find out everything you can about the company so you can decide if it’s the right place for you to succeed. A good broker will answer all of your questions thoroughly and honestly so you have a clear picture of the company. These are some of the questions you should ask:
Coaching and Training.
Questions to ask about how the brokerage trains new agents:
- Does the brokerage offer new agent training?
- If so, what does it look like? Is it 1:1, small group or large group?
- Will you be working with someone who will be a mentor/trainer/coach?
- If not, who do you call when you have your first offer to write, first listing appointment or just have questions in general?
- What tools and systems does the brokerage provide?
- How will they train you to use them?
- What kind of costs are associated with training?
Questions to ask about what kind of support services a brokerage offers:
- What kind of support staff does a brokerage have?
- What does it cost you to use staff services?
- Does the brokerage offer end-to-end services for a transaction or is it plug-and-play style?
- Does the brokerage have office space you can work from or meet clients at?
- If so, does it cost you anything to use it?
- What services are included in your fees and which are offered at extra cost to you?
- Does the brokerage provide any leads?
- What kind of technical support, if any, does the brokerage offer?
- What other tools does the brokerage use?
Questions to ask about a brokerage’s branding and its share in the local market:
- Is the brokerage part of a bigger brand?
- What are the benefits of working for the brokerage? (This question applies to any brokerage, no matter the size or style.)
- What events or training does the brokerage offer?
- What kind of extra tools and support does the brokerage offer?
- What kind of local network and connections does the brokerage have?
- If the brokerage is a franchise with an HQ out of state, how does that work for the brokerage?
- Does the brokerage promote local listings for agents?
- What kind of goals does the brokerage have for the business?
Cost and Commission.
Questions to ask about cost structure and commission splits:
- How much does it cost to be part of this brokerage?
- What kind of monthly costs for education, training, desk fees, etc. are there?
- What does the brokerage cover and what will you pay for?
- What is the commission structure?
- Does the commission structure grow over time?
- What other services does the brokerage offer? Such as marketing, finance, coaching, etc.
Questions to ask about the brokerage’s culture and team:
- What kind of team culture is there?
- Is it a collaborative environment or does everyone work independently?
- Are there team meetings, group sessions, happy hours, etc.?
- If there are team meetings, what do they look like and will you be expected to attend?
- What type of agents work there- hobbyist or full-time?
- How many agents are there?
- What are the company’s vision and mission?
At the very latest, you need to select a brokerage by the time you pass your licensing exam and complete the education requirements. Once you’ve committed to a brokerage, the managing broker can guide you through the last steps in the process.
Ultimately, you want to select a brokerage that matches your needs and your style of working. It’s best to interview a few different types of brokerages to get a feel for your options when it comes to training, brand value, market share, commission and culture. Your broker is instrumental to your success as a real estate agent.
HOW TO SUCCEED
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