eXp Realty

Sean Patrick Murphy

Choosing the right brokerage  is one of the most important  – and exciting – choices  we can make as part of  the real estate industry.  Most of us have bought a product on the  verge of obsolescence, such as an internal  combustion car, incandescent light, CD  or newspaper. You know there is a newer  product being adopted by consumers. Still,  you are either comfortable with the utility  of the older product, or you are getting  a superior value or savings by using an  outdated model. The same thing happens  in the brokerage business. 

Many agents discover their  brokerage by word of mouth,  brand marketing, and perhaps,  online reviews. But there is a  better way!

What is startling is that after conducting  thousands of interviews with real estate  agents, I have not found one that asked  to discuss my brokerage business plan or  financial stability. What is the company’s  profitability? How many producing agents  do you have? I have never had an agent ask  for any proof that a brokerage knew how to  run a business. 

What is real value in the brokerage  business? Most experienced agents would  say a superior financial model, companypaid  support for their business and more  opportunities that create revenue. Most  newer agents would say initial and monthly  cost, training, reputation and available  opportunity when asked.

The unacknowledged truth of the  brokerage business is that the financial  stability of the company leads to value  adds for the agent. Have you noticed  that most companies spend very free  on systems, services and events when  the market is hot? When the market is  cooling, like it is now, companies cut  staff, services and event spending. But the  agents and associate brokers do not get a  corresponding commission reduction for  reduced services or systems.

Take a serious look at your  brokerage model and ask  yourself five very important  questions: 

• Is the brokerage running at a loss? The  market is cooling and any company running  at a current deficit is headed for potential  trouble. Does the company have a plan to  support you and your business in a down  market? 

• Are you getting the service and support  you need? Access to support and staff is one  of the largest determining factors in agent  retention. Whether you are a seasoned agent  or fresh out of school, the brokerage staff is  your key to growing and thriving. 

• Does your company offer value-add  items and programs? Be sure to list out  paid and free. There is usually a bakedin  price for a system, and it is perfectly  fine to pay for something that has a good  return on investment. Critical items are:  Client Relationship Management systems,  marketing, training, leads (referral,  relocation, bank or corporate asset, paid,  portal affiliation), social media and website  hosting, networking / mastermind events  and divisions such as luxury,  commercial, military network, ranch and land, etc. 

• What is your exposure to risk?  Legal compliance and risk are  ingrained in real estate operations.  As your real estate business  grows, the potential legal risks  increase. Does the company have  a superior compliance program,  low deductible Errors & Omissions  (E&O) coverage and on-staff legal  counsel? 

• What are the company’s  plans for increasing market share,  profitability and agent count? How  can you build a bigger business if  your brokerage is not growing with  you? Be mindful of the impact that  the loss of one, or a few agents,  would have on your firm. Are  seasoned power agents moving to  the company, and if so, are they  getting special financial treatment  that the average agent does not get?  Paying incentives to acquire agents  is not sustainable. Net growth  determines future profitability. 

At the very top of the market,  many startups or thin-margin  companies rapidly appear to  partake in the easy money. That  ship has sailed. With price points  being reduced by up to 30%, the  thin margin ventures are struggling.  Ask your brokerage again: how  are they positioned to support you  today? Is your current brokerage,  or a prospective brokerage, built for  this market? 

Down markets are opportunity  creators, so in addition to asking  the right questions, you need to  change your mindset to see the  possibilities. Sowing the right seeds  now will reap untold benefits in  the future, and partnering with the  right brokerage is the critical first  step.