There are many different types of real estate companies to choose from. To help you determine where your best fit might be, I’ve broken them down here into five general categories.
The first category is commonly referred to as the mom-and-pop company. The mom-and-pop office is usually one where the broker/owner is still listing and selling real estate. He or she doesn’t have a separate manager. These types of operations have fewer than 20 agents in their offices. They are not part of any kind of franchise.
The advantage of this type of company is that it’s hard for you to hide. The broker can always motivate you and get you to work hard. It can be a very positive atmosphere. It’s intimate. You don’t get lost in the shuffle.
For example, when I started in real estate, I started in a mom-and-pop office. The company I was working for at the time had maybe 10 or 12 people, tops. I was young and living on my own, since my dad passed away when I was 14. At 19, I was the only boy in the office. The women in that office became like a surrogate family to me. They were all looking out for me and taking care of me. It was good for me at that time in my life to have had that kind of support.
Large Independent Company
The second category is the large independent company. This type of company, which is not part of a franchise organization, is solely owned and has at least 100 to 200 agents. Some large independents have over 2,000 agents. (I know of one that has over 10,000!) The good thing about a large independent is that there is a tremendous amount of money coming into that company because it has so many agents and so much market share. What’s really positive about that situation is that the money can be funneled back to the agents in advertising and in the local market. These large independents focus their energy, their money and their resources in the market that they want to own. They are not spread too thin. But there is one disadvantage: you can get lost in a large company unless the manager is exceptional and is very hands-on. With a large independent, you will find a lot of synergy and energy. There’s very much a large-family feel to it.
The third category is the franchise. Some of the most popular franchises are Exit, Keller Williams, Century 21, Coldwell Banker, Better Homes & Gardens, Berkshire Hathaway, Weichert and Realty One. A mom-and-pop office or a large independent can actually buy into one of the franchises—and no longer be independent.
With a franchise, you can tap into the power of the national exposure that the company brings. The other things a franchise provides you with are training, education, name recognition and perceived value, to name but a few. There’s a great argument to be made that, when someone hires your company, he or she is actually buying into the whole franchise nationally; that perception benefits the seller. So, there are some advantages to working with a franchise.
Unlike with the other two types of companies—the mom-and-pop operation and the large independent company—with a franchise, part of your commission will go toward the national advertising budget that the franchise has. Those costs do eat into your profit a bit, but the argument could be made that the money you’d be paying for advertising would go back to you in business that you wouldn’t have had otherwise if you weren’t a part of the franchise.
The fourth category is the discount broker. A couple of franchises—for example, Help-U-Sell and Assist-2-Sell—are focused solely on the discount broker. Here’s how discount brokers operate. They offer limited service to sellers, and because they have limited marketing, they can charge sellers lower fees than some of the other companies.
So, let’s say the average commission in a market is 6 percent. Discount brokers might have commissions of only 2, 3 or 4 percent. What the discount brokers are trying to do is attract sellers based on something other than the marketing that they do or on something other than market share. They are trying to attract the sellers based purely on price. That is the main focus of this model. An analogy would be the difference between going to a doctor and going to a
clinic. If you went to a doctor who specializes in what ails you, you’d be getting thorough treatment. A clinic would charge less, but you’d be getting fewer services. A discount broker is like that clinic. The full-service broker who is charging the higher commission would be like the doctor who specializes.
The fifth and last category is the 100-percent company. A couple of franchises that you would recognize would be RE/MAX and Realty Executives. To fully understand how a 100-percent company operates, you need to know how an agent gets paid.
Every real estate transaction has two sides: the listing side and the selling side. The selling side is the office and agent who brought the buyer to the property; the office that listed the property would be the listing side. So, you would take 100-percent of the commission and split it in half between the two sides; 50 percent goes to the selling office and 50 percent goes to the listing office. The agent of each office shares his or her percentage with the broker. So, let’s say you’ve got a $10,000 total commission. Five thousand dollars goes to the listing office and five thousand goes to the selling office. Let’s say that each agent in both offices is on a 50-50 split with his or her broker. That means each agent is going to get $2,500, and the broker of each office gets the other $2,500. That’s the model across the board for commissions and how agents get paid.
With the 100-percent model, the payment is handled like this: The selling side still receives half of the $10,000 total commission: $5,000. But the agent in this model would keep the full amount. He or she would not share that $5,000 with the broker. (Sometimes the amount might be divided a bit, so the agent would keep, say, 95 percent and the broker would get 5 percent. But, for all intents and purposes, it’s still the 100-percent model.)
Sounds like a great arrangement, right? But you’re thinking, wouldn’t the broker have to be paid somehow? They would. With the 100-percent model, how the broker gets paid is by actually charging each agent rent. In such a situation, you’d be paying a set amount of dollars to the broker every month—say, in this case, $800—whether or not you have any money coming in. You also have to pay all of your own expenses—all of your own advertising, all of your own supplies, everything. With the other models that I mentioned before, that wouldn’t be the case.
There are also hybrids of the above. More and more companies are offering flexibility in terms of commission structure. What you should be looking for in a company is one that will support your growth, help you shorten the learning curve, and provide the training and guidance you need to succeed.
Take some time to do your homework to see what company in your area is the right fit for you!
You’ve got this. I’m here to help, with a passionate community of Power Agents® that can be there for you as well. Learn more at www.ThePowerProgram.com/NewAgentSuccess.
Darryl Davis, bestselling author of “How to Become a Power Agent in Real Estate” and owner of Darryl Davis Seminars, has trained and coached over 100,000 real estate professionals around the globe for more than 27 years. He is the founder of the Next Level® real estate training system, The Power Program®, which has helped agents double their production over their previous year. For more information, and the new agent tools that can help take you to your Next Level®, please contact firstname.lastname@example.org or visit www.ThePowerProgram.com/NewAgentSuccess.