Exit Strategies for real estate brokers.
In a recession, the real estate market inevitably goes down. This is because there are simply fewer people with money to buy houses and investment properties. For brokers in this situation, it can be difficult to stay afloat if they don’t have an exit strategy for their brokerage.
Real estate brokerages have big liabilities. Not only do they have to worry about the expenses that they have to pay month after month to run their business, but they also have to think about the lives and careers of the agents that work at their brokerage during a real estate crash, recession, or unfortunate event that causes brokers to look for a way out of the business.
It’s no secret that it is extremely difficult for a real estate broker to run a brokerage that is even profitable, with the right systems in place to operate a business. Real estate brokers carry a lot of risks, both legally and financially.
Rent, office supplies, payroll, software, business reserves, and marketing are all expenses that a real estate broker must pay month after month whether or not their agents bring in any revenue. This means that in the event of a recession (like 2008) or a crisis event (like 2020), many real estate brokers will be faced with a lot of stress, anxiety, and pressure because they must carry the burden of these expenses while they are unable to generate revenue in their businesses.
This is why it’s so important for brokers to have an exit strategy.
An exit strategy is a plan that you make to leave or transition your business. This is important because it can help you if there is a recession or some other problem in the real estate market. When there is less money circulating in the economy for consumers to buy houses, it can be hard for brokers to stay in business. An exit strategy can help you deal with this and make sure that you are able to transition your business smoothly without having to file for bankruptcy, default on mortgages, or be sued by your creditors.
In this article, we will share with you the top 3 exit strategies for real estate brokers and explain why one of these options is the absolute perfect exit strategy for a brokerage.
So whether if you are a struggling real estate broker looking for a way to save your business and reputation, a seasoned broker looking to step away from running your business to enjoy the wealth and lifestyle you have created, or just looking to prepare for the next real estate crash, this article is for you!
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Table of Contents
3 Exit Strategies for Real Estate Brokers
- Sell your real estate brokerage
- Dissolve your real estate brokerage
- Partner your brokerage with eXp Realty
1. Sell Your Real Estate Brokerage
Selling your brokerage to another broker is probably the most common exit strategy for a real estate brokerage.
In this case, you would simply find another broker, real estate agent, or investor who is interested in taking over your business. This can be a great way to get out of the real estate business while still making or saving some money off of your investment.
Why you should consider this real estate brokerage exit strategy
As we mentioned previously, selling your real estate brokerage is the only way that you are able to get out of the real estate business while still making or saving some money off of your investment.
You also have the opportunity to hand over your business to another broker, agent, or investor who is interested in taking it over. This can be a great way to ensure a smooth transition for your business and for your agents.
Additionally, selling your brokerage can help you avoid any legal or financial problems that may come up in the future. When you are no longer the owner of the brokerage, you are no longer liable for any lawsuits, debts, or other financial obligations that the company may have.
The problem with this strategy
Although selling the real estate brokerage is one of the most common exit strategies for real estate brokers, in reality, it can be extremely difficult for a real estate broker to actually sell their brokerage.
One of the main reasons for this is that most brokers are not able to find a buyer who is actually interested in taking over their business in a struggling economy. Most buyers are only interested in buying brokerages that are already successful and profitable that they see a future for immediate profitability and growth.
Another reason why it can be difficult for a broker to sell their brokerage is because of the legal and financial risks that are involved in the transaction. There are a lot of risks for the buyer to take over a real estate brokerage, which can make it difficult for them to come to an agreement.
Why it is close to impossible to actually sell a real estate brokerage
Finally, many brokers who need to sell their brokerage do not have a business or system in place that actually provides a potential buyer with any value.
Think about if you were looking to purchase a real estate brokerage.
What would you want? Why would you purchase a specific brokerage over another?
When a potential investor, agent, or broker is looking to start their own real estate brokerage, they have the option to purchase a pre-built system through buying a franchise office from one of the top national real estate brands.
And since many independent brokerages do not have the same brand recognition and streamlined systems that a franchise brokerage offers their brokers, it makes it very difficult to actually provide the potential buyer with a unique value proposition.
Also, keep in mind that the single most important asset a real estate brokerage “owns” is their agents. A brokerage is only profitable if they have enough agents in their company who are producing sales and generating revenue for the company.
Since most independent brokers work very closely with their agents, most of the agents at your brokerage are there because they like working with you, the broker, and the way that you run the office.
Although that is a fantastic thing, allowing you to attract and retain quality loyal agents in your business, this can be a huge problem for your potential buyer.
A big part of the reason why so many agents stay at independent brokerages is that they have a good relationship with their broker, and sometimes even get a say as to how they are running the brokerage. When a new owner takes over, they will most likely change some of the things that agents liked about the way the previous broker ran their brokerage.
In most cases, a buyer of an established real estate brokerage will face an agent retention problem, especially as time goes on, with more and more agents leaving the brokerage. This makes it difficult for independent brokers to find a buyer who is willing to pay a fair price for their business.
In some cases, potential buyers will actually propose a purchase agreement with the broker that determines the purchase price based on the number of agents the new owner is able to retain over a period of time, with the price being lower if they retain fewer agents.
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2. Dissolve Your Real Estate Brokerage
Although many people do not like to face some of the harsher realities of business, in some cases, there is just no way for you to actually make your money back on your investment and you are forced to dissolve your business if you do not want to take on more debt and sink deeper into financial trouble.
Dissolving your real estate brokerage is one of the most extreme exit strategies for real estate brokers.
In this case, you would simply close down your brokerage and stop doing business altogether. This can be a great way to get out of the real estate business quickly and without any hassle.
Why you should consider this strategy
Dissolving your real estate brokerage is one of the quickest and easiest ways to get out of the real estate business. You do not have to worry about finding a buyer, going through a lengthy sale process, or dealing with any legal or financial risks.
Additionally, dissolving your brokerage is a great way to protect your personal assets if your business is in financial trouble.
How to dissolve your real estate brokerage
If you want to dissolve your real estate brokerage, there are a few steps you need to take.
First, you need to notify all of your agents that you are closing down the brokerage and that they will need to find a new broker to work with. You should also let them know if they have any current listings or transactions that need to be handled.
You will also need to cancel any contracts you have with vendors, such as office space rental agreements, phone and internet service contracts, etc.
Finally, you will need to liquidate any assets of the company, such as office furniture, computers, etc.
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The problem with this strategy
When you dissolve your real estate brokerage, it’s like you’re quitting your job. You have to tell all of your agents that they need to find a new broker to work with, leaving them to fend for themselves.
The main problem with dissolving a real estate brokerage is that it leaves their agents with no place to go. When a brokerage closes down, all of the agents are left without a job and have to find a new broker to work with. This can be difficult, especially if they have been working with the same broker for a long time and have built up a good relationship with them.
Additionally, dissolving a brokerage can be difficult and costly for agents who have active transactions or listings. They will need to find a new broker to work with who can take over their transactions or listings and make sure that they are handled properly.
Finally, dissolving a brokerage can be a challenge for many real estate brokers who have invested a lot of their own money into their business and their agents. Because you are closing down your business, you will not make back the investments you have made when you opened your brokerage like you would had you been able to find a buyer to sell your brokerage to.
This can be a hard pill to swallow for a lot of brokers because they have spent many years building and invested a lot of money into their business only for it to essentially disappear overnight.
Dissolving your brokerage can be an extremely radical and challenging exit strategy for a brokerage, especially because there is now a third option for independent real estate brokers to exit their business without needing to go through the painstaking process of finding a buyer or the heartbreaking process of dissolving their entire company.
3. Partner Your Brokerage With eXp Realty: The Perfect Exit Strategy for a Brokerage
The third and perfect exit strategy for a brokerage is to join eXp Realty.
This is a new way for real estate brokers to relieve themselves of the burden of running a business with costly expenses during a recession without having to sell or dissolve their brokerage.
eXp Realty has provided a new solution for brokerages who are struggling or brokers who want to step away from running the business to run their entire business as close as possible on autopilot for only $85 a month, without having to pay rent, own office supplies, pay for software, pay for staff members, etc.
eXp Realty is the fastest-growing residential real estate brokerage by agent count in the world and the first cloud-based brokerage. In 2021 alone, over 600 independent real estate brokerages partnered their entire businesses with eXp Realty!
As an “agent-owned” and “agent-grown” company, eXp provides brokers and agents with many benefits, such as:
-The ability to own equity in the company (Listed as EXPI on NASDAQ)
-An $85 monthly fee with no long-term contract (leave anytime! Although I doubt you will want to)
-No additional desk fees, royalty fees, or franchise fees
-A revenue sharing program that incentivizes your agents to recruit more agents to your team
-The opportunity to live and work anywhere in the world
-A comprehensive and complimentary training and support system of over 1000 paid employees
-The use of cutting-edge technology, including the first and only real estate metaverse
When you join eXp Realty, you are able to keep your current brokerage name, brand, and website. You are also able to keep your leads, clients, and agents.
The only thing that changes is that you now have the ability to run your business on autopilot with very little overhead costs, and you have access to a wealth of resources that can help you grow your business.
Joining eXp Realty is the perfect exit strategy for a real estate brokerage because it allows you to keep your business running without the costly overhead expenses and time liabilities, and it provides you with many resources that can help you grow your business.
If you are interested in learning more about joining eXp Realty as a broker, click below to find out our group is providing agents with additional training, tools, resources, assets, and systems that no other group at eXp is providing all for FREE.
Why revenue share at eXp is perfect for brokers
Partnering your business with eXp Realty is truly the best option for real estate brokers, whether if you are looking for an exit strategy or not.
Not only are you able to drop your overhead costs, provide your agents with more support and more tools than you can ever do so on your own with your own budget, you are also now able to actually grow and expand your business.
Global Market Share
The revenue sharing system at eXp is changing the way real estate agents and brokers are being compensated, and brokers and agents who join eXp Realty are able to turn their business from a local one to a global one overnight.
Because revenue share at eXp allows agents and brokers to partner with and recruit agents anywhere in the world to earn an override on their commission (paid to you by the company so the agent gets to keep their full splits), you are now running a brokerage that has a global market share rather than a local one.
Agents and brokers at eXp are currently partnering with top talent all around the world, from South Africa to India to Mexico to Hong Kong to Portugal and more, growing their business across and beyond geographical borders.
Another reason why so many brokers are deciding to move their entire business over to eXp is because of the duplication aspect of the revenue share model.
As we mentioned earlier, because all agents at eXp have the opportunity to sponsor other agents to the brokerage and earn revenue share, the agents at your current brokerage will be incentivized to recruit more agents for you at eXp.
Revenue share is paid 7 levels deep, which means that you are able to earn override income from the production of an agent that was introduced to the company by an agent that you directly introduced to the company.
Learn more about revenue share at eXp Realty
By now, most agents and brokers have a general understanding of what eXp revenue share is and the 7 levels of revenue share below you, but what no one talks about is the benefits of also having 7 levels above you.
Because agents at eXp are paid revenue share 7 tiers deep, they are incentivized to help their partners grow their teams. This means that the agent you choose as your sponsor when you join eXp is incentivized by the company to help you grow your brokerage.
This can be a big difference-maker for a lot of brokers because it takes a lot of the stress of recruiting off of them, especially if they are a broker who wants to step away from running a business.
By partnering with the right sponsor, you will get access to support from all 7 of your partners that give you additional systems and training for you and your agents to run their businesses without your involvement.
With the right partners at eXp Realty, you will literally have 7 agents working for you to grow your business for free!
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Partnering with eXp Realty is the perfect exit strategy for any real estate broker looking to reduce overhead costs while expanding their business globally.
Providing excellent training, support, resources, and systems to its agents and partners, eXp is making it easier than ever for agents and brokers to run their businesses successfully.
Want to Learn More About How You Can Partner Your Business With Our Group and Get Access to Additional Tools, Assets, Trainings, Systems, and Resources for You and Your Agents at No Additional Cost? Click Below to Find Out More!