As a new real estate agent, the first step you’ll need to do is choose a real estate broker to hang your license under – this is REQUIRED in order to practice real estate!
The process of picking a broker can start very early. Some states even require you to be sponsored by a broker when you take your licensing exam. But where do you even start? Don’t worry! Finding a real estate broker to partner with doesn’t have to be intimidating.
Here are 6 steps for Real Estate Agents on how to choose the right brokerage for you!
How to Choose the Right Brokerage for You in 6 Steps
- Determine your Goals
- Ask About Commission Split and Fees
- Evaluate the Support/Tools
- Determine Agent Benefits
- Try the Technology
- Ask About Extra Income Opportunities
Step 1: Determine Your Goals
The first step for new real estate agents when they begin to choose a brokerage is to define your your own personal goals.
- What is your purpose in getting your license?
- How do you see your career as a real estate agent panning out?
- Do you want to be a full time real estate agent or a part time agent?
- Will you use your license for investing?
- Do you want to do residential real estate or something else?
These are all the questions you should ask yourself before you can begin to choose a brokerage.
Many new real estate agents tend to have trouble determining how to choose a brokerage because their goals aren’t defined. They tend to fall into “big name” companies or national franchise models only to find out later that it wasn’t a good fit for them at all and actually cost them a lot of money that they won’t get back.
No one brokerage can be the perfect fit for every real estate agent. So you have to ask yourself what are the most important aspects in a brokerage for YOU. Once you’ve defined your personal goals in the real estate business then you can begin to determine how to choose the right brokerage for you.
Step 2: Ask about Commission Splits, Caps, and Fees
One of the aspects to look at when you choose a brokerage is to determine how much you are going to get paid when you make a sale. Now a few real estate companies offer salaried positions for their agents but most brokerages are on a commission split with their real estate agents.
Commission splits can vary a lot from broker to broker. Some brokerage will have a 50/50 split while others will only charge a flat transaction fee. Keep in mind that support, tools, training, will all vary as well!
Many real estate brokerages charge a 60/40 split, meaning that the broker takes 40% of your Gross Commission Income (GCI) and you keep the other 60%. Say you sell a $220,000 home on 3% commission. The GCI is $6,600. On a 60/40 broker split the brokerage will take 40% of that or $2,640 and you get to keep 60% or $3,960. Of course, this amount is BEFORE other expenses, taxes, and broker fees.
Although the 60/40 split is common, there are brokerages out there that offer 80/20 splits where their agents get to keep 80% of their commission right off the bat.
And on top of that there is a cap, or limit, on how money they have to pay to their broker. When agents reach their cap, they get to keep 100% of their commission. Many brokers have around a $30,000 cap, but some are as low as $16,000. That means that once you’ve paid $16,000 to your broker for the year, you’ll be at 100% commission! How cool is that?
When you’re choosing a brokerage, make sure you ask prospective brokers what their monthly desk, training, franchise, and transactions fees are. Many brokers will charge agents hefty fees to keep their offices afloat because of all their monthly office expenses. Make sure you find out all of the fees that the broker will charge you, because it might take 2-3 transactions per year before you can start seeing net positive income from your commissions!
The good news for real estate agents is that some brokerages have found ways to move their operations online. That means a significant decrease in monthly fees because it eliminates a lot of expenses for the broker – and those savings are passed to the agents as valuable benefits. You can learn more about one of these brokers here.
Step 3: Evaluate the Support/Tools a Broker Offers
Another key aspect for real estate agents to consider when picking a broker is the support they will receive. While some brokers offer lucrative payment plans, they tend to offer almost no support to their agents.
There is a happy medium where agents can make a lot of commission income and have access to all the support, tools, and training they need.
Make sure that the broker you choose has the right systems in place to support you and your business, especially as a new real estate agent. Ask about what training programs the brokerage has for new agents. Some brokers are great for new licensees because they offer whole training programs for them. A few brokerages even offer one on one mentorship programs that pair new agents up with an experienced mentor to show them the ropes!
Another aspect to consider when picking a brokerage is finding out what tools they offer their agents. That includes marketing resources, lead generation tools, CRM software and website, transactions management, company emails/numbers, etc. With the right array of tools, real estate agents can have a massive advantage in marketing and branding, and save an enormous amount of time when completing transactions.
Step 4: Evaluate Agent Benefits
Something that many real estate agents overlook when choosing a brokerage is the benefits that the broker can offer their agents. Real Estate brokerages are notoriously known for not offering real estate agents health benefits so make sure that you keep this in mind when picking your brokerage.
While it’s traditionally known that real estate agents have to fend for themselves when it comes to health insurance, there are brokers out there that are ready to break this trend. Make sure to be on the lookout for brokerages that offer health care benefits, it can be a game-changer financially in the long run.
Step 5: Evaluate Technology
As a new agent, you are just starting out in a career that can last many years. In this day and age it is important that whichever brokerage you go with is prepared for the constantly changing information age. Be sure to evaluate each broker’s technology and how they are incorporating tech into their operations. Brokerages that embrace technology are better positioned to weather any storm or revolution that will put other brokers out of business.
As we’ve experienced recently, the companies that are best prepared technologically are the ones that are the most sustainable in the modern climate. Ask your potential brokers how they are planning to improve their technology as a way to keep up with the market. Determine how much of your business can be done online or in a cloud.
Being with a tech savvy company can not only save you a lot time, but also a lot of money and expenses when you’re doing business. Smart CRM softwares are the new normal for the real estate industry, make sure the broker you choose is able to keep up with the competition.
If you’re really tech oriented, check out this brokerage that operates their business completely online in a cloud based platform!
Step 6: Ask about any Extra Income Opportunities
The last step in choosing the perfect brokerage is to find out if the brokerage offers any extra income opportunities. A few brokers have revenue sharing programs with their real estate agents for trying to help grow the company. If you find the right model, these incentives can help real estate agents retire early by providing us an extra stream of residual income and even be scaled into national or international businesses.
Also some brokerages are publicly traded on markets like NASDAQ. Those companies give out company stock awards to their real estate agents for reaching certain milestones such as making their first sale or capping with the company. Earning free stock for doing your job is a great way for real estate agents to build long term wealth through equity.
Some brokerages are even embracing iBuyer programs rather than shunning them, allowing agents to bring a marketplace of investor buyers directly to sellers. Plus, agents can earn commission on BOTH the buy side of the transaction AND the sell side for the flip investor! That’s DOUBLE commission on the same property, plus additional business from being the listing agent on a newly renovated listing.
Why Choosing the Right Brokerage is So Important
As a new real estate agent you will have tons of uncertainties starting out. A broker will help you get your feet wet, answer your questions, take you through your transactions, and set you up for long term success. Sometimes being with the right brokerage can double your income! You just have to determine what is the best for you.
As professional entrepreneurs, there are no one broker fits all for real estate agents, but always keep an open mind and be on the lookout for brokerages that can offer you the opportunity to exponentially grow your business!
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