Broker. If you’re a real estate agent, you’re probably reading this with seriously mixed feelings. Here you are working like a madman or earning an extra penny, and as soon as some hard earned money comes your way, you have to give it (or at least a piece of it) a go. What I’m saying is a big chunk of your cake. But that broker does offer some pros, doesn’t it?
hopefully. read on.
While brokers provide a lot of benefits to young real estate agents, more often than not, they are the ones making the real profit. Agents are attracted by a good brand presence – other traps catch up with them later. It becomes a downward spiral. In fact, dealing with brokerage is one of the major reasons why so many agents don’t continue.
But do real estate brokers really give and take advantage of nothing – or is there a bigger picture that agents need to consider when choosing a brokerage?
Let’s weigh the pros and cons.
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4 Disadvantages of Working Under a Large Real Estate Brokerage
1. unfair treatment
There are many stories how real estate agents were cheated out of their earnings because they were associated with the wrong brokerage firms. Today, there are unscrupulous brokerage firms that take young, ambitious agents and make them do all the hard work under the umbrella of their often very well-known brand names.
A brand name brokerage may offer good exposure, but agents often work hard for very little pay – without ever receiving the promised exposure. For new agents, this can be a real morale-killer.
2. Low commission
There is not much money to be made when young agents associate themselves with well-known brokerage firms. As you know, an agent’s salary comes from the commission he gets on selling properties. Unfortunately, their brokerage association drastically changes the figures because they have to split the commission.
These splits are generally unfair to agents, who have little say in brokerage houses when it comes to commission splits. This is especially true when the agent is not getting much value from the broker. It is a bitter pill to swallow.
3. Not many leads
You might think that joining a high-profile brokerage would give you a cascade of leads. Not so much.
Despite the high commission splits, leads are hard to come by at large real estate brokerage firms—especially the good ones. That’s because there’s already a huge team of agents, all with their eyes on the next big deal. (Not to mention that many of said agents are experienced and mature—and will get a sizable slice of the big deals.)
Despite being associated with a top brokerage firm, you can still get cheap deals. Some brokerages require floor time — or the portion of the two hours where you answer the phone, hoping to pick up seller leads. In my opinion, this is complete BS.
4. High Fees
Apart from the commission split, which is often pitifully low, agents are often subjected to higher fees from brokerage houses. A vast number of brokerage firms operate with a flat fee that is “supposed” to cover the charges for all services offered…but sometimes this is not the case. Inexperienced agents are also hit with a range of other fees – everything from office space to internet fees, paper and advertising. You can also pay transaction fee, course fee, training fee and many more.
Some even end up as administrative assistants, doing nothing more than bringing leads to senior agents.
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3 Disadvantages of Working Under a Large Brokerage
While the commission structure is unfair to real estate agents, it’s not always a bad idea to get involved with larger real estate brokerage firms. There’s a good side to this as well—which is why many young agents join.
1. Brand presence
Brokerage houses have been around for years. That strong presence means that their brand enjoys a good reputation and great brand recall. This is a great plus for inexperienced and novice agents who can build their network with little effort.
2. Networking
These companies have been in the market for a long time, so they have built large networks. While the brand name helps them get business, the network helps them easily identify, buy and sell homes. Deals that would otherwise be impossible for new agents are suddenly attainable with a strong brokerage network.
3. Training
Real world is the best training ground – but in brokerage house, you can easily find experienced advisors. The learning curve is much flatter with a good mentor, as they can bring some invaluable insight to the table. What you learn at a reputable brokerage firm can propel you forward in your career. All you have to do is listen and keep an open mind.
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So what should a real estate agent do?
Despite the low commission and high fee structure of large brokerages, it has some clear advantages. Their experience and brand name can really be a stepping stone for young real estate agents. Just be sure to choose carefully.
know what you want
Do you want a network, or would you prefer a higher commission split? Would you like to train there? Generally, the more a real estate agent expects from a brokerage house, the lower their commission. So decide what you want and then set your expectations.
Also, select a brokerage house selling the maximum number of properties in the area of your interest. That’s where most of the deals will happen.
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see your deal
Knowing what to expect from a deal can help you make the right choice. So, a brokerage firm that provides training to young realtors may actually charge you more. This is because they are also charging you for the training they provide.
Alternatively, the less training a firm provides, the higher your commission can be. Additional services provided by the brokerage firm also take a cut of your commission – so decide what you need.
Expect the split of commission to feel unfair
The position of the brokerage firm and their network is what got you a deal in the first place. Because you have to rely on these factors, the split will be uneven.
However, having said that, do not agree Very Low commission. You’ll lose your motivation – and eventually, you’re going to have fun doing it too.
Opt for Transparency
Choose a brokerage house that is open about their fee structure and commission split. Look for information on what to expect when you actually connect with them. You want a firm that clearly states the percentage of commission that you, as a real estate agent, will receive regardless of who buys.
Make sure there are no hidden costs involved. It should be clear and easy to understand.
Know there are options
If you are a freelance worker and have the patience to make things happen, there are smaller brokerage firms that follow a monthly fee structure. This means that you will not get paid a percentage of your sales. Instead, you’re keeping it all. That’s right, 100 percent commission.
Although it is not for everyone. If you’re the kind of person who needs a framework to function well, you’re probably better off with a more traditional structure.
Real estate brokers can be a valuable resource. Although finding a good brokerage firm is not always easy, young agents should spend time and research their networks to identify the best firm for them. Good brokerage firms know the neighborhood well, know about the listing, and are familiar with it to get a good deal. They have a good network, know how to identify genuine buyers and sellers, and know what to pick from the internet and what to ignore.
Young real estate agents learn fast when paired with experienced real estate brokers. However – being well aware – brokerages can also be an agent’s nightmare with their low commissions and ridiculous fees. The solution lies in choosing a brokerage firm that offers exactly what you are looking for.
Real Estate Agent: How was your experience working at a brokerage? Would you add something to this list?
Let me know with a comment!
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
