The broker. If you’re a real estate agent, you’re probably reading this with seriously mixed feelings. Here you are, working like a madman to make a living or earn an extra buck, and as soon as some hard-earned cash comes your way, you have to part with it (or at least a piece of it). A big chunk of your cake is what I’m saying. But that broker does offer some pros, right?
Hopefully. Read on.
While brokers seem to offer plenty of advantages to young real estate agents, more often than not, they’re the ones earning the real advantages. Agents are lured in by a good brand presence—the other traps catch up with them later. It becomes a downward spiral. In fact, dealing with brokerages is a top reason why so many agents do not continue their work.
But do real estate brokers really give nothing and take advantage—or is there a bigger picture that agents need to consider when choosing a brokerage?
Let’s weigh the pros and cons.
4 Cons of Working Under a Big Real Estate Brokerage
1. Unfair practices
There are many stories out there of how real estate agents were duped out of their earnings because they associated with the wrong brokerage firms. Today, there are unscrupulous brokerage firms that take in young, ambitious agents and make them do all the hard work under the umbrella of their often very well-known brand name.
A brand name brokerage might offer good exposure, but agents often end up doing hard work for very low pay—without ever receiving the promised exposure. For new agents, this can be a real morale-killer.
2. Low commissions
There isn’t much money to make when young agents associate themselves with well-known brokerage firms. As you know, an agent’s pay comes from the commission they receive when a property is sold. Unfortunately, their brokerage association changes the figures drastically, because they have to split the commission.
These splits are usually unfair to the agents, who have very little say when it comes to commission splits at brokerage houses. This is especially true when the agent isn’t getting much value from broker. That’s a bitter pill to swallow.
3. Not many leads
You might think joining a high-profile brokerage will land you a waterfall of leads. Not so much.
Despite a high commission split, leads at big real estate brokerage firms are hard to come by—especially the good ones. That’s because a large team of agents is already in place, all of whom have their eyes on the next big deal. (Not to mention that many of said agents are experienced and mature—and will get a big piece of the big deals.)
Despite being associated with a top brokerage firm, you could still be getting low-end deals. Some brokerages require floor time—or two-hour chunks where you answer the phone, hoping to pick up a seller lead. That’s complete BS, in my opinion.
4. High fees
Besides the commission split, which is often pathetically low, agents are often also subject to high fees from brokerage houses. A large number of brokerage firms work with a flat fee that is “supposed” to cover fees for all services offered… but sometimes doesn’t. Inexperienced agents are hit with a range of other fees, too—everything from office space to internet charges, paper, and advertising. You also may pay transaction fees, course fees, training fees, and many others.
Some even end up as administrative assistants, doing nothing else than bringing in leads for senior agents.
3 Cons of Working Under a Big Brokerage
While the commission structure for real estate agents is unfair, associating with big real estate brokerage firms is not always a bad idea. There’s a good side, too—which is why many young agents join.
1. Brand presence
Brokerage houses have been around for years. That strong presence means their brand enjoys a decent reputation and great brand recall. This is a great plus for inexperienced and beginning agents, who can form their network with less effort.
These firms have been in the market for a long time, so they have created huge networks. While the brand name helps them get business, the network helps them identify, buy, and sell homes easily. Deals that would have been otherwise impossible for new agents to pull off are suddenly attainable with a strong brokerage network.
The real world out there is the best training ground—but in a brokerage house, you can easily find experienced mentors. The learning curve is a lot flatter with a good mentor, because they can bring some invaluable insights to the table. What you learn at a brokerage firm with good reputation can shape your career up ahead. 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 large brokerage’s low commissions and high fee structures, there are some clear advantages. Their experience and brand name can really be a stepping stone for young real estate agents. Just make sure you choose with care.
Know what you want
Do you want a network, or would you prefer a higher commission split? Would you like to be trained there? Usually, the more a real estate agent expects from a brokerage house, the lower their commission will be. So decide on what you want, and then set your expectations.
Also, choose the brokerage house selling the highest number of properties in your area of interest. That’s where the highest number of deals will be.
Look at your deal
Knowing what you expect from the deal can go a long way in helping 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 fees for the training they offer.
Alternatively, the lower the amount of training a firm provides, the larger your commission may be. Additional services provided by the brokerage firm also cut into your commissions—so decide what you require.
Expect the split of the commission to feel unfair
The standing of the brokerage firm and their network is what got you a deal in the first place. Because you have to depend on these factors, the split will be uneven.
However, having said that, don’t agree to too low commissions. You’ll lose your motivation—and after all, you’re supposed to have fun doing this as well.
Opt for transparency
Choose a brokerage house that is open about their fee structures and commission splits. Look for information on what to expect when you really associate with them. You want a firm that clearly spells out the percentage of commission that you, as a real estate agent, will get—regardless of who makes the purchase.
Make sure that there are no hidden costs involved. It needs to be clean and easy to understand.
Know there are alternatives
If you’re an independent worker and have the grit to make things happen, there are smaller brokerage firms that follow a monthly fee structure instead. That means you won’t be paying a percentage of your sales. Instead, you’re keeping all of it. That’s right, 100 percent of the commissions.
It’s not for everyone, though. If you’re the kind of person who needs a framework to function well, you’re probably better with a more traditional structure.
Real estate brokers can be valuable resources. Though it isn’t always easy to find a good brokerage firm, young agents should spend time and check with their network to identify the best firm for them. Good brokerage firms are well versed with the neighborhood, know about listings, and are familiar with what it takes 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 faster when associated with experienced real estate brokers. However—well versed as they may be—brokerages can also be an agent’s nightmare, with their low commissions and ridiculous fees. The solution lies in choosing a brokerage firm that provides exactly what you’re looking for.
Real estate agents: What’s your experience in working at a brokerage? Would you add anything to this list?
Let me know with a comment!