What’s Important when Starting Own Brokerage?

I am thinking of starting my own brokerage. I haven’t been 100% pleased with my brokerage lately, for a variety of reasons, so I’m thinking of starting my own. I understand all the start up expenses, risks, etc. I’ll probably start as a solo operation, but I don’t necessarily want to stay a solo operation for long, so I’m seeking input from other agents on what you want and prioritize in your brokerage. This would likely not be a franchise of any kind, but rather an independent boutique-type brokerage.
Other than the commission split, what are the top 3 things that are important to you in a brokerage? If you want to elaborate on them or choose more than 3, that’s fine.

Stevie Sloan

Here is my answer. Among the top three things that that would be—and, in fact, are—important to me are:

Training

Most agents would rank this as a high priority. The problem is: Training means different things to different people. Let’s break it down in four different areas:

How the brokerage operates. This includes the internal procedures to follow when listing a property or when signing up a buyer as a buyer’s agent. What’s the paperwork? What are the internal guidelines? Who receives what paperwork when? When you’re a listing agent and receive an earnest money deposit from a buyer, what do you do with it? And how quickly? Although commissions are negotiable, the brokerage may set a lower (or upper) limit on commissions. What are those? What flexibility does the agent have in negotiating those commissions . . . considering that the broker must approve them. (Technically, in fact, all contracts are between the broker and the buyer or seller; the agent is the broker’s intermediary.)

These procedures also will be governed, in part, by external parties. For example, a listing agent who gets a listing may be required by the local multiple listing service to enter the information in the MLS within a specified number of hours. Does the brokerage track the number of continuing education hours earned by the agent in order to renew his/her license?

Laws and regulations. A small subset of these are covered in the pre-licensing courses required by the states. These will range from ethics to asbestos and lead testing to equal rights and nondiscrimination laws to landlord-tenant relations. Any one of these could consume more time than is allocated to the entire pre-licensing program, and—in fact—those and many other topics are subjects of multi-day courses. Further, laws and regulations are constantly changing. Brokerage training should help agents stay current on laws and regulations.

Customer and client relations. How should agents handle customer leads? A broker undoubtedly has preferred procedures for agents to find clients—whether that’s farming a neighborhood, doing desk duty, or providing leads to agents. But how does the agent convert those leads into clients? It turns out that different clients have different objectives (beyond simply buying or selling a house). They also have different personalities and styles. And so do agents. How does an agent relate to and work with customers and clients?

Shoring up “weak” areas. I’ve known agents who in a “former life” were military officers, CPAs, teachers, editors, information technology professionals, and more. It’s likely that those agents are strong in certain areas and not as strong in others. An agent may not need to be completely well-rounded in subjects ranging from sociology and ancient philosophy to the latest programming language and calculus. But it’s likely that most agents will have some weaknesses. It’s helpful if the broker can at least help identify those and provide information on how an agent can strengthen those areas.

Support (beyond Training)

The broker should provide support to his/her agents. Some of this will include the items listed above under “Training.” But there are at least two other important areas:

Support in marketing and business activities. A successful agent will need quick and smooth access to marketing and business tools. Some of this is physical: “For Sale” signs, “riders” for the top of the signs, an installation and removal process for the signs, and so on. Many brokerages also provide templates for marketing materials, or access (at a reasonable cost) to services that can put together marketing packages, mail postcards on a regular basis to the agent’s farming area, access to a low-cost photo service both for agent headshots and for professional photos for a property listing, and so on. In addition, what sort of referral program does the brokerage have?

Support in advice and guidance. Agents will have questions about how to handle situations. Some of those may be situations that arise regularly, but with which the agent has had little experience. Others will be unusual situations, or new questions that didn’t exist in years past. (A current example: How do you show a house during a pandemic? Or: How do you best assist a buyer during a pandemic? If the agent is involved in handling a lease, how does one handle a potential client with a therapy animal? Or a service animal? (The laws and regulations on the two are very different.)

Culture

This may be more difficult to define, especially in a brokerage with multiple offices, but it’s necessary to examine.

Some elements of “culture” in multiple-office situations are defined by the parent company (or the broker who may be in charge of the multiple locations). And this can be affected by whether the brokerage is part of a franchise or simply one office of many owned by the same parent company.

Read Also: How To Make Money From Cheap Houses

Because the question asked about starting an independent brokerage and not a franchise, we’ll limit our answer to that.

Part of the element of culture relates to the desired client. Some brokerages prefer to deal with high-end properties and wealthier buyers. Others target so-called “bread and butter” properties and middle-class (or lower) buyers. Some specialize in retirement communities or condos. Legally, a brokerage can’t discriminate in ways that would violate the law, nor can they “steer” clients. But a brokerage that specializes in high-end properties likely will have a different “vibe” or “feel” than one that focuses on starter homes.

Some brokerages are very willing to work with investors, either as buyers or sellers. Others choose to avoid them.

Culture also may be affected by the age of the agents and their years of experience. An agent in her 20s may be just as competent and knowledgeable as an agent in his 60s. But a brokerage with mostly 20-somethings will have a different “vibe” than one with most of its agents in their 60s.

Culture is strongly affected by the broker. This may manifest itself in areas ranging from ethics to whether the brokerage engages in community outreach and support programs.

And a bonus fourth consideration:

Location

In most cases, it’s preferable if a brokerage is located close to the agents, and vice versa. Some of this is due to sheer convenience: If it’s necessary for an agent to visit the office (perhaps for a weekly sales meeting, perhaps to meet with clients in a conference room), an office that’s a mile away is going to be more convenient than one that’s 15 miles away.

Beyond that, though, it’s likely that the agent’s farm area (if he/she has one) is relatively close to where he/she lives. That’s what the agent is familiar with. It’s more convenient for the agent to meet with clients who live within a few miles than ones who live 15 miles away.

Admittedly, with distance-related technology (Skype, Zoom, Microsoft Teams, etc.), that’s a bit less of an issue today. Further, the COVID-19 pandemic has conditioned more people to use technology rather than to meet in person. Yet some in-person meetings are likely to continue for quite a while.

Further, although agents and brokers are licensed by the state and therefore can practice anywhere within a state, other considerations—such as MLS systems and the geographic range of the local Board of Realtors—are more local.

What this means for the broker is that much of his/her business is likely to be very local, as are the agents at the brokerage. That means the broker should select a location that aligns with his/her target market and with the availability of agents.

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