With over three million active real estate licensees in the United States (according to NAR), both good and bad real estate brokers obviously exist. Does the raw volume or number of agents indicate whether a broker is good or bad? What determines good or bad? Is it perhaps a broker’s reputation? Could it be the split that brokers give their agents? Do they have a successful digital presence or the ability to provide good leads? Is the real estate broker a qualified professional?
The answer is…it depends
Are you looking at it from the perspective of a real estate agent/REALTOR, or from a consumer’s point of view? Although many differences exist from both perspectives, in some rare instances, those two answers might even align.
From the real estate agent’s perspective
From the REALTOR’S perspective, synergy must be first. Agents must feel comfortable with the people who run the brokerage and with the business reputation.
Second is the “commission split”, which is arguably trumped by the value proposition of the brokerage. Many agents would still concede that commission splits (the percentage they receive of the total real estate commission) are more important, but let me explain why that may not be so.
The broker’s value proposition to the agent
If the broker provides awesome technology, training, website leads, etc it may make financial sense for the agent vs a higher “split”.
- Does the broker provide the real estate signs?
- Does the broker provide a CRM?
- Do they provide a website?
- Does the broker provide online forms?
- Do they offer SEO?
- Do they provide real leads?
These perks may offset what percentage of the commission paid only after a closing.
Some of the more traditional real estate brokers may keep 50 percent of the commission, and in some instances, the agent may earn a higher percentage when they produce more. The traditional brokers generally claim to offer more technology, training, leads, office space, copy usage, and other extras.
Initially introduced by RE/MAX, some real estate brokers take substantially less commission from the sale but make their money on “desk fees”, technology fees, copy fees, etc. These fee-type models are currently being practiced by the majority of real estate brokerages nowadays. To sweeten the pot, some real estate models include ownership in the company or royalties or offer a “downline” on the recruiting of agents to the brokerage.
Best real estate broker from the consumer level
In contrast, if you ask the average consumer, they don’t even understand how real estate commission works. If you asked most home buyers or home sellers, they would likely say that Zillow is the largest real estate broker. Truth is, Zillow (and most other nationally recognized real estate websites) are just marketing initiatives. They generally don’t get involved in a real estate transaction (notwithstanding iBuyers). Those real estate websites and the information they give, provide real VALUE to the consumer.
Real estate consumers want value
Truth is, consumers simply want value in their real estate transactions. This value can be provided by giving top-notch service and truly understanding their business and real estate market. But what do you do when most of the agents out there have the same market knowledge and customer service abilities? Some discount real estate brokers provide value to the consumer in the form of a discounted real estate commission on the listing side.
Save the customer money to provide value
If you provide the same quality of service at the same level of competency as the best agents around, you can win new customers by providing them the same services for a lower price. With the average home sales price at $389,400, the savings of $7,800 would be attractive to the home seller.
Because of the large volume these models produce, their agents generally become far more experienced. They can also handle a wider range of transactions vs an agent that completes only two or three transactions a year.
Now, before all the agents start freaking out, … according to NAR, the median gross income of REALTORS® was $43,330 in 2020. How many transactions would that be in your market?
Agents Make More Money
Today, with technology playing such a key role in a real estate transaction, agents can make money listing at 1 percent and still make their traditional commission when working with a buyer (which is arguably more of a time investment, so it’s fair).
For both homebuyers and sellers, the best real estate broker is the one that provides clients with real value. That value includes doing a great job and possibly saving the customer thousands of dollars or more. From the agents’ perspective, they must feel comfortable with their leadership, believe in the brokerage model, do more deals and make more money.