Every brokerage brand, franchise and individual firm is distinguished by its unique features, benefits and people. It's important to understand the varying structures and offerings, and to meet with several brokers before deciding where to start or shift your career. Use this guide to get started.
What is a real estate brokerage, and what do brokers do?
A licensed real estate brokerage is a legal entity in the form of a sole proprietorship, partnership, LLC, corporation (S-Corp or C-Corp) or other such legal entity which employs a licensed real estate broker. The broker, or broker-owner, serves as the principal broker who oversees, is responsible for and directs all licensed activities of the brokerage and its real estate brokerage services.
Brokerage services can pertain to many different types of real estate involving the sale and/or leasing of property. Real estate categories include: single-family and multifamily residential (1-4 units and 5+ units), agricultural (land and farms), commercial (shopping centers, mixed use, office buildings, etc.) and industrial (cold storage buildings, warehouses, manufacturing facilities, etc.).
What are the different types of residential brokerages?
Independent, not affiliated or franchised (e.g., Baird & Warner)
Independent franchised companies (e.g., Howard Hanna)
A national or regional organization or its subsidiaries, franchised (e.g., BHHS)
A national or regional organization or its subsidiaries, not franchised (e.g., eXp)
See AlsoRules that helped set real estate agent commissions are changing. Here's what you need to knowIndependent Broker-Dealers: Pros and Cons vs. Working for a WirehouseWhat You Need to Know About Independent Financial AdvisorsFranchise vs Independent Real Estate Brokerage in 2022: What's the Difference for agents and brokers? - Agent Wealth Hustle
Just because brokerages fall into the same category doesn't mean they'll be similar, however. Important differences to consider may include:
Commission structure — traditional vs. discount brokerages
Virtual or technology-based models
Limited-service brokerages
Boutique firms
Exclusive buyer brokerages
Exclusive seller brokerages
Limited-function real estate referral companies
Brokerages that specialize in specific market segments (e.g., luxury homes, trophy properties, new home specialists, bank REO properties, waterfront properties, land and farms)
How do agents get compensated?
Most agents are independent contractors (working full time or part time) whose earnings are reported on IRS form 1099. Pay is typically based on a fixed "percent" of a percentage of the sale price. For example, if a brokerage charged 2% commission on a $500,000 house sale (i.e., $10,000 commission), an agent on a fixed 50/50 percent split would receive $5,000 with their brokerage firm keeping the other $5,000.
Other types of commission plans:
Tiered commission plans that increase an agent's commission split as they increase their sales production
Capped commission splits that allow an agent to receive 100% of the commission after a set threshold, or "cap," is met
Commission plus annual profit sharing
100% commission minus a monthly fee and/or a per-transaction fee, paid to the brokerage
Less commonly, agents may be employed by a brokerage and earn a salary, with or without a share of profits or a production bonus.
What kind of training or career development do brokerages offer?
Most brokerages offer a variety of training programs, but it's important to do your research. Access to good training can greatly impact an agent's financial success and happiness. Ask for details about training programs and structures since some brokerages offer more antiquated programs, while others may offer more modern alternatives. Training can range from how to use social media for sphere-of-influence marketing to building one's own organization. It may take place in a classroom, in the field with a mentor, or streaming.
What kinds of marketing tools and technology do brokerages offer?
Brokerages vary in their offerings and fees they charge, or don't charge, for their marketing tools and technology. In many brokerages, these are 100% company paid, but some firms require agents to pay a la carte for what they use. Each brokerage brand has its own policies, so ask upfront. Most MLSs and Realtor associations also offer some level of technology for their members.
Tools provided by a brokerage can include customer relationship management (CRM) programs with features such as geo farming, automated emails, text follow-up tools, digital marketing materials on demand, personalized websites, online and in-person training and coaching, transaction management tools, forms library, post-closing follow-up programs, and more.
What is a virtual brokerage?
A virtual brokerage has no physical "storefront" but generally offers the same types of agent tools and trainings as a brick-and-mortar brokerage. Some virtual brokerages invest heavily in technology to streamline their operations. The largest virtual brokerage is eXp, with over 80,000 agents. Agents who join a virtual brokerage still meet with clients in person and perform the same functions as agents who work out of a brokerage office.
What are discount brokerages?
Unlike traditional "standard" residential brokerages, discount brokerages typically offer deeply discounted real estate fees to consumers, and their services and commission structure may differ. Redfin is the best-known discount brokerage, charging a 1.5% listing fee to sellers. Some discount brokerages charge a flat fee rather than a percentage.
What are specialized brokerages?
Specialized brokerages may offer specific services or cater to particular home types or market segments, such as luxury, land and farm, and many others. Some specializations are limited-service brokerages, exclusive buyer brokerages, exclusive seller brokerages, and limited-function real estate referral companies.
Are there advantages to choosing a specialized brokerage?
Deciding whether to specialize in a certain facet of real estate is a very personal decision. Agents are typically best served by leveraging their strengths and by working with properties and in market segments they are familiar with and enjoy.
