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I'm currently writing a research paper on the real estate brokerage industry for school and I have a few questions that I can't seem to answer reading the content on this forum and elsewhere. I was hoping a few Realtors here can answer them directly:
1. What are the major benefits of joining a national franchise office? Is it possible to start out as an independent agent? Are independent or start-up offices more attractive for older and/or more experienced agents?
2. Among the national brokerage franchises, is there a consensus on which brand is the "best" in terms of attracting new leads? Do the brands themselves actually generate tangible benefits or is it more of a psychological benefit?
3. Are the compensation schemes at different brokerages typically the same? How do agents select which franchise to work for? Does the commission split matter?
4. How is new technology affecting the day-to-day work of agents? Are they making lives easier or threatening to disrupt the industry?
Thank you so much for taking the time to answer these questions. If there is anything that I should know about the industry in general, please don't hesitate to mention it.
1. What are the major benefits of joining a national franchise office? Is it possible to start out as an independent agent? Are independent or start-up offices more attractive for older and/or more experienced agents?
I started out at Century 21 and was there for 6 years before switching to a mom and pop business. I did get more referrals at C21 but that's about the only benefit that I saw. They do have a Nationally known website but because of data sharing my listings are on their website anyhow. The commission splits were worse at C21. My office didn't offer a lot of support so in my experience, there was little benefit being there
2. Among the national brokerage franchises, is there a consensus on which brand is the "best" in terms of attracting new leads? Do the brands themselves actually generate tangible benefits or is it more of a psychological benefit?
I believe this changes from market to market. In my market, the big office to beat is a local office, not a franchise.
3. Are the compensation schemes at different brokerages typically the same? How do agents select which franchise to work for? Does the commission split matter?
Every office is different. The franchises will typically charge a franchise percentage before your split with your broker. So if your commission is $1,000 you might pay the first 8% to the franchise then a 60/40 split with your Broker
4. How is new technology affecting the day-to-day work of agents? Are they making lives easier or threatening to disrupt the industry?
I find I am tied down to my computer more instead of getting out and about. I think it's an asset to our industry if we chose to use it as such
1. What are the major benefits of joining a national franchise office? Is it possible to start out as an independent agent? Are independent or start-up offices more attractive for older and/or more experienced agents? Brand recognition. Not in any state I'm aware of. No.
2. Among the national brokerage franchises, is there a consensus on which brand is the "best" in terms of attracting new leads? Do the brands themselves actually generate tangible benefits or is it more of a psychological benefit? RE/MAX, they spend far more on advertising that other brands. Yes and yes.
3. Are the compensation schemes at different brokerages typically the same? How do agents select which franchise to work for? Does the commission split matter? Vary not only by franchise but from office to office since many are independently owned and operated. Splits, training, office environment are the most common factor. Pay matters very much so splits are very important. RE/MAX and KW are the better models IMO.
4. How is new technology affecting the day-to-day work of agents? Are they making lives easier or threatening to disrupt the industry? It complicates it and makes the business more expensive. The agent has to buy their own leads back from the many internet companies like Zillow.
What are RE/MAX and KW's splits models out of curiosity? I've never worked for a huge national franchise and was just wondering...
I will speak for RE/MAX only as I am a RE/MAX franchisee. Note the bottom line of every RE/MAX advertisement: "Each office is independently owned and operated."
Now that being said, there are 6000 RE/MAX offices. We are as different as your family members. Some are outstanding, some are getting old, some are just being born, and others are hitting their stride.
The basic RE/MAX model is built around a 95/5% split plus each broker sets a monthly combination of broker management fees, shared office expenses, and possible desk/private office rent.
There is no brand, as a whole brand, that provides more for agents for less, and this has been documented time and again.
RE/MAX is not likely to be a good fit for someone who doesn't understand how fixed and variable expenses work, but as I like to compare, there is a reason shops pay more to be in malls. It's simply because there are more people shopping in a mall. If you own a store in a mall, you pay a monthly rental (broker management fee), you pay your own utilities, labor, & insurance (shared misc), and then the mall takes a portion of your sales volume (franchise fee). In addition, in your mall store, you buy your own inventory, advertise, and then from the difference in your costs and your proceeds, you pay yourself.
A RE/MAX model office is no different. Pay the broker your fixed expenses, then advertise (at RE/MAX, you pay into a local, regional, and international "institutional" advertising pool as part of your fixed expenses). Nationally, RE/MAX agents clear more profits than other brands. They just have to clear the early fixed expenses which keeps low producers at other brands.
Institutional advertising is defined as that advertising that is "brand building." It is that branding than helps people sell more. Example, by US trademark registry, if you see any sign advertising anything with a sign divided into three equal horizontal bars that are colored "red-over-white-over-blue" its a RE/MAX sign just like the swoosh of Nike or the shape of the Coca-Cola bottle.
The Re/max business model sounds interesting and definitely the most differentiated. Do you find that a lot of good agents come from Century21 or other brokerages to Re/max in search of higher commission rates or are the best ones generally happy where they are?
Even with a franchise the support will vary from office to office. The C21 office I worked in had EXCELLENT training because of the owner/principal broker. I know there were things I learned from him about CMAs, commercial real estate, what to watch out for and how to protect my clients that agents in business for more years did not know or understand.
Even under a particular franchise commission splits will vary within an office and vary between offices. There is no standard.
Like all things real estate, it's all about location.
Even with a franchise the support will vary from office to office. The C21 office I worked in had EXCELLENT training because of the owner/principal broker. I know there were things I learned from him about CMAs, commercial real estate, what to watch out for and how to protect my clients that agents in business for more years did not know or understand.
Even under a particular franchise commission splits will vary within an office and vary between offices. There is no standard.
Like all things real estate, it's all about location.
There are no telling how many times that I have said what rrah has written. Each office is each and every brand is indeed unique even from offices of its own brand.
That being said, on a macro-basis bringing all the offices of each brand into a comparison and then comparing the various brands, RE/MAX is undisputed as the most productive brand. There are larger office counts, high agent counts, and any number of other measuring criteria, but RE/MAX agents with fewer agents still have higher gross volumes than any other brand's total gross commission income and transaction counts.
The Re/max business model sounds interesting and definitely the most differentiated. Do you find that a lot of good agents come from Century21 or other brokerages to Re/max in search of higher commission rates or are the best ones generally happy where they are?
Yes, agents come to RE/MAX from every major and minor brand. A few RE/MAX agents even leave the Balloon to go to other brands and independents. Most who leave, however, return to a RE/MAX office within just a few months or even few years. I am one.
The thing most people don't get, is that few come to RE/MAX to increase commission splits. They come because of the number of additional transactions they can realistically expect to improve over their past production. In 2013, RE/MAX agents with approximately 54,000 agents in the US sold over 907,700 transactions not including more than 12,000 commercial transactions. This is more than 17 transactions average per agent.
Second place Coldwell Banker only had 725,000 transactions from 93000 US agents.
So, the question is what kind of split would you need at your current broker to match the difference in transactions you can expect at RE/MAX.
Again, I must clearly state, each RE/MAX office is independently owned and operated. There will be select offices of every brand which will out produce even the best RE/MAX office in any given city.
All the numbers I have quoted come from Coldwellbanker.com and RE/MAX publicly distributed documents.
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