More and more teams are popping up everywhere. Some as big as 20-30 members, and some as small as the realtor and assistant being dubbed as a team.
The benefit of a building a real estate team is known as the economies of scale.
Economies of scale is an economic term referring to the cost advantage experienced by a group or company when it increases its level of output (i.e real estate sales). In other words, the advantage arises due to the inverse relationship between fixed cost and the sales produced.
Think of it this way. Realtors all spend money on marketing their brand. Most will need an assistant at some point in their sales career. Balancing demand and supply of time and resources are often a challenge. A realtor only has so many hours in a day. Being too busy can mean either losing business or not maintaining service excellence. When you begin giving away business to other realtors in your office, you’re losing future repeat clients.
Cost Savings of Team Building
Building a team saves costs because several realtors benefit from the same brand presence and marketing dollars spent, several have access to the same assistant or marketing coordinator, and most likely save costs on sharing office space (and desk fees). So leads that the team reputation and brand generate are reaped by all realtors on the same team. The power of the group outweighs what each one independently could have achieved alone. And let’s face it, a group of agents generating a $1 million in gross commissions earn awards and accolades that put the group in among the best of the best in the industry, which in turn generates a bigger brand presence.
Why do real estate agents join teams if they have to give up 50% of their commissions?
You might think that only new agents, who are just graduating from OREA are joining real estate teams. That’s not entirely true. Most real estate teams are not keen on hiring straight out of OREA because a new agent is a very high-risk hire.
Will the new agent learn quickly? Will the new agent handle the clients with professionalism and confidence? Will the new agent have the ability to close deals and negotiate against experienced realtors? Will the new agent even enjoy being a realtor? Will the new agent survive the 24-7 demand needed to succeed in real estate? Will the new agent stay in the team after year 1 or 2, when they start earning six figures?
Producing Realtors join teams everyday!
I have personally interviewed and placed into teams realtors grossing $100,000-$700,000, and they join a real estate team knowing that they will give up 50% of their commissions. And it might seem crazy why anyone would do that, but successful realtors join teams every day.
Some real estate salespeople know that they love selling. They love meeting clients, doing listing presentations, offer negotiations but they don’t like working on marketing, or financial management, or administration or even hiring administrative support. Some just don’t want the headache of running a real estate business —- they just want to be salespeople. There is nothing wrong with that. In fact, taking 50% of the gross commissions earned, without worrying about marketing expenditures, hiring, retaining and paying for an assistant, renting office space, is actually a lot more money than what they might net alone.
So why do Buyer Agents leave teams if it’s as good as it sounds?
The short answer is not all teams offer value. Value will vary from one agent to another. Some value leads — they simply want to be fed warm leads without any door knocking or cold calling efforts. Some salespeople want coaching and support. Some want to pass off all their administrative work to the office administrator.
In today’s highly competitive market, realtors who want to attract amazing buyer agents to their roster need to do more than just sell their “brand presence”. They need to offer coaching. They need to provide warm leads as well as teach prospecting, even if it means door knocking together with the team lead. The team needs to invest marketing dollars co-farming each of their buyer agents; after all the buyer agent didn’t join a team to just cold call internet leads that may not come to fruition for 12-18 months.
The sweet spot in real estate teams
Every day, I speak to buyer agents in large teams that are looking to make a move to a smaller, more involved team leader relationship. Buyer agents want a team that has two to three buyer agents to one team lead who offers coaching, teaches prospecting, provides warm leads and has an administrator to support the team with a solid marketing campaign. This appears to be the sweet spot. Especially if you are trying to attract buyer agents with a proven sales history of $100,000 GCI per year. For buyer agents making more than $300,000 a year net commissions earned while on a larger team, their motivation and needs will be very different as to why they will make the move. One size certainly doesn’t fit all.
The exception to every rule
There are large teams that are very well structured, offer a lot of value and have amazing retention of their Real Estate Associates — I know because I have helped recruit for them. Theses teams do not label agents as Buyer Agents. They often give them titles of Real Estate Associate or Sales Partner. They offer coaching, marketing and all sorts of administrative support.
Bottom line… it’s all about value. You will attract the type of realtor that your offering will yield. If you do not offer coaching, or fair market commission splits, or any warm leads, nor any administrative support, then chances are, you’re going to attract someone who won’t be very productive or someone who won’t stay very long.
