Agents Decoded: How to choose a real estate brokerage 

The direction of your business depends on decisions you make every day. Agents Decoded can help you by presenting the perspectives of seasoned pros who have been there, made mistakes, and found success.

Whether the ink on your real estate license is barely dry or you're a grizzled industry veteran, you need a place to hang your license — and choosing a brokerage is a decision that can impact both your production and your quality of life. 

Pick the right one, and you may get more business via training, mentoring or leads. You may even enjoy learning from your broker and have helpful co-workers who make your personal and professional life better. 

Choose the wrong brokerage, and you could wind up frustrated and discouraged.

Fortunately, there are lots of brokerages out there, and you're in the driver's seat. You just need to determine what you're looking for in a brokerage, set up an interview and make your choice.

Easy, right? It can be — if you have a sense of what you want, understand the different brokerage models and know how to interview. 

Defining your wants and needs

If you're that grizzled veteran, you probably know exactly what you want from a broker: the flexibility to run your business how you see fit, a good commission split and someone who is responsive and supportive when things go south. But you'll still want to do some research before deciding to make a switch.

If you are a newer agent, you may not know enough about how brokerages work or what they can (and cannot) do for you to make an informed decision.

You're going to have to take the initiative to educate yourself. Get used to this. You are now an entrepreneur and business owner, so be prepared to do your homework.

Some things to consider when researching and selecting a brokerage:

• Office / Brand culture

• Availability of training and mentorship

• Accessibility of broker and staff

• Services provided

• Errors & Omission (E&O) insurance

• Office amenities

• Technical support 

• Brokerage / franchise fees (including commission split and cap, if applicable)   

Local vs. national brands

While every brokerage is a little different, they fall into a few categories with varying business models.

The broadest brokerage categorization is independent vs. national, with national broken down further into franchise and non-franchise brands.

Indie brokerages tend to be very local, though some have multiple offices that can span across metro areas or states. They are generally smaller than national firms and may have fewer resources. That isn't necessarily a bad thing, as smaller sometimes means more direct and personal help is available. Many indies also have strong hyper-local brand recognition. 

National franchises (think RE/MAX, Century 21, Keller Williams, etc.) offer wide brand recognition, and (somewhat) standardized policies and procedures — franchises are "independently owned and operated," which allows for some differences between offices. A potential drawback can be franchise fees, which are often passed on to agents.

Non-franchised nationals (Compass, Real, eXp, etc.) don't have franchise fees and provide more consistent policies and procedures than franchise offices. It may be easier to build widespread geographic teams at a non-franchised firm. 

The different business models

Any of these brokerage types can be further categorized by business model. T3 Sixty's latest Trends Report breaks brokerage business models into four primary categories: traditional, capped, fee-based and business generation.

Most U.S. brokerages fall into the traditional model and split commissions with independent contractor agents. Split levels vary widely and can be different depending on whether a transaction was generated from a broker or agent source. 

Many agents, particularly newer ones, make a broker decision based entirely on split levels. This is a mistake! The best split in the world doesn't matter if the agent doesn't close any transactions.  

The capped model caps those splits at a set level each year. This is a positive for higher-producing agents as they only pay that set amount of commission split annually — but brokerages may continue to charge fees after the agent's cap is reached.

Fee-based brokerages charge agents fees, and in return pass all or most of the transaction commission through to the agent. You will often see this marketed as "100% commission," which is a bit of a misnomer, as a brokerage isn't a nonprofit operation.

The business generation model differs in that the brokerage generates the bulk of the business that agents do. Most are structured like large teams. 

A relatively new development in brokerage models is revenue and equity sharing. This is where agents get a share of the revenue generated by other agents they introduce to the company. Publicly traded brokerages sometimes offer equity (stock) for meeting certain recruiting and/or production goals.      

Preparing for the interview

Real estate sales is one of the few businesses where you interview the company, rather than the company interviewing and hiring you. Most brokerages will hire anyone with an active license. 

Do your research, understand the model, and ask very pointed questions about what the brokerage can do for you. Ask if you can sit in on a sales meeting or training session. This will give you an idea of company culture and training value.

Using that information, gleaned from interviewing multiple brokerages, you can make the best decision for you and your business.

Jay Thompson is a former real estate agent, broker-owner and industry outreach director. He is currently an industry consultant and sits on several boards. The views expressed in this column are solely those of the author.