June 19, 2019
Of all the thousands of questions we get from our real estate licensing students, no matter which of our New Jersey real estate classes they are in, we know one question will come up repeatedly:
“How do I choose a broker once I have my real estate license?
Garden State Real Estate Academy is not owned by any real estate company, so we have no conflict of interest in answering this question. But it also has several answers, which different students may weigh more or less heavily. Here are some of the questions we suggest any newly licensed real estate agent asks during their broker interview:
What is your commission split for new agents?
Most traditional firms start their new agents out at a 50% commission split, but some begin as high as 70%. That is a huge difference. In your first year as an agent, assuming an average commission on your sales of $2 million, that would mean the difference between a gross commission income to you of $15,000 versus $21,000.
What is the scale of future commission splits?
Be wary of a manager who gives you vague answers, such as “Oh, you can go up as high as 85%.” Ask to see in writing the commission schedule for various volume levels or other criteria the broker may have. I once fell for this “Trust me, we’ll take care of you” response, only to later discover that the manager had given agents with a fraction of my volume a higher commission split because they had threatened to leave for another broker. Have you ever been on an airplane and found the three other people in your row paid vastly different fare for the same trip? That is what is can be like when a broker or manager can arbitrarily decide each agent’s commission splits.
Can I ever get to where I earn 100% commission? And if so, is that truly 100%, or does the company still deduct money for franchise fees, royalty fees, etc.?
What training will you provide me?
Again, if you get a vague answer, such as “We have great training,” drill down with follow-up questions:
- What sort of training?
- When would it start?
- How long does it last?
- Who does your training?
- Is it a formal training program, or is it an agent who wings it? If the former, may I see an example of the training program content? Who designs the training curriculum?
- Is there a cost to me for the training, and if so, what is it?
How can your brokerage help me progress to ever-higher levels?
You won’t be a newbie forever! In fact, many of our students have told us that one of the things they appreciate most about Garden State Real Estate Academy’s classes is that we provide hundreds of tips on how they can quickly go from newly-licensed Realtor® to top producer.
You should ask your prospective broker for detailed descriptions of what they offer to get you from A to B to C in your career. It is one thing to have a class for new agents to learn how to run an open house, but what mechanism does the company have to help you get from $10 million to $20 million in sales in the future?
Do I have to do “floor time?”
Back before prospective buyers had all the information they needed about a property right on their smartphone, they would call the listing broker’s office to ask about the home’s details. The real estate agency would tell their agents that if they spent 10-20 hours a month answering the phone, they would be entitled to any leads that came in that way—provided the caller did not ask for an agent by name.
“These agents are crazy,” one prominent real estate attorney once told me. “They are being conned into serving as unpaid receptionists by their brokers with the expectation that they will pick up leads.” There may be an occasional legitimate lead call, but most of the time, you will spend your time answering the pine and transferring calls to other people in the office. Agents put their cell phone number on their listings. Why would a buyer call the office?
Nowadays, virtually 100% of potential buyers use their cell phones or computers to research a property themselves, and then they call either their own agent or the listing agent. Some traditional brokerages still have floor time, but most agree this is a waste of time when one considers how valuable that time would be if they spent it doing their own lead generation.
So a followup question here would be, “If a person calls the office number enquiring about one of my listings or marketing campaigns, does the lead always come to me, or to an agent who answers the phone?
What about Errors & Omissions insurance?
Every broker requires you to carry E & O insurance, but how does the one you are considering make you pay for it? Some charge as much as $800—payable in one lump sum. If you leave the company a month later . . . too bad! Others break it down into a more manageable monthly charge. A few deduct a part of the E & O premium from each commission check—but you still must pay the balance if you don’t earn enough to pay the premium on a per-transaction basis.
What about technology tools?
Real estate today is a hi-tech profession. You should ask your prospective broker:
- Do you provide me with my own website? If so, what will be my cost? (Having your own website built and connected to the MLS can easily cost $3,000 and up, plus as much as $200 per month in IDX and hosting fees.)
- Will your firm provide me with a contact management system? If so, what is the cost to me?
- Will your firm provide me with DocuSign, DotLoop or some similar document management program that I can use to exchange contracts paperlessly? (This is the method almost every broker uses today). If so, is there a cost to me?
- Does your company provide a mobile app that can be co-branded for my own name and the broker’s that I can offer to prospective clients to search for home online? What is my cost for this?
Does your company offer any sort of profit sharing, or the opportunity for me to take an ownership interest in the company of I want?
If you contribute to the profits of the owners of that brokerage, some companies let you buy in with an ownership share, while others offer their producing agents a share of the profits. It’s worth asking!
If I decide to leave your company and I have several listings or buyers in the pipeline at the time, will I be able to take those listings and buyers with me to my new broker?
Many very successful agents get to a point where they simply do not like the management or policies of their employing broker, yet when they want to go to another company, they discover that the broker’s policy is that they would have to leave all their existing business there. This could be valued at tens of thousands of dollars. And so they grudging feel forced to stay where they are.
If I buy or sell my own home, do I have to pay the company-side of the commission?
Realtors® move too! And many of them decide to invest in rental properties. Find out if this company gives you a break on commission when you do so.
David C. Forward is a licensed real estate broker and instructor and was first licensed as a Realtor® 31 years ago. During his career, David and his business partner sold more than 450 homes in South Jersey. He is now School Director of Garden Real Estate Academy, has won numerous awards for real estate sales, is a much-requested public speaker who has addressed audiences on six continents and is the author of 14 books. David can be reached at Support@GSREacademy.com