For years, real estate teams have been something large brokerages have benefited from and also struggled with. Along with high production, came headaches in the form of liability and a drain on resources. The explosion of teams in the last ten years has given credence to the fact that teams are not only an excellent model but produce at a higher rate per capita than an individual agent.
Why Teams Outperform Brokerage Firms
Based on the recent RealTrends Study: “It’s true, that real estate teams outperform brokerage firms“, when a team’s production is compared to an individual agent’s, the team structure not only allows the team to be more flexible but also more profitable. The study found that teams retained an average gross margin of 61.8%, while the brokerage companies that RealTrends benchmarks (of all different business models), had an average gross margin of 13.8%.
The Shift to Real Estate Teams
The origin of most real estate firms can be rooted back to a high-producing agent or agents who felt stymied by their broker, so they launched out to start their own firm. Most high producers, when they start their own firm, are savvy enough to surround themselves with people who understand the mechanics of running a business outside of selling real estate. But along with starting a company comes a lot of work that is not real estate related and demands the need for significant seed money to support a fledgling business.
As profit margins shrink, more top producers are looking for alternatives to going head to head with their former firm just to achieve the autonomy they crave. Instead of leaving to start a real estate company, they just create a real estate company within a real estate company.
The Rise of Real Estate Teams
Teams of various types have existed in traditional model brokerages for many years. They were initially manufactured by the brokerages to target specific business lines such as relocation, rentals, REOs, and more recently internet leads. The broker could set very specific performance metrics and payout structures to achieve their desired results. Those teams are typically loyal and compliant because they found it hard to generate that business and maintain it on their own as an individual agent.
But in the case of agent teams and their own personal business, no one knows better how to manage it than they do and there is no corporate entity creating a roadblock for their entry point.
Well-funded Team Solutions
The real question for teams is: Do teams need the support and name recognition of a large brokerage? Or, can they use a vendor to provide the services they don’t know how to manage or don’t want to manage? Entities like PLACE, Side and Keller Williams-backed, Livian, are pushing the boundaries of the traditional model by catering specifically to teams.
National Networks Enter the Team Market
Brokerages can no longer ignore the elephant in the room. They need to determine what support and resources will be offered to support the growing team population. Word on the street is that Compass and RE/MAX are creating specific programs to cater, attract, grow and retain large teams.
The RE/MAX pilot program for eligible teams features expanded education, improved technology, and enhanced economics that further support the growth and profitability of teams.
The Fear of Teams
Liability, drain on resources, and unpredictability are some reasons why broker-owners are fearful of teams. Teams can be a drain on resources because either the brokerage can step in and help with various needs of the team, or they risk the liability of letting them wing it without supervision. If the team runs their business based on what seems like the right thing to do, they can create a serious liability for the broker