In Canada , in order to represent clients in real estate transactions, real estate agents must work under a real estate brokerage and can only work for one real estate brokerage. With these stipulations, choosing the right real estate brokerage is critical. It can make the difference between success and failure — not just in terms of money, but also the ease or struggle of doing business.
What is a real estate brokerage?
A real estate brokerage is a licensed intermediary individual or agency that oversees and facilitates real estate transactions. They have a number of duties including listing properties on the Multiple Listing Service (MLS) and supervising the deals to make sure they are accurate and follow the rules.
They may also provide varying amounts of other services, such as advertising, support/mentorship or even extra benefits such as health/dental insurance. As a new agent looking for a real estate brokerage, it is important to consider everything a brokerage offers and how you think it will fit your goals and personality. Do your research and interview the agencies that look interesting. Some important questions to investigate are:
- What is the commision split?
- What is the real estate brokerage work culture?
- What is the reputation of the real estate brokerage and what niche does it serve?
- What sort of support is offered?
- What type of real estate brokerage is it?
This article delves into the last point, digging into the pros and cons of the three basic types of real estate brokerages: national, boutique, or virtual.
National Real Estate Brokerages
These are the big guys, the ones that come immediately to mind when thinking about real estate. Names such as Royal LePage, ReMax, Sutton Group are household brand names. They are among the top real estate franchises in Canada, handling thousands of transactions across the entire country every year.
National franchise brokerages sell the rights to use their branding and business model to brokers and charge them a fee for every deal that is closed. This model comes with its benefits as well as its disadvantages.
The credibility that comes with brand recognition: this is one of the top benefit sof joining one of these national franchises, especially of you are a new agent who hasn’t build up a name yet, but also for more established agents who want to boost their own brand with a powerfully established reputation that is relevant right across the country.
Cutting Edge Marketing Systems and Technology: This can be a boon for the new agent who might be trying to keep set-up costs to a minimum. National agencies often provide access to management software and marketing tools.
Support and Training: National real estate brokerages usually offer a wealth of business and educational resources along with training with highly experienced mentors. A national franchise is part of a network of professionals that can help each other to build their business, improve skills, provide referrals and build teams.
Less favourable commission split: All those benefits might come at a cost; the commision split and other fees may be higher in a national real estate brokerage.
Less autonomy: Most national real estate brokerages have strict rules as to procedures, branding and other business decisions. You will need to stay within the limits of the brand. As well, upward mobility within the company is difficult in these large national real estate brokerages.
More competition: While being part of a large establishment with hundreds or thousands of agents has benefits in terms of networking and support, it also means a higher level of competition.
Boutique Real Estate Brokerages
Boutique real estate brokerages are often owned by an individual, are smaller and are local. But that doesn’t mean they are less profitable. Because they can’t rely on a nation-wide brand recognition and because they often serve a niche market, they are some of the most profitable agencies.
It is hard to characterize boutique brokerages since they grow naturally out of the needs and personality of a specific owner and community. Some may offer marketing systems comparable to a national real estate brokerage, whereas others will only have rudimentary marketing services. Generally though, what is common to all, is the camaraderie and support.
Close knit team spirit and camaraderie: This translates to less competition and more teamwork as well as general support.As well, even as a new real estate agent, you will have access to the leadership, expanding the opportunities for learning and growth.
One-on-one training: Each individual agent is critical to the success of the boutique real estate brokerage, so the brokerage has a vested interest in making sure the agent is properly trained and their skills are exemplary. Even if the training programs are not technologically sophisticated, they might make up for this lack by providing hands-on, personalized coaching.
As well, most boutique brokerages serve a niche market, providing a unique learning experience.
Flexibility and creative control: Decisions at the brokerage level can be made quickly since there isn’t a bureaucratic quagmire to navigate. These brokerages are very nimble, able to deal effectively with changing circumstances.
As well, agents are allowed extensive creative freedom to experiment with advertising and marketing to build their business.
Decent commission split: Because the boutique brokerage has lower overhead costs than national brokerages commission splits can be better for the agent.
Less cutting edge technology: Less technology could impact productivity and reduce the number of leads.
Less marketing resources and smaller budgets: While you have more freedom with your marketing, you will need to learn and use marketing efficiently to garner leads. Leads are often harder to come by in boutique real estate brokerages.
Virtual real estate brokerages, sometimes called cloud brokerages offer all their services online with no physical location. These types of brokerages are best for experienced real estate agents, who want maximum flexibility, access to technological tools and excellent profits.
Access to Cutting Edge Technology and Resources: Many virtual brokerages offer an extensive array of technologies and resources to increase productivity and flexibility. Technological tools and resources might include: websites, cloud comparative market analysis, CRM (customer relation management tools) as well as online training and support.
For the experienced real estate agent who has already built their local network, the latest technology, conveniently accessed from their laptop, may provide all the tools and flexibility needed to take their business to the next level.
High Commission Splits: Without the overhead, and by eliminating the middleman, commission splits are usually very good for the agent.
Extra Benefits: Some agencies offer stock options, and revenue-sharing programs
Lack of individual and local support: Especially for new agents, the lack of individual and local support might make it hard to build the local knowledge and networks necessary for a successful business.
Lack of hands-on training: While the online training can be extensive, it just isn’t the same as personalized one-on-one coaching. Especially for new real estate agents who have many questions, the lack of in-person connection could leave gaps in their knowledge.
To sum up
The three types of real estate brokerages each offer benefits and drawbacks, depending on your goals as well as your level of experience. A new real estate agent might be better off in a national or boutique brokerage while they learn the ropes. An experienced real estate agent, however, would be able to take what a virtual real estate brokerage has to offer and make it work spectacularly to increase their business.