10 Questions to ask a 100% Commission Real Estate Broker
During this changing real estate market many 100% commission companies have emerged, some good, some not so good. While looking for your next broker, you should ask each broker a series of questions......Here is a list of 10 questions that every agent MUST ask their future broker.
1. How long have you been in business? This is an extremely important question to ask all potential brokers. The change in the market has resulted in lower commission checks resulting from fewer sales and lower prices, many agents are now considering 100% commission companies. With this surge of agents considering these types of companies, a surge of high commission companies have also entered the market promoting themselves as the premier 100% Commission Company. When considering a company to affiliate with, it is recommended to only consider established companies with 3 or more years of experience with this type of business model.
2. Do you have an office? Most people would assume that all real estate companies have an office...WRONG! Most 100% commission companies use a P.O. Box or a home address to keep costs down. Although keeping costs down is a major priority for many companies, an office is a MUST HAVE! It is recommended to only consider companies which have a physical office location. While agents are not often provided with desk space at 100% commission companies, it is imperative that the company have a physical office location for mail, drop off/pick up, and client interaction.
3. Are there any hidden fees? This is one of the most important questions to ask. Very few companies actually net the agent near 100% commission. The biggest marketing gimmick is a large "per transaction fee", for example, "100% Commission - only $995 per transaction". Those companies should be called "80% companies". If an agent earns a $3,000 commission check and pays the broker $995 - THAT IS OVER 30% OF THEIR COMMISSION!!!!! This is the biggest scam in the real estate industry. Beware of hidden fees such as: file review, compliance, or incredibly high insurance rates.
4. What is the broker's experience level? Did you know that a recent college graduate with NO real-life real estate experience has the ability to obtain a California broker's license and open a real estate company? Since a broker's license is relatively easy to obtain, this question is very important. When you are deep into a transaction and an issue arises, an experienced and knowledgeable broker is invaluable. Just because you are earning 100% commission does not mean you should sacrifice support and guidance. It is recommended to look for brokers who have sales experience and a minimum of 5 years experience, 7+ years would be ideal.
5. When is broker support available? As a real estate agent, ask yourself, do you ONLY work 9-5, Monday thru Friday? NO WAY, and neither should your broker! When considering a company, broker accessibility should be a major concern. All too often a broker at a 100% commission company only offers support Monday thru Friday. Real Estate is sold predominantly on nights and weekends as most clients have a job to attend during the day. If you have a question on Sunday at 6 pm, is there someone to call? Are you on your own every weekend? If so, where is the value in working for this broker? Many agents think they are knowledgeable enough to not need much support. Be very careful in the company you select as after-hours support may be the difference between staying out of court and being slapped with a lawsuit.
6. Do you carry E&O Insurance and what is the cost to the agent? Doesn't every broker carry E&O Insurance? NO!!! There are companies that are "Self Insured" or have the "Deal with it when it happens" approach. The bottom line is E&O insurance is a must have in the real estate business. An agent is doing a disservice to their clients by not being adequately insured. In addition to asking your potential broker if they carry E&O Insurance, you should also ask the following:
- What is the policy limit? Brokers can reduce their monthly premiums by lowering the yearly payout maximums on the policy. Make sure the broker you are interested in carries AT LEAST $1,000,000 in Errors and Omissions Insurance.
- What is the policy deductible? In the unfortunate event of a lawsuit, a deductible must be paid for representation (similar to car insurance). Common deductibles range from $1,000 all the way up to $10,000+. If your commission check is only $2500 and the deductible is $5,000....You could be out double what you earned for that transaction....It is recommended to become affiliated with a firm that has a deductible of $2500 or LESS!
- Is there anything I should know about what is not covered? As mentioned earlier, brokers can lower premiums by eliminating things such as: Agent Owned Transaction Coverage, Land & Commercial, Rentals & Property Management, High Value Properties, Etc.
As you can see, there is more to it than just "Having E&O Insurance". As important as it is to be insured, it is equally as important to have a sufficient policy limit, a low deductible, and the proper coverage.
7. Do you belong to X Association or X MLS? If your potential broker is not a member of your association or MLS, you will no longer have access. To stay a "REALTOR", your broker must be an actual member of the association for you to have the title of a "REALTOR" and to receive the benefits associated with a full association membership. Be aware of brokers who say they are a member of X amount of associations, often times they are merely an MLS only member. If your broker is an "MLS Only" member, you can gain access to the MLS, but will no longer be a REALTOR.
8. Is there an on-site transaction coordinator? This should be important to every agent looking for a 100% company to become affiliated with. The company you are considering MUST have an In-House Transaction Coordinator. This means a TC that ONLY works for that specific company and its agents. Many companies have a "Contract" TC or do not have any relationship at all. If a company has a "Contract" TC, do they have your best interests at heart? Do they know which forms the broker requires? Do they give preferential treatment to the agents which produce more? It is recommended that you only join a firm with an actual In-House Transaction Coordinator.
9. How many agents do you have? This is a questions that should give you many answers as to the level of support you should expect to receive and if the company is growing. 1 Broker/Office Manager should be able to manage 100 - 150 agents. If a company has 500+ agents and 1 broker/owner who handles all of the administrative and support duties as well, there is a good chance there will be extended response times to your inquiries. It is also recommended to only join those companies with 20 or more full time agents.
10. How many transactions has your company closed Year-To-Date? This is a very important question to gauge the quality of agents this company attracts. If a company has 500+ agents and only closes 50 deals per year, do you want to be a part of that? Many 100% commission offices take any licensed agent they can find, regardless of experience, lawsuits, closings, etc. It is recommended that an agent only consider a 100% commission company which employs quality agents, has a good closing to agent ratio, and does not have a license warehouse type approach to hiring agents.
10 Questions, a lot to think about. As you embark on your journey to find the 100% commission company which offers the most benefits at the lowest cost, be very cautious and do your research. There is no REAL 100% commission; brokers do not work for free. However, with the right company you can get very close. The only way to get close to a 100% split is to join a company with a small monthly fee. The broker can predict the monthly office profit and is able to keep commissions HIGH! Companies that charge $500 or more per transaction are rarely anywhere near 100% commission when it is all said and done.
At Realty Source, we offer 100% commission for ONLY $99 per month and $99 per transaction! To learn more, please visit www.JoinRealtySource.com