Questions to Ask a Broker Before Becoming a Real Estate Broker at Their Brokerage
Whether a new or an experienced agent, the most important thing you must consider is the brokerage where you hang your license. Even a brand new real estate licensee shouldn’t just work for any broker. Yes, you might be just starting out in the business, and you have a lot of work yet to do. This however is no reason to accept the first job you come across. Being polite and cordial is key to scoring a good place to hang your real estate license in California, but caution and asking the right questions never hurt any real estate agent, either.
Before choosing a broker, you must be prepared with what to expect from the interview process. You should always approach these questions with care and positivity. Remember those first impressions can be last impressions as well. The point is, don’t be scared to ask questions, just ask them politely. With that said, let’s get into the big questions you need to ask before hanging your real estate license in a brokerage.
1. What Is My Pay?
Being a real estate agent makes you a business owner, both in terms of filing taxes and having your own work hours and paying for your expenses. Now you may be working under a broker, however, as independent contractors, agents run their own business, hours. The pay really depends on whether you are an employee of the broker or an independent contractor working under the broker’s license. Naturally, an independent contractor will make more money in most cases, unless they make no sales.
To be clear, most agents are independent contractors – that is to say, they hold their license under a brokerage and only make money from the commission of a sale. An independent contractor agent is responsible for performing and running the business. An agent whom is an employee of the broker performs duties asked by the broker and is on a specific work schedule.
In the first year, particularly the first six months of being an agent, you must set your expectations clearly. Sales take a long period of time to close, typically 3-6 months, and it takes even longer to get the business. What is rewarding about this career, is if done correctly one can make much more money than employees and people with multiple degrees. The business of real estate is delayed gratification, meaning an agent may not make money the first 6 months to a year, but once their pipeline is large enough, they will make large sums of money in a short period of time.
An agent’s pay structure should be at least 60% for the agent and 40% for the broker. The broker should ideally be entitled to 40% or less percent of the total commissions. Once an agent completes enough deals, typically more than five per year, they will be able to request a higher commission split.
2. What Resources Will I Need & Which Ones Will Be Available To Me?
Assuming you have found a brokerage looking for a serious hire, this is a very important question. A real estate salesperson is expected to pay out of pocket to release material advertising the listings you’re in charge of selling. This will require professional pictures and videos of the property, maybe even with a drone. This is especially true of properties with the potential to earn a large commission (one million dollars or more), and advertising could cost upwards of $10,000 without the right equipment.
The resources you will need could consist of a professional camera and video camera. Your iPhone likely not be enough for high-end properties. A drone might be needed, though you could rent one. Having a computer is a requirement. Laptops and tablets are great assets. A personal website for yourself as a salesperson is almost a must when working as an independent contractor working for commissions.
Certain brokers like to offer personalized websites to their sales associates. They might also have a professional camera and video camera that they will loan to you. Again, it is all about asking politely but remembering to ask. That is actually true of all the questions we have listed here.
3. Is Training and Continued Education Provided?
Becoming a real estate agent in California, whether experienced or new, requires constant training and continuing education to stay current on industry legislation and best practices. Best practices in this market is primarily being current with the best advertising trends such as search engine optimization, lead capture forms, internet marketing, and other technological avenues to gain business.
The ideal way to deliver a well-rounded education is to combine mentorship programs or with an exhaustive new agent training series.
Mentors can teach novice agents real-world scenarios as well as industry dos and don’ts. The legal landscape is constantly shifting, and agents must be aware of best practices, including training, in order to avoid costly mistakes and litigation.
4. What is the Most Common Structure for Forming a Business Entity?
Although most real estate brokers work as single proprietors, this is not the greatest strategy for avoiding lawsuits and lowering taxes.
To run your firm as an agent, the optimal business structure is an LLC.
The money is paid to you personally as a sole proprietor, and you will obtain a 1099 — the worst way to take income. Payments to an LLC, rather than payments to you as a sole proprietor, can help you save money on taxes. A limited liability company (LLC) also shields your personal assets against claims.
5. What Expenses Am I Responsible For?
It is difficult and expensive to start a new business. Understanding the costs associated with being an agent including commission split and expenses of dealing with a broker is critical to your success.
Agents are typically required to pay desk fees and fees for specific online services including having access to MLS, TLO, and other online paid services.
Errors and omissions insurance is one of the most essential components of the cost structure; you want to buy the right insurance to safeguard your license from potentially costly lawsuits.
Understand the brokerage’s coverage and what additional procedures are required to keep your company protected and secure.
Make sure you understand the brokerage’s E&O insurance coverage including what it covers and how much it costs.
6. What kind of Marketing Materials are there?
The core of what agents do is marketing. Although the marketing materials offered by brokerages differ from one to the next, be aware of the firm’s standards for using each marketing channel.
Frequently, the firm will know the finest words and visuals to use to promote your properties while also safeguarding you from lawsuits. This saves agents a lot of time and more importantly gives them a blueprint of how to market their products. The best brokerages in today’s market, have the best technology platforms to assist agents in finding clients, locating properties, and increasing business productivity.
7. Is There a Company Policy Manual?
The majority of policy manuals are dull and dry. Most policy documents, on the other hand, are intended to legally protect the company, and you should read and understand your organization’s policy handbook. If your potential broker doesn’t have a policy handbook, that’s a red flag.
If your potential broker doesn’t have a policy handbook, that’s a red flag.
8. What are the Percentages of Commission?
This is your company, and you need to know how much money a sale will bring in. After all, in this industry, you only eat what you kill; there are no paychecks or free trips.
Commission splits must be reasonable and consistent with industry norms. Also, find out what commission splits other brokers provide in the nearby market and find out what is appropriate for your specific niche in real estate such as doing residential, commercial, or leasing, which all typically have different commission splits.
Commission splits must be reasonable and consistent with industry norms.
9. Do you have an Independent Contractor Agreement?
The importance of independent contractor agreements cannot be overstated. Before signing, be sure it’s in writing and that you’ve read the full agreement. Seek legal advice if necessary to guarantee that your bargaining power is almost equal and that your interests are safeguarded.
10.What about a Policy that Covers Errors and Omissions?
Every broker requires you to have E & O insurance, but how does the one you’re contemplating charge you? Some ask as much as $800, which is paid all at once. If you leave the brokerage after a month, it’s too late! Others divide it down into a monthly fee that is more manageable. Some companies take a portion of the E&O premium from each commission check, but you must still pay the balance if your earnings are insufficient to cover the premium.
11. Will I be Able to Take My Listings and Buyers with Me to My New Broker if I Decide to Quit your Company and have Multiple Listings or Buyers in the Pipeline?
Many highly successful real estate agents reach a point where they just do not like their employing broker’s management or practices, but when they try to leave, they realize that the broker’s policy requires them to leave all of their previous business behind. It’s possible that this is worth tens of thousands of dollars. As a result, they are resigned to remaining in their current location until all of those deals close. Be sure to understand the company’s policing of leaving with current clients.
Summing It Up
It is important to prepare yourself before going to a real estate broker to ask the questions you need to ask. That way you do not forget what you need to ask and sit there fumbling with your words. That is important for your own well being, as you do not want to end up with a bad broker. It is important to have a broker that not only fits your personal needs but is able to provide you with the resources, knowledge, and mentorship that you may need for getting a real estate license.