Editor’s note: View additional Inman News coverage of agent teams and related issues here.
While agent teams can create their support network by pooling resources and sharing expenses, they also pose challenges for brokers and brokerage companies.
There is the matter of office space to accommodate teams, as well as marketing costs and technical support.
"The interesting thing is agent teams aren’t growing by leaps and bounds, but they do create unique challenges for the brokerage to understand how to partner with them," said Joe Spencer, president of John L. Scott Real Estate, which has 140 offices and 3,500 agents in Oregon, Washington and Idaho. "It’s more dynamic than dealing with an individual agent."
Spencer said that while less than 5 percent of John L. Scott agents are part of a team, the team model is the subject of much discussion within the broker industry, as the team is basically a business operating within a business.
Other brokerage companies, broker-owners and team leaders interviewed by Inman News said the relationship between a brokerage and agent team is more dynamic and presents various challenges, and they have seen growth in agent teams.
"I can’t think of an office that doesn’t have numerous teams," said Harley Rouda Jr., CEO of Columbus, Ohio-based Real Living, which has 60 company offices and 80 franchise offices.
Historically, Rouda said, smaller teams were common at Real Living’s offices, but recently he’s seen the formation of teams that "frankly look like a well-run small brokerage" and are made up of 15 to 20 agents with one team leader.
Rouda said that he has also seen downsizing among some larger teams that were formed during times of strong sales activity, in order to make the team more efficient.
"There was a trend where you tried to have as many buyer and listings reps (as possible) … being big for the sake of being big," Rouda said.
Also, he said that agent teams of the past typically involved a partnership between family members or relatives, though "Today we’re seeing a tremendous increase in two, three or four agents getting together who are not related."
Chad Ochsner, broker-owner of RE/MAX Alliance in Denver, Colo., which has 22 offices and about 800 agents, said he has witnessed an increase in the number of agent teams.
"I’ve absolutely seen an increase. I would guess 20 percent of our (company) populous is involved with a team in some capacity," he said. …CONTINUED
A recent trend Ochsner has seen is two agents partnering up, pooling together resources and sharing the same office assistant while still operating independent of each other.
Russell Taylor, broker-owner of RE/MAX Realty Associates in Champaign, Ill., said a significant amount of new agents have been joining teams as a way to learn and receive support during what is a slower overall market, in terms of activity.
Brokerage challenges
Some brokerage companies and broker-owners who are seeing a rise in agent teams regularly review their policies regarding teams and the fees they charge those teams.
"(RE/MAX Alliance is) paying attention to the increase in teams. We used to not be involved in the hiring (of team members). That has changed," Ochsner said, explaining that in the past he had team leaders hiring agents without his knowledge.
"We learned quickly that could destroy a brokerage."
Taylor said RE/MAX Realty Associates, similar to RE/MAX Alliance, also changed its team member hiring policy in the same fashion.
While the two brokerages now maintain hiring policies, they — along with Real Living — have not set ground rules on how large a team can become. However, they all require team leaders to sign a commitment saying they are responsible for the actions, training and managing of their licensed team members.
Aside from hiring policies, the brokerage industry frequently analyzes the amount of fees they require each agent team to pay for the services they provide, such as office space, transaction management software, and marketing.
"This is a bit of a moving target. As there are more agent teams, we have to look at what we charge agent teams on an annualized basis," Spencer said. "We know one of our largest fixed costs is space. That’s usually where we start (when analyzing fees)."
While Spencer would not give a specific example as to how the fee structure relates to a team’s size, he said it is standard that the more team members you have, the higher the fee for the broker’s support.
While hiring and desk-fee policies have changed, it appears that a brokerage’s policies regarding commission splits between team leaders and agents have remained consistent.
According to the broker-owners and brokerage company executives contacted, agent teams often do not directly split their commission income with brokers, paying fees instead, and it’s up to the team leader to determine commission splits with team members.
Branching off
Because the majority of brokerages don’t limit the size of agent teams, there is always the possibility that a large, successful agent team will leave the brokerage and forge out on its own.
However, they would also be cutting off the support that the brokerage company provides. …CONTINUED
"Do some of them get romanced with, ‘Hey I could be on my own?’ I’m sure from time to time every team considers this," Ochsner said.
"(But) in our environment every one of the teams is so focused on selling and productivity that they look to the brand to take care of things they don’t want to."
These "things" include marketing, listing presentations, listings Web sites, technical support, and forms according to Rouda, as well as business planning tools.
"They (Real Living) provide a great brokerage and technical marketing piece," said Marilyn Vutech, partner in the Vutech Ruff agent team, which consists of eight team members. "They make my life so much easier."
John L. Scott provides similar support including transaction management and listings services, and human resources services through a third-party company.
"I’ve seen agents branch out and create a boutique brand with a team, and they many times do come back to the larger brands," Spencer said.
Leading a team
While team leaders may continue to be active agents, the management responsibilities can be time-consuming as the team grows in size and complexity.
"If you want to be a team leader but also an active agent, then you wouldn’t have time to for a large team," said Pete Veres, associate broker-owner of the Elite Asset Management Team in Albuquerque, N.M., which has four members. "You’ll be doing personnel management."
Spencer said many agents are not good at running a business with multiple employees and may have trouble when team production declines and layoffs are necessary.
The lack of a written exit strategy, should a team member retire, die or leave the team, was cited by Rouda as the biggest problem with inexperienced leaders of larger teams.
Because large teams carry a heavier management workload for team leaders, those interviewed suggested that the ideal agent team typically consists of less than five members, or is led by a group of partners who share leadership responsibilities.
"By having a team (of four) it allows me to spend all my time negotiating, taking care of problems with transactions, and focusing on the client," Veres said.
Another key aspect of a successful team, say industry participants, is to bring together agents with different skills and knowledge of varying markets.
"There’s strength in this team. We all specialize in different areas, so if one area goes cold (in terms of activity) we can look elsewhere," Vutech said.
Erik Pisor is a freelance writer in California.
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