Monday, January 11, 2021 / by Johnnie Morine
- Team leaders should ask all licensed team members to sign an agreement.
- Agents need to know what happens to their database after they leave the team.
- Brokers must make sure all members of a team ascribe to professional practices and standards of the firm.
- Learn about team legal issues at the Partnerships & Teams topic page and this "Window to the Law" video.
There are any number of ways to structure and operate a real estate team, whether it’s a family partnership or a rainmaker with a dozen agents. Regardless of the approach, success for any team—and the brokerage that houses it—requires maintaining solid relationships, including clear communication among the real estate professionals involved. Here are ways to help make sure the interests of all parties are aligned when agents are considering the formation or expansion of a team.
Know Your 'Why'
A broker’s role is to listen to a potential or existing team leader, learn what they’re trying to accomplish, and understand whether they have the systems and organization in place to manage other people, says DeAnn Golden, senior vice president and managing broker at Atlanta-based Berkshire Hathaway HomeServices Georgia Properties. Golden, along with four other brokers, participated in a “Zoom-table” hosted by real estate coach Lee Davenport to discuss best practices for working with teams.
When Johnnie Morine is asked by one of his agents if they can start a team, he first seeks to understand what that person can offer other agents. Morine, broker-owner of The Morine Group, REALTORS®, in Arlington, Texas, says, “I need to make sure they have the capabilities of leading.” This includes a written description of the roles and goals for the team. Most of the time, after agents learn what goes into leading a team, they decide not to go through with it, he says.
The most successful teams that Randal Lautzenheiser, managing broker and owner of Atlanta Intown Real Estate Services, has seen at his company have grown organically. Usually they’ve involved two people who’d been working independently but found themselves with more leads than they could handle. They paired up and brought others on board.
There’s an opportunity, says Jon Hunter, vice president of residential success for John L. Scott Real Estate in Seattle, for the broker-owner or managing broker to take a coaching approach with team leaders to make sure they’re getting what they need, including the systems and the leadership training to help them achieve their goals.
It’s critical, though, that agents consider what they want and what they’re good at before they start a team. “You have to have a skill set that includes management and being detail-oriented,” says Leigh Brown, broker-owner of One Community Real Estate in Concord, N.C., and vice president of advocacy for the National Association of REALTORS®. Brown, who has led a team for more than 15 years, says team leaders must also understand their own culture to attract and retain the right people. “Not everyone is a great fit, and that’s a hard lesson to learn,” she says.
Get It in Writing
In addition to the independent contractor agreement each team member should have with the brokerage firm, team leaders should ask all licensed team members to sign a team agreement that outlines the term of the work relationship, compensation, guidelines, and policies. Many local and state REALTOR® associations offer contract templates for their members. Companies or team leaders who write their own agreement should have it reviewed by an attorney, Brown says.
The worst issue Lautzenheiser has experienced with teams is when they break up without any signed agreements in place. “You have to make sure all the agreements are in writing,” he says. The brokerage owner should also receive copies of the contracts between the team members and team leader for their records.
There’s also risk involved—including reputational risk—when the broker doesn’t know what people on a team are doing, Golden says. Brokers must make sure those team members ascribe to professional practices for specifics such as response time and communication methods, she says. This may include following up with leads and keeping clients in the loop with emails, phone calls, video calls, and text messages.
Companies or team leaders who write their own agreement should have it reviewed by an attorney. The brokerage owner should also receive copies of the contracts for their records
Not many brokers are involved in how teams are structured; however, some real estate firms provide guidelines and recommendations, Brown says. Brokers should acknowledge the menu of team styles—such as agent and assistant; two-agent partnership; spousal team; or an agent, buyer’s agent, and admin team—so that those who have employees can be aware of payroll and HR issues, she says.
“Brokers need to understand that they carry some liability for everyone under their license, so it’s prudent to understand the structures and agreements among the agents,” Brown says. “Brokers may not dictate terms, as agents are 1099 independent contractors for the most part, but having a copy of the agreements on file is smart.”
Brown makes sure her team leaders have written job descriptions outlining who does what on a team and exit agreements with each agent who joins. These documents are just as crucial with partnerships, she says, because two-person teams tend to forgo the legal documentation more often than larger teams, which can be risky.
The team leader’s name goes on each transaction at Morine’s firm, and his company’s team agreement template outlines the split, the ownership of the lead, the role of the showing agent, and expectations for follow-up.
The status and ownership of information in the lead agents’ database needs to be thoroughly discussed by all parties as well. Agents need to know what happens to the database they built before they join or form a team, what happens to the leads added to the database after they become part of a team, and what happens to the database after they leave the team, Hunter says. For example, expectations must be in writing to help determine which team member is responsible for keeping in touch with a past client: the team leader? The buyer’s agent who received the lead from the team leader?
About the Money
Morine says a team contract must address compensation, specifically the split agreement between the agent and team leader. Often, the commission split between the agent and brokerage stays the same whether or not an agent is on a team. For example, if the brokerage offers a 70/30 split but the agent works on a team, the agent still gives 30% to the company and a percentage of each commission to the team leader. According to the 2020 NAR Member Profile, 37% of REALTORS® were compensated under a fixed commission split with their brokerage, such as 60/40, 70/30, or 80/20, followed by 22% with a graduated commission split, meaning the split increased with higher agent productivity.
Team leaders often ask for 20% to 50% of the full commission, Davenport says. Let’s say a brokerage receives a $10,000 commission and the team leader’s agreement asks for 40%. In this scenario, the broker takes a 30% share of the $6,000 that remains, and the team member nets $4,200.
While it may seem costly for an agent to be part of a team, the benefits are plentiful and likely include mentorship, collaboration, and a consistent source of leads, especially if it’s a high-volume team, Davenport says. Sometimes the team leader will pick up a portion or all of team members’ monthly brokerage fees. And some brokers will take a flat transaction fee instead of a commission split unless the lead came from within the company.
The benefits are plentiful and likely include mentorship, collaboration, and a consistent source of leads, especially if it’s a high-volume team.
Brokerages providing a variety of concierge services for agents, such as social media advertising and other marketing services, are usually less willing to negotiate on splits and fees, Davenport says. But many companies will negotiate discounts if the team employs its own administrative staff or does all of its own marketing, she says.
One of the main reasons a team leaves a brokerage is limited accessibility to the broker, Brown says, especially in hot markets like many are experiencing now, in which everyone is busy. Brown has instituted a “text then call” policy: She asks all agents, including her team members, to text her first to make sure she’s available and understands the reason they’re calling. That also gives her an opportunity to prepare her response if needed.
Hunter recommends that brokers proactively support their agents. “We should be the ones reaching out to our team leaders,” he says. “If we’re reaching out and having a business conversation on a regular basis, that’s really powerful.” It shows team leaders the value of being part of the brand.
Morine and his director of training and development will have four to five Zoom calls a week with their agents, including those on teams, just to touch base. While many brokerages leave the training of team members up to the team leader, Morine says his brokerage strongly encourages all agents to participate in his company’s weekly “Workshop Wednesdays,” in which he offers two hours of mentoring and coaching.
Because agents create teams partly to build their own brand, a broker has to stay mindful and respectful of teams’ identities, Brown says, without sacrificing their own brand and standards.
Editor’s note: Before setting up a team, the broker should ensure the team formation, name, advertising, payments, supervision and other details are compliant with state license laws and regulations. Learn more about about teams at the Partnerships & Teams topic page and in NAR's "Window to the Law" video on team legal issues.