How to Build a Real Estate Brokerage

Real estate is a lucrative industry that holds endless opportunities for professionals who have ambition, passion, and expertise.

If you are a real estate agent looking to take your career to the next level – or an entrepreneur with an eye for opportunity – building a successful real estate brokerage is an excellent idea.

Here are some tips and strategies to help you build a thriving real estate brokerage from scratch.

1. What is the Difference Between a Real Estate Brokerage and a Real Estate Agent?

Real estate is an extensive industry that includes many professionals working in various roles. It includes real estate agents, real estate brokers, mortgage brokers, title companies, and more.

However, when it comes to buying or selling a property, many people are confused about the difference between a real estate brokerage and a real estate agent. If you are in the market to buy or sell a property or planning to work in the industry, knowing the differences between these two entities is essential.

The primary difference between a real estate brokerage and a real estate agent is licensing requirements. In most states, real estate agents are required to work under the supervision of a licensed broker.

Agents are required to complete a specific number of hours of pre-licensing coursework and pass the licensing exam.

On the other hand, brokers must have an additional level of licensing and are required to have more experience, complete more coursework, and pass a more comprehensive broker examination. A broker can work independently or hire agents as they wish.

Real estate agents may work alone or with a brokerage. They work under the supervision of a broker in the latter case. An agent represents a client in a transaction, which means the agent works on behalf of the client and owes the client certain fiduciaries, such as loyalty, confidentiality, and full disclosure.

A broker, on the other hand, can represent the client directly or indirectly. Brokers have more authority in executing deals and negotiating offers.

Real estate agents work under the supervision of a broker, and they do not have the authority to work independently. In contrast, brokers are independent business owners with the authority to hire agents, participate in more extensive transactions, and open multiple offices.

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2. How to Build a Real Estate Brokerage: Step-by-Step Instructions

If you are looking to start your own real estate brokerage, then you have landed at the right place. Here’s a guide to everything you need to do!

A. Find Your “Why”

Starting your own real estate brokerage is a massive decision, and it’s not for everyone. You should ask yourself why you want to start a brokerage. It’s important to have a clear idea of what you want to achieve and what objectives you have in mind.

Do you want to provide top-notch customer service, or do you want to be recognized as the most prominent in-town brokerage?

Whatever your “why” is, it should motivate you and your team to work hard towards your goal. Write down your “why” and post it somewhere you’ll be able to refer to it often. This will help you stay motivated throughout the journey!

B. Understand the Pros and Cons of Starting a Real Estate Brokerage

Before starting a real estate brokerage, it’s important to understand the pros and cons associated with it.

On the pros side, you get complete control over your work, your schedule, your team, and your business. You get to be your own boss – and of course, if you work hard, the earning potential is tremendous.

On the flip side of things, starting a brokerage requires a significant investment of time and money, and there are no guarantees of success. You will be responsible for building your brand, marketing your business, and managing your team, among other things.

C. Figure Out Your State’s Requirements for Licensing

Licensing is an important requirement for starting a real estate brokerage business. You need to figure out the state’s requirements for licensing, which may include pre-licensing education, passing an exam, completing a background check, and meeting other eligibility criteria.

You can check your state’s real estate regulatory authority website (here’s an example of New York State’s) to get the specific information you need.

Once you have obtained the necessary licenses, you can move on to the next steps of building your brokerage.

D. Do Some Market Research

As you build your brokerage business, conducting market research is critical to providing insights into the industry and understanding your target market.

Research should include an analysis of local market conditions to help you make informed decisions about your business strategy, the type of properties to focus on, and the marketing plan that works best for your target audience.

E. Come Up with a Business Plan and a Name

Once you have researched and identified your niche and target market, it’s time to develop a business plan that outlines your goals, objectives, and strategies to achieve success.

A business model for real estate brokerage is crucial in helping you determine crucial details such as funding, revenue streams, expenses, and cash flow projections. You will also need to develop a name for your brokerage. Make sure you adhere to business name guidelines in your area and that the name is unique, memorable, and relevant to your brand.

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F. Get an Office Space

To run a thriving real estate brokerage, you need to have a physical location that represents your brand values and provides a professional image to clients.

The location should be in a prime area to attract potential clients, and the office should be well equipped with essential amenities like a meeting room, reception, and workspace for real estate agents.

G. Register Your Business

Register your real estate brokerage to obtain a legal and regulatory framework that helps you operate and do business within your locality.

Registering your business is an essential component of your brokerage’s success as it allows you to engage in business transactions legally, pay taxes, and access other government services.

H. Figure Out if You Need Staffing – and Hire a Strong Team 

Once you’ve set up all the previous steps, it’s time to figure out staffing needs. Assess the workload that you can handle yourself and which jobs could be delegated to your agents.

Hire a strong team of agents with varying degrees of expertise and experience. Strong teamwork can lead to better performance and a stronger reputation on the market.

I. Invest in Solid Marketing and Lead Generation

In today’s digital age, it is essential to have an online presence. Create a professionally designed website that showcases your brand and services offered.

Develop a social media presence on platforms like Facebook and Instagram to connect with potential clients and promote your listings. Make sure your website and social media accounts are updated regularly with engaging content.

You may also want to consider focusing on local audience marketing, as it can yield fantastic results. Lead generation strategies will take some time to ramp up, but in the long run, they can be a rewarding way of generating business.

J. Start Selling Listings!

The final step in building a real estate brokerage is to start selling your listings! To maximize your selling success, stay up to date on market trends and keep your brand fresh and engaging. It will help if you also train your agents better and support them where necessary.

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3. How Much Does It Cost to Create a Brokerage?

Overall, the cost of starting a real estate brokerage will vary depending on the type of brokerage you want to start.

If you choose to open an independent real estate brokerage business, expect to budget for start-up costs of at least $10,000.

Some of the key elements making up your total costs include pre-licensing real estate classes, which typically run for about $300 or more. Then, you must pay the real estate license application fee, which ranges from $325 to $500 or more.

You will also need to cover real estate broker fees, ranging from $25 to $500 or more per month.

Other significant costs include membership dues of $200 or more per year, and marketing costs of $1,000 or more per year.

Finally, you’ll need a continuing education program for yourself and your team, which typically range from $50 to $300 or more per year.

By contrast, if you are thinking about opening up a brokerage under a franchise, you are looking at start-up costs of about $200,000. High start-up costs would be needed for the brand, licensing fees, and marketing materials required.

There is a wide range of ongoing costs to consider after you have opened your brokerage as well. The cost of office space, internet access, printing, phone service, and employee salaries are all expenses that need to be calculated in it. The cost of these expenses will vary depending on the size and location of your brokerage.

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4. How Do Brokerages Make Money? 

Here’s the breakdown of how, exactly, you can make money as a real estate broker.

a) Commission

The most common way real estate brokerages make money is by following the commission-based income model. Here, the brokerage receives a percentage of the sales price and is split between the buying and selling brokerages.

Usually, the commission fee ranges from 5-6% of the sales price, but this varies depending on the location and competition. However, this commission percentage is not necessarily carved in stone, and both parties are open to negotiation.

The commission received by the brokerage is used to pay for agents’ training, office equipment, rent, marketing, and other operational expenses.

b) Brokerage Fees

Some brokerages charge their agents fees to work under their brand. These fees may include desk fees, transaction fees, and technology fees. In some cases, the brokerage may also charge agents for administrative support services such as paperwork and bookkeeping.

Brokerage fees can vary depending on the franchise or brokerage firm you work for and can sometimes run into thousands of dollars annually. It’s crucial to consider these fees when choosing the brokerage to work with and weigh them against the value and support they provide.

c) Ancillary Services

Brokerages also derive revenue by offering additional services, such as property management, mortgage lending, and real estate training. These services are an excellent source of revenue because they provide a predictable income stream that’s not tied to changing market conditions.

Ancillary services allow brokerages to differentiate themselves, increase profits, and establish a competitive edge over other firms.

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d) Franchise Fees

Some brokerages operate as franchises, such as Keller Williams and Century 21. These franchises provide branding, marketing, and technology support to their brokerage agencies. In exchange, they take a percentage of the brokerage’s gross revenue.

The franchise fee varies between 3-7% of the brokerage’s revenue, depending on the franchise’s brand recognition and support. Franchise fees can sometimes limit a brokerage’s profitability, but they provide valuable resources, technology, and marketing that may help grow and build the brand.

e) Referral Fees

Real estate brokerages also make revenue through referrals. When clients purchase property out of their brokerage’s service area, they may refer the clients to another brokerage.

In this case, the referring brokerage receives a percentage of the commission earned by the receiving brokerage. While referral fees can be an excellent income source, they also come with certain risks, such as legal requirements and ethical considerations.

Final Thoughts

Building a successful real estate brokerage is not easy, but it is achievable with the right strategies, team, and mindset.

Follow these tips to build a solid foundation, attract top talent, and serve clients with excellence.

With dedication, innovation, and hard work, you can build a thriving real estate brokerage that offers endless opportunities for growth, stability, and success.

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