How do real estate teams work?
If you are a real estate agent you have probably heard of or have even been on a real estate team. One of the most unique models in the real estate industry is the ability for an individual agent to start and run their very own real estate team.
The team model has been very popular amongst agents in the past few years for both new agents who are team members and experienced agents who are the team leaders. It has allowed real estate agents of different experience and production levels to align their interests financially to create mutually beneficial relationships.
But how do real estate teams work? Many agents who are either new to the industry who are deciding whether or not to be part of a team and experienced agents who want to start a team are wondering just exactly how do real estate teams work.
In this article we will explain how real estate teams work for both new real estate agents and experienced real estate professionals.
How do Real Estate Teams Work?
So just exactly how do real estate teams work?
Real estate teams are a team or group of real estate agents work together to generate more leads and close more deals as a unit by sharing their commissions with each other similar to a referral agreement between agents for each closing they have.
Generally a real estate team structure will consist of a team leader who will receive a percentage of the commissions of all of their team members’ closings in exchange for providing them with additional training, resources, and leads.
Agents on a team are usually paying an additional commission split to their team leader for the closings that they have simply because they would not have been able to generate the lead or converted the client if it was not for the support of a team.
Although every team works a little different, usually a real estate team leader will provide agents on their entire team with resources that a solo agent do not have access to such as:
- Transaction Coordinators
- Opportunity to host Open Houses
- An Administrative Assistant
- Real Estate Leads
- Professional Development as an Agent
- Digital and Physical Marketing Campaigns
- Marketing Materials and Advertising Materials
- Other Support Staff
For many new real estate agents, joining a real estate team gives them the resources that they need to help launch their business even with little or no experience and are happy to share a larger part of their commissions in exchange for the additional resources that a team provides.
As an experienced agent, starting a real estate team is a good way to create an additional income stream in your real estate business by having other agents in your team help you work and convert your leads and receiving a smaller percentage of the commission for every closing that they generate on your team.
Many individual agents start teams in hopes of creating more work-life balance in real estate by slowly removing themselves from the client representation process and moving into a business owner or CEO role for their team.
Understanding how a real estate team works will give you a better idea of whether or not you want to join or start your own real estate team. Although there is a great deal of information out there on how real estate teams work, we believe that these 5 things are the 5 most important attributes of real estate teams to understand for both potential team members and team leaders.
5 Things to Know About Real Estate Teams
- The Team Leader is Usually the “Rainmaker”
- Agents on a Team Splits Their Commission With The Team Leader AND The Brokerage
- Real Estate Teams Generally Use The Same Branding for All Agents
- Some Teams Allow Agents to Generate Their Own Leads
- Successful Agents Tend to Outgrow Their Teams
1) The Team Leader is Usually the “Rainmaker”
Like we mentioned before in “how do real estate teams work”, real estate teams are usually headed by a team leader who provides additional resources and support to their agents in exchange for a piece of their commissions.
Team leaders are usually “rainmakers”. This means that their main role is to generate an abundance of leads and distribute those leads to their team members to then work and convert into clients and closings.
Most agents start teams simply because they have too many leads that they don’t even have time to work them themselves.
As a team leader, you need to make sure that you have an extremely solid foundation to be able to provide your agents with a consistent stream of leads at all times in order to justify your team split. The biggest reason why most real estate teams fail is because the team leader is not able to generate enough leads for their agents.
Another thing to keep in mind as a team leader is the fact that you need to be able to set up and maintain a predictable system for your team so that they can move the leads that they receive through a sequential and clear sales funnel so that they can convert them into closings.
Many successful individual agents who start teams fail to do this step and as a result do not see the success from their team that they see as a solo agent.
As a team member, it is important to realize that you will be receiving leads from your team leader to work and that most team leaders will distribute their lead flow based on their team members’ location, work ethic, and conversion rates. This means that if you plan on getting “free leads” without putting in the effort to work them, you will most likely not succeed as a team member.
Also remember that as a team member you are splitting a portion of your commission with a team leader, this means that you need to understand exactly what it is that you are receiving in return for that additional split. If your team leader is not providing you with adequate or quality leads, then it might not be enough to justify splitting your commissions with them.
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2) Agents on a Team Splits Their Commission With The Team Leader AND The Brokerage
On the topic of agents on teams splitting commissions with their team leader, it’s important for a team member to understand that this split with the team will be on top of the split that you will pay to your brokerage.
Yes, this means that effectively you will be splitting your commissions for every closing with two different parties. Your team leader and your brokerage.
As a team leader, you will also be held by your broker to the same rules for the additional commission you are earning from your team members. Once you receive a split from your team members’ closings, you will then split that commission with the brokerage that you hang your license with.
For example:
If a team member closes a deal that yields them $10,000 in total commission income and they are on a 50/50 split with their team and a 80/20 split with their brokerage, this is how the commission will be split.
- 50% goes to the team member – $5,000
- 50% goes to the team leader – $5,000
- The Brokerage Receives 20% from the Team Member – $1,000
- The Brokerage Receives 20% from the Team Leader – $1,000
- The Team Leader Keeps 80% of $5,000 – $4,000
- The Team Member Keeps 80% of $5,000 – $4,000
In this scenario both the team leader and team member walks away from this closing with $4,000 in total commission kept after splits while the brokerage keeps $2,000 as their own revenue.
As both a team leader and a team member, it is important to understand this fact and pick a brokerage to join where you will be able to keep a fair portion of the commission that you are earning in exchange for the tools that the brokerage is providing you.
3) Real Estate Teams Generally Use The Same Branding for All Agents
One of the big questions that agents have when it comes to understanding how do real estate teams work is understanding how real estate teams are branded.
Usually a real estate team will have a team name or team brand that the team leader decides on and the agents on the real estate team will be allowed and encouraged to brand themselves as a part of that team.
This means that agents will be allowed to use the team name on their own marketing, branding, prospecting scripts, and social media posts in order to further strengthen the brand of the team itself while giving the agents more credibility by associating with a strong and trusted brand in the real estate community.
Aside from that, team leaders are usually very generous when it comes to promoting the efforts and achievements of their team members, especially if those achievements came from the support of the team itself such as when a closing was generated by a lead provided to the agent from the team.
Team leaders will help promote their agents and their deals on their own marketing, branding, and social media channels in order to accelerate the efforts of their team members since they will have a financial incentive to do so.
One of the things to watch out for as a team member is the flexibility to create, develop, and cultivate your own brand and identity in the process. Although getting to associate yourself with your team’s brand is a benefit especially for newer agents, it is also important to work on building your own reputation as an agent that is separate from the team you are associated with.
As a team member, make sure that your team will allow you to also create your own brand and not be forced to use your team’s branding, but will allow you to when you choose to. This way, you will able to leverage your team’s brand credibility, but also be able to work on building your brand reputation with clients in the meantime.
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4) Some Teams Allow Agents to Generate Their Own Leads
Aside from creating your own brand as an agent that is apart of a real estate team, it is also important to understand that just because you are an agent that is on someone else’s real estate team does not mean that you will not be able to generate your own real estate leads.
Generating leads in real estate is one of the most important skill sets an agent can learn, and just because you are a team member does not mean that you will never have to learn how to generate leads.
In order to understand how do real estate teams work, it is important to remember that by being a part of a team, you are NOT an employee of the team leader, you are simply associated with them but you are still an independent contractor who is responsible for your own business and income.
The vast majority of teams will allow agents to generate their own leads while still providing leads to their agents. As both a team member and team leader it is important to understand why some teams function better than others.
The best teams are teams where agents not only get to generate their own leads, but also gets to keep ALL of their commission for the closings that were generated by their own leads and not the team leader’s. This means that if an agent on the team generated their own lead from their own efforts (SOI, marketing, networking, social media, etc.), the team leader will NOT take an additional split on that specific closing.
As a team member, joining a team where you can have the option to generate your own leads and keep your commissions is a great way to help encourage and reward you for learning lead generation skills as an agent.
As a team leader, creating a team structure where your agents get to keep their commission from leads that generated themselves allow you to retain more agents for a longer period of time so that agents don’t feel like that they are outgrowing your team and end up leaving.
It is crucial to remember that both team leaders and team members are independent contractors as real estate agents and that both team leaders and their agents should have the flexibility to grow their own business however they choose to without restrictions.
5) Successful Agents Tend to Outgrow Their Teams
Lastly, understanding how real estate teams work is understanding that teams don’t last forever, or at least very few do.
Most real estate agents like to START their careers on a team. Teams give new agents with no experience the structure and foundation of support that they need to launch their business in their first few months or years as an agent.
With that being said, most successful agents who have been on a team for a couple months or years tend to outgrow their team and the need for the support that their teams provide.
As agents learn to generate leads for themselves, create their own brand, or even just start closing more deals, they tend to want to keep more of their commissions and see being a part of a team as a handicap to their ability to keep ALL of their commissions.
For many team leaders, they tend to see that their agents do outgrow their teams and leave the more successful that they get. Retention is the #1 problem for team leaders who don’t have a structure to reward and retain their top performers.
One of the ways that many team leaders have been able to retain their agents on their team and continue benefiting from their production is by joining a brokerage that offers a revenue share model.
Revenue share in real estate is when the brokerage that you are sponsored by shares a portion of their own revenue back to you for growing the brokerage. This means that when one of the agents on your team closes a transaction, the brokerage will actually give you the team leader back a portion of the brokerage’s commission split from that closing just because you were responsible for bringing that agent to the brokerage in the first place.
For team leaders, a revenue share brokerage allows them to retain their agents who outgrow their teams. When an agent outgrows your team and no longer wishes to pay an additional commission split to the team, you will still be able to benefit from that agent’s production through the brokerage sharing revenue back to you.
This creates a win-win-win situation for the brokerage, the team leader, and the agent because it encourages agents to grow beyond their teams while also encouraging the team leader to help in developing their agents to become more independent so that they can continue earning overrides on their sales without having to manage them.
To learn more about joining a revenue sharing brokerage, click the button below!
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Join The Best Brokerage for Real Estate Teams!
Now that you understand how real estate teams work for both the team leader and the agent, it is important to start considering joining a brokerage that is the most beneficial for teams, team leaders, and team members.
As we talked about in the last section of this article, there are multiple brokerages out there today that offer revenue sharing as a benefit for their agents. The best revenue share models are tiered, meaning that you are able to earn overrides on the agents that you were responsible for referring to join the company, but also the ones that they refer to join too.
Over the past few years, multiple teams varying in size from 5 agents to up to 500 agents have moved to one specific brokerage to improve their agent’s lives and their own earning potential.
That brokerage is eXp Realty.
To learn more about why teams need to join eXp Realty, please click the button below!
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If you are interested in joining the best brokerage for agent growth, compensation, and opportunity in the world, be sure to partner with the best sponsorship team in the world as well! We provide additional training, tools, coaching, partners, collaboration, masterminds, and resources for your success!
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