With commissions compressing, consumer demands increasing, and technology integration continuing, real estate teams increasingly offer entrepreneurial agents an organized way to grow. Brokerages increasingly must develop programs to support them, from office space, branding and marketing support to competitive compensation structures.
In many ways, teams are tailor-made for modern real estate, which requires technology and organized teamwork to support consumers with ever-higher expectations. The industry is moving toward fewer, better agents doing more deals, a situation perfect for real estate teams. Sites like Zillow and realtor.com, with their new referral ad products, only want to send leads to top-performing agents, which more often than not are teams. For more on teams, read the top trend from the 2017 Swanepoel Trends Report, “The Explosive Growth of Teams."
This post provides some insight into how real estate team leaders evaluate brokerages and the increasingly blurred line between what constitutes a team and what constitutes a brokerage.
Realogy acquired San Francisco-based independent brokerage Climb Real Estate in 2016 and announced plans to franchise the brand in 2018. However, this January 2020 Realogy made a sudden announcement that it was shuttering the brand and folding its 160 agents into its area Coldwell Banker-branded NRT offices.
Climb agents had the opportunity to choose a new brokerage, but they had to do it quickly. If they didn’t choose by the deadline date, they would join Coldwell Banker-branded NRT office by default.
Kenny Truong, 35, perhaps better known by his Fast Agent moniker, has a 12-agent team that did $56 million in sales on 76 transaction sides in 2019 at Climb. With a business centered on the Oakland market in the San Francisco Bay Area, Truong has built an industry following based on his innovative marketing and his embrace of newer technology, which prompted Inman News to name him its most innovative agent of the year in 2015.
On Thursday, Jan. 9, news broke that Realogy would close Climb. A day earlier, president and CEO of Coldwell Banker Ryan Gorman met with all Climb agents at a company meeting and shared the news, where Truong learned he had eight days to evaluate and choose a new brokerage. The 160 agents at Climb had until Jan. 17 to choose a brokerage; if they did nothing, they would be incorporated into NRT.
That lit a short fuse. Truong had only a week to choose a new brokerage for his team.
Team Fast Agents shopping for office space after learning that they’d have to join a new brokerage. Credit: Kenny Truong
His thought processes during his search for a new brokerage home provides insight into the real estate team dynamic and the relative value propositions of brokerages. The appeal of brokerages’ team offerings vary by specific teams, of course. This article provides an opportunity to evaluate several brokerage propositions to real estate teams through the eyes of one team leader.
#TEAMFAST operates as a high-performance team – it has a clear structure, training and organization. Truong employs technology, training and coaching to keep the unit humming. The team has a licensed director of operations, who administers the system he developed as an individual agent, which includes ample use of integrated newer technologies such as RealScout, Chime, MailChimp, Facebook and more. In addition, Truong provides regular mentoring to his agents. Most of his 12 agents are younger and relatively inexperienced with an average age of 25. #TEAMFAST’s agent compensation structure reflects this.
Buyer agents are on a 50/50 split with Truong that ratchets up to 75/25 split in their favor based on annual sales volume tiers that ratchet up every $2 million from $4 million to $12 million. Their listing work contributes to that sales volume threshold. Listing agents are on a 75/25 split, with the bulk going to Truong if it’s a listing from his network and 60/40 split (bulk to Truong) if it’s a listing from their lead-gen activity or network.
Now with a decade under his belt and an aggressive marketing spend, Truong brings over 90 percent of his team’s business from the lead generation as an advertiser with Zillow, his branded bus benches throughout Oakland, his email marketing and his growing sphere of past clients. Those familiar with Truong recognize his quirky, bold, standout marketing, reflected in his weekly pop-culture-themed email newsletters.
Examples of Kenny Truong’s pop culture-infused email newsletters. Credit: Kenny Truong. Note: T3 Sixty has not determined whether the adaption of IP in this way violates trademarks. Consult an attorney should you choose to do something similar.Truong’s annual $145,000 marketing spend
· $60,000 for 60 bus benches
· $50,000 for Zillow
· $20,000 for mailers
· $15,000 Grocery store checkout dividers
Forced to pick a new brokerage, Truong dissected what he most valued at Climb; these would be the elements he would look for when evaluating brokerages. At Climb, he valued the legal team, which helped him stay out of trouble; the insurance the firm provided; the marketing team which provided custom design work; a culture of independence and creativity; the potential for growth with a young brand; and sleek office space that fit his and his team’s forward-looking, younger brand image.
Upon reflection, he determined that legal support, insurance, brokerage brand and office space were commodities among brokerages, so he focused on compensation structure and the opportunity for growth when evaluating brokerages.
At Climb, he was on an 86/14 split which included a 4 percent fee paid to the Climb franchise with no annual compensation cap. His team members had 70/30 splits with Climb.
In a period of just eight days, he met in person and had calls with over 14 brokerages with East Bay operations, including:
Big Block Realty
Intero Real Estate
Keller Williams Realty
Marker Real Estate
Red Oak Realty
A Sotheby’s International Realty affiliate
The Address Realty
The Grubb Co.
Many of these interviews involved meetings at the brokerage offices and discussions with brokerage leadership to discuss terms.
After their initial meetings, Truong and his team met on Jan. 15 (two days before their deadline to choose) to narrow their choice down. Based primarily on office space considerations, they picked the following brokerages as finalists: Compass, Side, Keller Williams Realty and eXp Realty.
Initially, Coldwell Banker ranked near the top for Truong and his team as it would be a simple transition given the short timeframe they had to choose a new brokerage. While it offered a competitive compensation structure with a $30,000 annual commission cap for himself and a $9,000 annual compensation cap for his agents (not including a 6 percent franchise fee that remained) and would provide a simple move, Truong’s team felt the company’s office design in the East Bay did not match the energy, younger and sleek style they had come to appreciate at Climb. So the company did not make the final round.
While most of his agents wanted to join Compass because of its lustrous office space, high-profile branding and upward momentum, all 12 agents decided on eXp Realty with an initial six-month commitment. They chose eXp Realty for primarily three reasons:
Its commission structure,
The freedom it allows for branding and
The opportunity it provided for growth.
EXp Realty’s flexible compensation structure had the most upside. EXp Realty agents have 80/20 splits with the company. Truong comes in at a $16,000 annual commission cap while agents on his team come in at $8,000 annual commission caps.
Some of #TEAMFAST’s eXp Realty branding. Credit: Kenny Truong
Truong and his team didn’t love the eXp Realty branding, but they felt it was malleable enough that they could adapt it into what he needed. The company’s more lenient branding guidelines allowed the team, for example, to have just “#TEAMFAST” on the back of its business cards. Some firms required the brokerage brand to appear on the back of the business card. Truong said he likes Compass’ branding but its marketing guidelines would require him to grow the Compass brand not his own, and branding is his passion and forte. Even if he did his branding at Compass, he felt it would be hard to stand out.
In addition, Truong liked that he could make money when he recruited agents to eXp Realty with the company’s recruiting bonus structure that compensates agents for recruits up to seven levels down in their recruiting ladder. Also, given that eXp Realty did not have a strong East Bay presence, Truong felt he could define the brokerage brand in the area and felt there was room to grow.
In fact, eXp Realty allows Truong to leverage a team-as-brokerage model. He plans to run and grow #TEAMFAST in the East Bay and also operate a FAST REAL ESTATE brand “powered by eXp Realty.” This will allow him to recruit agents from all over the country to eXp Realty, who will contribute to his downline. He’ll share his systems and his tech with those agents. Other team leaders have done this through eXp Realty, including Veronica Figueroa and Kyle Whissel. This setup essentially means eXp Realty provides brokerage back-end services to a team that essentially looks like a brokerage.
The one downside was eXp Realty did not offer office space other than access to local space at generic office rental company Regus. So Truong signed a six-month, $30,000 lease on a 300-square-foot office in Oakland’s Jack London Square. The space will accommodate up to 30 team members with no extra overhead from Truong, with eXp Realty’s commission structure offsetting the office space expenses.
Truong’s experience shows how vulnerable brokerages are to high-performing teams. Large groups of agents and significant revenue can move from one company to another in a very short time period. New models such as eXp Realty and Side are seeing success by offering into tools and compensation structures that align with the needs and interests of teams. All brokerages should carefully analyze how they can profitably align their interests with teams.
Disclaimer: Kenny Truong is not a client of T3 Sixty but several other real estate brokerage and franchises mentioned in the article are, or have been. This article was not written at the request or on behalf of any company, but solely mentioned for the sake of this article’s accuracy and completeness.