Real estate companies have been offering potential recruits hefty packages to come on board. Reliable sources are saying that sign on bonuses range from $5000 to $250,000. Yes, that is ¼ of one million dollars, to entice agents to consider their company. They are also offering high, fixed (and unearned splits) for 2-3 years. The same package can also include 30,000 pieces of direct mail, up to $1500/month for assistant payment, building out space, and logo development incorrectly referred to as "branding". In return for these hefty packages, they are requiring agents to place liens against their personal property and signing 2-3 year contracts stating that the agent will return all of the money should they decide to leave prior to the expiration of their contract. We are also hearing that they are trying to move contracts to 3-5 years to ensure you stay there and they can get past their break even point for revenue. Signing a contract to stay, turns your wonderful "independent contractor" status to "indentured servitude". This flies in the face of why you probably entered this business. They are not offering these packages because they like you or they think they can grow your business. They are offering these to build instant market share. They just want you to keep doing what you have been doing for years without them.
Companies that lure agents with these incredible packages either don’t have a lot to offer or they don’t believe they have a lot to offer. From a broader perspective, I wouldn’t affiliate with a company that is giving away their equity (and financial stability), through inflated splits, high sign on bonuses, and other big perks. The average agent commission split for financially-healthy real estate company is 65%. The remaining 35% is a gross, not net, number for profit. From the 35% "profit" comes mortgages on the office buildings, technology, insurance, staff, supplies, advertising, marketing, telephones, light, heat, power, maps, yard signs…you get my point. The margins on profit are slim and getting slimmer as the cost of doing business continues to increase. In a "normal market", if a company is left with a few percentage points of profit, how can they offer these over-inflated packages? This is how: They find other small, yet significant ways to charge their current agent base. Adding these small fees helps them offset the huge losses they are taking on the recruiting front. Once you agree to the package, you then become one of the people that gets thrown into the bucket and gets charged these fees.
Promising that you will make a lot of money and not have to do any hard work is impossible. They lull you into a false sense of security which is serious business for you. It ultimately affects your business and livelihood. Here some things to consider when being courted by a company:
- Why would any real estate company feel compelled to offer such packages to get agents to make a transition?
- Why would the owner of the company give away the equity in the company to you…equity that has taken years to build? What’s in it for them?
- What value, other than the package, do they have for you on a day-to-day basis?
- What support do they have in place for you to service your clients? (Remember them?)
- What business development coaching do they offer you to help you grow your business?
- If they made you promises, are they ALL in writing?
- What happens if you get there the first week and don’t like the environment? What happens if you want to leave? Do you owe them the bonus? Do you owe them anything else? Are you now bound for many years?
- How do they help you reach your goals?
- Is the Manager someone who is going to help you grow your business? What systems do they already have in place?
- Have you been allowed to "bond" with the Manager of the office or are you being courted by their corporate people who you will never see again and haven't sold real estate for decades, if ever.
- What other fees have they not disclosed to you that would help them balance out your package?
- How fair is it to offer a package to you coming in when the agents that have been there for many years are held to the split schedule, roll backs and agent expenses? The shoe will be on the other foot soon with agents coming in behind you.
- What is the office environment like with the unfair system? Do you think it is happy? Do you think it's a trusting environment? Not likely if unfair and hefty packages are being offered to those coming in. Don’t expect any team support from your fellow agents. They all will know why and how you came on board.
- What happens when your contract expires? Do they allow you to renegotiate? Not likely to the extent that you could when you were just a glimmer in their eye. You have now priced yourself out of the market, because no logical-thinking company would continue to give away their company equity. Companies need to balance profit so they can reinvest in their company and stay financially sound. They are counting on your fear of making another transition and hoping you stay well beyond your heavily-bonused contract time, when they can actually make money from you.
Think through any outlandish offer you may get. It may be the latest "gimmick" or "slight of hand" from that company. Recruiting is getting more aggressive and outrageous, but it’s the time to take a step back and make sound, long-term business decisions for your growth. Don’t get "taken" by promise to make a lot of money and build your ego. Your long-term vision should include a solid business plan with the tools, guidance and support of a fair company that values your clients.