For real estate agents who are looking for a chance to take their professional life to the next level, pursuing the role of real estate broker is a natural step. While part of the pursuit of this goal involves additional education and training, it also involves determining how you’ll use your broker’s license. If you’re thinking about becoming a broker owner, you’ll need to decide whether to work for a big-box real estate franchise or become an independent broker.
What is an independent broker and what does it take to become one? What are the pros and cons of being an independent broker and how can you decide which path is right for you — an independent or franchise brokerage?
Independent broker defined
An independent broker owns or manages an independent real estate brokerage. As such, they maintain a group of agents and staff members who provide real estate services to buyers and sellers in their area on behalf of the broker. An independent brokerage is in contrast to a franchise brokerage, where the brokerage is one office of many in a large real estate company.
How do independent brokers make money?
For the most part, an independent broker earns a portion of each commission generated by their real estate agents. Independent brokers may be competing or non-competing brokers, which means that they may or may not be working with their own clients while also managing agents who provide client services. Some independent brokerages also earn money on affiliated services, including title and escrow service providers which may be associated with the brokerage.
Advantages of an independent broker
Many independent brokers enjoy their independent status and see it as a distinct competitive advantage. Some of the upside potential of an indie brokerage comes from the following factors:
Wider range of brokerage options
An independent broker may have a great deal of freedom and may be able to structure their brokerage and its services as they choose. Because they are not constrained by the brand identity, requirements and fee structure of a franchisor, they are free to choose how they will conduct business and what market segment they will focus on.
For example, an independent broker who has developed a specialty in working with a particular real estate niche — like farm and land, coastal properties, or luxury estates — may be able to gear their branding, marketing and service offerings to clients in those specific niches.
Higher payout on commissions
Big-box, franchise brokerage companies charge expensive fees to their franchise owners. These are meant to cover branding, marketing and tech infrastructure as well as the upstream leadership of the brokerage company.
When independent brokers are able to avoid these fees, they have more control over their earnings from commissions — and thus the amount of money they can put back into their brokerage.
Diversified marketing strategies
A franchise real estate company must create branding and marketing that’s designed to appeal to the broadest possible audience — often across the country or even internationally. By contrast, an independent brokerage can maximize the local character of their marketing, gearing it toward their market’s unique aesthetic or toward a specialty niche. For instance, this may be especially useful in resort communities, historic neighborhoods or in areas that are already popular with newcomers.
Superior market knowledge
Because they often have a hyper-local focus, an independent broker may have deeper roots in the market that they serve and they may be more tuned into local trends. With a narrower market focus, they can dig deep and maximize their service to the local market.
Disadvantages of an independent broker
As with any business model, there are potential drawbacks to ownership of an independent brokerage. Here are some of the possible pitfalls to watch out for:
Cost of doing business
While you’ll save money on franchise fees as an independent broker, you’ll be responsible for other costs that would normally be covered, at least in part, by those same fees. Your brokerage’s tech platforms, branding and marketing, digital footprint, legal and financial services, and other costs will be your responsibility.
Increased responsibility
When you’re part of a franchise company, you may have human resources, tech support, marketing experts and others at your disposal, there to provide services both to you and to your agents and staff members. When you’re an independent broker who owns or manages an independent brokerage, you’ll need to take on those responsibilities yourself. That means that it will be essential for you to figure out the nuts and bolts of starting up and running your own business so that you can offer a competitive experience when you’re recruiting agents to your brokerage.
Need for compliance
As a broker, you’ll be responsible for compliance on your own transactions and on those of the agents who work for you. That means that you’ll need to stay up on all of the latest rules and regulations, connect with an attorney or consultant who’s an expert in compliance, and be responsible for creating and implementing appropriate training programs for your agents.
Franchise vs. independent broker
Starting your own business can be intimidating enough, but when the professional lives of others are dependent on you, that can be even more difficult. Thus, the choice between franchise and independent broker is an important one.
Ultimately, so much comes down to intangible factors like your personality, your risk tolerance and even your confidence level. For instance, you may prefer a franchise brokerage if you
- Want a proven business model to follow — one that’s already baked in
- Want support and extensive resources to draw on when needed
- Want to spend more time selling real estate and managing agents and less time focusing on the basics of starting a business.
On the other hand, you may prefer an independent brokerage if you
- Have already made a name for yourself in your local market that you can leverage to establish your brand
- Have a specialty niche or are working in a unique market
- Have an entrepreneurial spirit and love the idea of creating a brand from the ground up.
Whether you’re a veteran agent who’s looking for more autonomy or a younger agent with big dreams who’s looking to build a brand, becoming an independent broker may offer the challenges and rewards you’re looking for. Take some time upfront to explore your options, including talking to franchise owners and independent brokers in your market and beyond to understand the pros and cons of each model. In addition, determine whether you plan to continue selling real estate yourself or whether you’re ready to take on an advisory and oversight role.
