S E C R E T S O F A T O P R E A L E S T A T E T E A M

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1 S E C R E T S O F A T O P R E A L E S T A T E T E A M Nick Krautter Principal Broker Oregon SellPDX Team 35 NE Weidler Portland, Oregon 97232

2 The Secrets of a Top Real Estate Team: Why top performers in real estate are not going it alone anymore. Congratulations! You ve made the team! An interesting thing is happening in real estate lately. Gone are the big egos at the front of the pack. Now those egos are chasing the new leader and it isn t a different breed superstar agent but a team of people working together. A good team achieves more together in less time than its members could on their own. When you are able to focus on one thing you can achieve amazing results. Imagine getting to do the thing you love most in real estate and only that! Imagine cutting almost all your business expenses, increasing your number of clients, having support, and taking more time off without losing clients! A great team is an amazing thing and in these next few pages I m going to inspire you to go find a team and join it! If you re already on a team I m going to show you why you should stick with it. Finally, if you re a lone wolf mega-agent I m going to share reasons to start your own team and share the wealth. Thanks for joining me as I share my inside story of how a team works and why I think it s such a great idea to work together. I will show you how a team is built, what each team member does, and how the money is shared from everyone s perspective. Who Are You? A team can be two people or twenty (even more sometimes) and everyone has their role to play. So the question is Who are you?

3 Buyer Agent / Showing Agent: Do you love people, the city, houses, driving, and counseling stressed out people? You re going to fit right in on the buyer s team. While small teams usually have either and Buyer s agent or Showing agent larger teams will have both Buyer s and Showing agents. The difference is that Buyers agents handle consultation, contracts and negotiations. Showing agents get to do the fun part of showing houses and opening the house for inspectors and contractors. Requirements: Real estate license, great with people, love of homes, the city, an ability to be the calmest person in the room during negotiations. Compensation: 15-20% of gross commission for showing agents 30-40% of gross commission for buyers agents 20% additional referral fee for clients from agent s sphere Why Do It: You get tons of leads from the team, have consistent closings, and built-in administrative and paperwork support, lowered or no desk fee and the team covers almost all your expenses. Buyer Agent / Showing Agent: Call and quickly and consistently all buyer leads Convert leads to appointments Set expectations with clients to ensure there are no surprises Show houses, get Buyer Broker agreement signed Present best options [condo, house, investment] and get offers negotiated, signed, and accepted Set inspections and negotiate repairs Coordinate with Listing Agent if client is also selling 95% client retention Sell a minimum of 3 houses/month Minimum 1 hour lead generation daily (not related to existing clients) Bring in 6 closed listings or buyers from their sphere annually Manage showing agents Get 40% of gross commission from buyers the agent has worked with

4 If not hitting lead generation and closing goals, there will be a 60 day review period to get back on track. If after 60 days the Buyer s Agent not on pace with lead generation and closing goals, decide if they will stay on thereafter. Team Provides: Leads from referral, web, sign, other Support Staff Office Marketing System and Tools Training/Coaching Opportunity for growth Access to team database Reduced desk fee 50% of the cost of utilizing a showings agent for buyer s agents

5 Operations: Admin, Marketing, Transaction Coordinator: Do you love helping out, being on the winning team but don t want to worry about bringing in the business or calming frayed nerves? You ll be happiest on the operations team. On a small team operations usually means an executive assistant. On larger teams the roles get more specialized. Administration focuses on the general needs of the team and is the hero of the office. Marketing focuses on newsletters, flyers, websites, social media, SEO, database management, and past client retention. A transaction coordinator helps take the long checklists for buyers and sellers and ensure that everything is filled out correctly, fully signed and turned into all parties on time. Requirements: Detail oriented, patient, focused, computer skills, web skills, check list checker offer. Compensation: $30k-$75k salary based on market location and experience. 20% Referral fee for clients from operations sphere Why do it: You want to get paid every month (the same amount!). You don t love the idea feast or famine. You don t want to have to do sales to survive. Operations: Admin, Marketing, Transaction Coordinator: Operations: Database and systems management and creation Staff support Get bids from vendors Assist in recruiting team members Goal and production tracking Marketing: Create web campaigns including SEO and Ad Buys Newsletters created and sent Listing marketing, created and maintained Outreach to database Manage online profiles Manage blog

6 Marketing reports Public Relations Transaction Coordinator Confirm all paperwork is signed Compliance with office Coordinate paperwork and deadlines with lenders, agents, title, clients, office Team Provides: Training/Coaching Opportunities for growth Budget for Marketing Bonus/Referral Fee for leads closed from personal sphere Opportunity to master and learn marketing, operations, transaction coordination, real estate back end Outcome based environment with flexibility Work that makes a difference in the lives of our clients and our community

7 Listing Agent / Listing Coordinator: Do you love winning contests, making calls, hitting your goals, and have thick skin? You should be a listing agent. A listing agent finds people who want to sell, sets appointments, signs contracts, prices homes and then does it all over again. While a buyers agent is people driven a listing agent is numbers driven. On bigger teams a listing coordinator helps qualify leads, set appointments, compile market analysis, draft contracts, and manage all the listing marketing Requirements: Real estate license, drive, great phone and presentations skills, able to handle objections and move quickly. Compensations: Listing Agent: 20-30% of the gross commission. Sometimes a salary plus performance bonus. Listing Coordinator: $25k-$45k plus bonuses. 20% additional referral fee for clients from agent s sphere Why do it: You love selling houses, lots of houses. You get a thrill out of making calls, setting appointments, and signing contracts. You don t want to handle the paperwork or marketing. You d rather not drive around town with buyers anymore. Oh and half your production is pretty much guaranteed by referrals and repeat business from the teams past clients. What Does a Listing Agent Do? Lead generation for 2 hours/day (Database, FSBO, Expired, Farm, Perimeter) Set 5 listing appointments/week Take 10 well priced listings/month Create a market analysis for each seller Ensure listing contract paperwork and remarks are correct and complete Set clear deadlines/tasks for support staff Coordinate dates with Buyer Agent if client is also buying Six closed deals from personal sphere annually Weekly seller check in calls Price reduce listings when needed Send monthly seller market report

8 Team Provides: Leads from referrals, past clients, web, sign calls, the team, and more Systems, tools, office space Training/Coaching Support Staff Opportunity for growth All marketing materials including signs, photos, video, flyers Some teams provide car and phone if position is salary based Reduced desk fee

9 Commercial Agent: Do you love huge challenges, making calls, being a part of the business community, and have tons of endurance? You should be a commercial agent. A commercial agent finds people who want to buy, sell, or lease investment and business property, sets appointments, signs contracts, runs pro-formas, and does it all over again. While a residential agent is people driven a commercial agent is numbers driven. On bigger teams a commercial assistant helps qualify leads, set appointments, compile market analysis, draft contracts, and manage all the listing marketing. Requirements: Real estate license, drive, great phone and presentations skills, able to handle objections and manage the complexity of commercial deals. Compensations: Commercial Agent: XX-XX% of the gross commission. Commercial Assistant: $35k-$55k plus bonuses. 20% additional referral fee for clients from agent s sphere Why do it: You love selling buildings, lots of buildings. You get a thrill out of making calls, setting appointments, and signing contracts. Consistent closings, and built-in administrative and paperwork support, lowered desk fee and the team covers almost all your expenses. Oh and a ton of your production is pretty much guaranteed by referrals and repeat business from the teams past clients. What Does a Commercial Agent Do? Lead generation for 2 hours/day (Database, FSBO, Expired, Farm, Perimeter) Set 5 appointments/week Create a market analysis for each seller Ensure listing contract paperwork and remarks are correct and complete Set clear deadlines/tasks for support staff Coordinate dates if client is also buying Six closed deals from personal sphere annually Weekly client check in calls Price reduce listings when needed Send monthly seller market report

10 Set up searches for buyers, pitch deals Prospect for off market deals for buyers Call and quickly and consistently all buyer leads Convert leads to appointments Set expectations with clients to ensure there are no surprises If not hitting lead generation and closing goals, there will be a 60 day review period to get back on track. If after 60 days the Buyer s Agent not on pace with lead generation and closing goals, decide if they will stay on thereafter. Team Provides: Leads from team referrals and repeat clients, web, sign, other Support Staff Office Marketing System and Tools: Co-Star, CRM, Loopnet, Vertical Training/Coaching Opportunity for growth Access to team database Reduced desk fee Leads from referrals, past clients, web, sign calls, the team, and more All marketing materials including signs, professional photos, video, flyers

11 Team Leader: Have you built a business that is getting bigger than you can handle alone? Do you already have an assistant that is over worked but still need more help? Are you interested in taking a few days off and not getting calls at 10pm from clients? When you re finally ready to trade some of the money and control for some time and freedom you re ready to be a team leader. The first job of a team leader is to develop more business than they can handle alone. The second job is to carefully choose who they will let on the team. Once the team is started leaders keep team morale high by casting a big vision for the team to achieve together. The team members look to the leader for the training and resources to succeed in their roles and contribute to the team. The bigger the team becomes the more the leader focuses on team development and less on sales. Requirements: Patience to learn the new skill of leadership and train others to excel at what got you here (hint its sales). Learning to manage people and not just yourself. Networking and interview skills to find the best talent for your team. This is harder than it looks; having a vision and business big enough to support a team takes time and energy. Compensation: $0 to +$1,000,000 Team profit, time off 50-60% of commission from Buyers 70% of commission from Sellers Why do it: You re ready to share the wealth in exchange for less of the daily responsibility. You want to grow your business with out losing your mind. You have too many clients to handle on your own. What Does a Team Leader Do? Lead generation for 1 hour/day (Past clients, large scale opportunities, recruiting) Set vision for the team Ensure everyone knows their role and the systems, tools, scripts, processes, and expectations so they can succeed Recruit talent for each role on the team Remove team members that are not honoring their commitment to their goals and responsibilities.

12 Run weekly meeting to check on the team s performance lead generation, conversion and current listings and buyers in escrow Set clear deadlines and tasks for support staff Meet with each team member monthly to review progress and provide support Train each team member and give them the tools and support to succeed Pays for support staff, office space, operating expenses, marketing, gifts The leader usually has a full desk fee Team Provides: Front line support for clients including showing houses, client consultations, and market analyses. Draft all contracts and listing paperwork Lead generation Answers most client questions Negotiation from contract to close for buyers, sellers, and investors Implementation of all marketing and systems

13 Where Did All the Money Go? Everybody wants to get a fair deal. One of the things that makes explaining the economic model of a team difficult is conveying the huge difference between gross and net income. In real estate people get big checks with no taxes or expenses taken out. Unfortunately for many agents they don t have a good grasp on their expenses. One of the truths in real estate is that once you re successful enough to need an assistant you are going to spend 40%-50% of your gross income on expenses and this is before taxes are taken out! I m going to use a 45% pre-tax expense ratio to illustrate the team model from both the team leader s perspective and from the perspective of everyone else on the team. I m going to use real numbers from my market and real brokerage splits (desk fees) to make this as accurate as possible. For the sake of clarity I m going to use an average commission gross commission of $10,000. I will also use an average successful agent who is capping, meaning they pay off their desk fee in full each year which means they gross about $60,000/yr. This means that a capping agent nets $33,000/yr. Before you think that I m shooting low on what an average agent earns to make my numbers look good I ve got another secret to share Seventy percent of agents in a good brokerage actually earn less than $60,000 in the Portland market. The NAR national median income for Realtors reported in 2013 was $47,700 with $1.8 million in sales which equates to you guessed it, six sales based on Portland s average home price. I m also going to show how being on a team adds to the volume of business each person will close and how even for successful agents a team can add value not only in support but also to your net bottom line. Note that in the examples that follow the referral fees come out first and then the rest of the money is split amongst the team members.

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16 Team Perspective: My actual expense ratio in 2013 was 49%. In order to not double count the money earned by the team members I m using my actual after buyer agent commission split expense ratio of 32%. The team covers almost all the expenses so that 32% comes out of the team lead s share of the pie. I m leaving in my salary of $60,000 since if I was just the owner of the business, I would need to hire a manager.

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19 Win, Lose or Draw? Being on a team isn t for everyone. The more people share a commission the more volume you have to do to make it work. That being said, it isn t just about doing more sales, there is also an efficiency gained when people work as a team and share resources. So if an average agent sells six houses and nets $33,000 a year how many houses do you have to sell in each team position to hit the breakeven point? I will assume that even on a team an agent will have around $10,000 a year in expenses. I also assume that each team member brings in six clients and gets a 20% referral fee for each one. Also, I m keeping with an average commission amount of $10,000 gross. Buyer s Agent: 8 houses $80,000 gross commission X 40% = $32,000 + $12,000 referral fees - $10,000 expenses = $34,000. Showing Agent: 16 houses $160,000 gross commission X 20% = $32,000 + $12,000 referral fees - $10,000 expenses = $34,000. Listing Agent: 12 houses $120,000 gross commission X 30% = $36,000 + $12,000 referral fees - $10,000 expenses = $38,000. I d bet these numbers are lower than you expected, right? Even if you were one a team and didn t bring in any referrals it still makes sense for most people to be on a team. Keep in mind that 70% of agents are currently making less than the average I m using in this report. You might agree that teams are great for average or below average agents but what about really good agents? What about the top 10% of agents? To illustrate this I m going to share the story of Terry, an agent with their own team consisting of Terry, a buyer s agent, and an assistant. Last year Terry sold 40 properties [25 buyers and 15 sellers] and is considering joining a bigger team as a listing specialist. Terry loves the idea of focusing on just listings and letting someone else drive around town with buyers. Keep in mind that Terry grossed $400,000 but the net with a 45% expense ratio was $220,000. Also, in this scenario the bigger team had 50 sellers last year and this year

20 should be the same. How many houses does a top 10% agent like Terry need to sell for this new team to make sense economically as well as emotionally? Here s how the numbers add up for a top agent: $50,000: Terry is going to hand off 25 buyers next year and get a referral fee $75,000: 15 listings from past clients will get Terry the listing agent split plus referral fee $150,000: Terry s listing agent split on the 50 houses taken for the team -10,000: Expenses $265,000 Total In reality a great agent on a solid team will do more together than each did separately but if all they did was repeat their performance it s still a win for Terry. Beyond the economics Terry isn t driving around town with buyers and gets to spend more time with family and friends. Terry doesn t have to manage a team, recruit, hire, fire, make payroll, do the books and all the other things you do as a team leader or solo agent. I promised at the beginning I would inspire you to join a team, stick with it if you re already on a team or if you insist, to build a team of your own. It has been a huge win for me to find people I trust and build a team of my own. I know in my heart that everyone who has spent time on the team has learned an enormous amount, done great work, and left a better agent than when they first started. The concept of teams is still new to real estate but it s a compelling idea and it works. My hope is that this report has cleared up the confusion often associated with how teams work and why even above average agents choose to join teams. If you re looking to join a team and happen to be in the Portland Oregon area give me a call. -Nick Nick Krautter is a successful agent, real estate expert, and the author of the book The Golden Handoff: How to adopt clients from retiring agents and double your business. Nick is an avid golfer and enjoys all the food, drink, and adventures found in Portland Oregon.