Why this article is important: Assembling an effective real estate team is a task requiring consideration and skill, and a team organizer with a dose of talent. Read on to learn the rules and strategies behind real estate teams in California.
What a team is — and what it isn’t
A brokerage office typically employs several sales agents and broker associates. Each of these licensees work under the umbrella of the employing broker’s license. But are they a “team?”
No. Agents, even when working at the same brokerage, operate independently of other agents or broker-associates but not the employing broker. Their sharing of earnings is always as an employee of their broker under their agreed fee split.
Among licensees employed by a broker, a real estate team is a group of sales agents or broker-associates who pool their professional resources and leads to promote and expand their practice to provide greater income from fees. The members consist of two or more licensees, each agreeing to self-identified duties they owe each other.
For example, one agent might focus on homebuyers and another on homeowners. One might be a seasoned negotiator, and another might be a new agent who is still learning the ropes, though socially connected in the community, but in the meantime assists the team by taking buyers on tours. Or, the team may be less structured, with each member assisting their own clients and pooling resources to share office space and operating costs.
In turn — based on the level of work and experience, expertise and production of each individual — team members agree on different fee shares. In our example above, the newer agent might receive 10% to 20% of team fees shared, while the seasoned negotiator might receive 50% of the fees due the team members. Fees shared are always disbursed by the employing broker as agreed with the team members. [See RPI Form 512 §§1; 3]
Why join a real estate team when a practicing agent is already obligated as part of a brokerage office — and when splitting duties also means splitting fees?
Teams typically produce synergy as members collectively generate a greater number of leads on average than by working independently. Agents working together, pooling efforts, expertise and clients, are going to attract more clients of better quality.
Being a member of a team is particularly advantageous for new agents. The mentorship and oversight training provided by senior team members is invaluable development necessary for a career agent.
Moreover, team members often agree for the team member who developed the lead which produced a team fee to receive an initial percentage share of the fee, say 10% to 15%. The balance of the fee is shared by all members receiving their agreed percentage.
That said, opportunities exist to cut the costs each member had before joining a team. Teams may share the costs of:
- office space;
- supplies;
- software;
- marketing materials; and
- transaction assistants. [See RPI Form 512 4]
From the client’s point of view, hiring an agent who is part of a real estate team provides a diversity of advice and progress reports not often available when represented by a single agent or broker. Teams assign routine periodic communications with clients to one member to keep clients updated about specific team efforts on their behalf.
For example, consider a seller. When they retain a real estate team, they have access to:
- more reach due to the concerted efforts of more than one agent, an octopus approach to market their property for sale and locate a buyer who closes escrow;
- a wider range of agent availability, as someone on the team is available at all times; and
- expertise not just in one agent or one facet of a transaction, but the insight of all members to achieve the client’s objective.
When forming a team, consider the personalities of potential team members for the best fit to seamlessly complete assigned tasks, as well as their experience and work ethic.
Also, a client getting assistance and advice from agents with different professional backgrounds gives all types of clients another reason to favor working with a team.
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Team structures
Consider a newly licensed agent. At an early stage, they exhaust their existing leads, consisting mostly of family and friends and their referrals. Suddenly when working alone with a broker, they find themselves paying rent for a cubby with little to do beyond farming for clients.
The idle agent is approached by a seasoned agent employed by the same broker who has more client activity than they can comfortably handle on their own. Rather than passing clients off to another agent (and earning a one-time referral fee), the more experienced agent asks the new agent to consider teaming up to work as an assistant to the agent as the team leader.
The team leader’s proposal: the new agent is to initially coordinate access to properties, take buyer clients on tours and handle client follow up while the leader with experience handles most all negotiations and document preparation and review. Proceeds from transactions the new agent participates in are shared with the “green agent” receiving, say, 15% to 20% of the fee remaining after the broker’s cut.
20% may seem like small change for a percentage participation in fees. But when the newly minted agent sees the opportunity as a good deal for gaining experience and contacts, teaming up may be their best decision. For the experienced agent seeking to build a team to service their client base, it’s a no-brainer. While the sharing of fees initially cuts into earnings, the greater number of closings the team produces equals a larger annual income for both the experienced agent and the novice.
As part of any team efforts, the agents agree to weekly meetings attended by all team members, including any unlicensed assistant employed to handle the team’s administrative needs. During the meetings, activities performed for clients in the prior week are reviewed and tasks are assigned for the week ahead. [See RPI Form 512 §2.4]
Unlicensed assistants
Real estate teams may consist of two or more sales agents licensed under a broker, or they may consist of any combination of broker-associates and sales agents. However, while team members may choose to save money and coordinate efforts by sharing the cost of an assistant such as a transaction coordinator (TC), any unlicensed assistant falls under the supervision of the employing broker. [See RPI Form 521, 521-1]
In other words, while a real estate team may benefit from the shared use of an unlicensed assistant, the assistant still reports to and is paid by the employing broker — one cost of doing business as a team. [Calif. Business and Professions Code §10131.01]
Further, unlike the licensed members of the team, unlicensed assistants may not receive a percentage of the fee or a fixed sum when a fee-generating transaction closes. Instead, unlicensed assistants receive an agreed wage or salary funded by the team members.
Unlicensed assistants perform duties such as:
- handling documents and files;
- performing residential tenant-related negotiations;
- opening a property to third-party service providers;
- assisting licensees to manage an open house; and
- communicating with providers in a transaction. [See RPI Form 507]
Here, the TC is tasked with confirming the completeness of the documents needed in a client file. Any form or document not completed or entered into by all required participants is brought to the attention of the team. Only on a licensed member’s instruction may the document be forwarded to the client or participant for signing or acknowledging receipt.
Unlicensed TCs and assistants may prepare documents as instructed by a licensee. Once complete, all documents prepared by the assistant are then reviewed by the agent or broker prior to delivery to any participant in the transaction. [See RPI Form 507 §2.5]
On instructions from the agent, the unlicensed assistant may deliver or obtain documents relating to the transaction directly to and from the client. They may also obtain signatures on documents from any participant in the transaction. However, an unlicensed assistant may not discuss the content or significance of the document or the subject property with any consumer of a real estate activity requiring a DRE license. [DRE Bulletin, Winter 1993; see RPI Form 507 §2.6]
When assisting a broker who engages in the origination of consumer mortgages, an unlicensed assistant may perform administrative duties, such as information gathering and mortgage processing — activities which do not require a real estate license or mortgage loan originator (MLO) license endorsement. [Bus & P C §10137]
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Team names
The use of a real estate team name is advantageous for agents seeking to stand out while operating in a large brokerage operation or competitive local real estate market. Name recognition is significant in real estate — when a former client wants to recommend you to their friends and family but can’t recall your name, you’re out of luck. A memorable team name helps past and future clients remember you and helps them make the necessary mental connection to locate you.
A team name needs to sound professional, look good on marketing materials, ideally consisting of three to five syllables, and facilitate recall. But it also needs to follow DRE rules.
In California, a team name needs to include the last name of at least one of the sales agents on the team, in addition to the word:
- associates;
- group; or
- team. [Calif. Business and Professions Code §10159.7(a)(3)(B)]
For an example in compliance, a sales agent who wants to start a real estate team whose last name is Lopez might use names such as Lopez Real Estate Team, Lopez Realty Associates or Lopez Home Sale Group under the rules. The team name can also combine more than one last name of agents in the team, for example the Lopez-Lamott Realty Team.
Agents may be tempted to get more creative when naming their team, which might work in their favor but also might place the team in a box. For example, including a certain type of real estate in their team name (e.g. Lopez Luxury Property Associates), might sound nice, but it also has the potential to prevent buyers and sellers of other types of real estate from contacting the team.
The use of team names such as “The John Smith Team” or “John Smith & Associates” are often included on “For Sale” signs, business cards and other promotional marketing pieces. Both team names and fictitious business names are subject to the state rules governing their use.
Editor’s note — A team name is not the same as a fictitious business name a broker might use for their business operation. Thus, use of a team name requires no paperwork to be filed with the DRE.
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Fictitious Business Names, Teams and Identification Requirements
Advertising a team name
Advertising materials including a team name need to also include the last name and license number of at least one of the licensed team members. [Bus & P C §10159.6(a)]
Further, the employing broker’s name is displayed as prominently as the team name on all advertising materials. For example, the broker’s name needs to appear in the same or larger font size than the team name. [Bus & P C §10159.6(b)]
Advertisements including a team name shall not include terms or messaging implying the team is a separate operation or entity, such as brokerage or broker. [Bus & P C §10159.6(c)]
Advertising material includes:
- real estate purchase agreements;
- business cards;
- stationary;
- advertising flyers;
- television ads;
- print ads;
- electronic media;
- directional signs; and
- any other materials soliciting business from members of the public. [Bus & P C §10140.6(b)(2)]
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