Flat Fee Brokerage Pros & Cons // The Real Estate Blitz
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Flat Fee Brokerage Pros & Cons // The Real Estate Blitz


What’s going on, everybody? KSA Kris here, the Real Estate Blitz, coming
to you to talk to you about flat-fee brokers. Flat-fee brokerages and flat-fee brokers. I think I’ve talked briefly about a lot of
different types of brokerages; you know, you’ve got your franchise brokerages, you’ve got
your small mom-and-pop boutiques, you have your hybrid brokerages, you’ve got your flat-fee
brokerages, so … I’ve talked about a lot of these, but I’ve never gone in-depth with
really any of them, so today is gonna be kind of my first one. We’re gonna talk about one in-depth, it’s
gonna be a flat-fee brokerage. So, what is a flat-fee brokerage? Well, usually a flat-fee brokerage is … A
broker has made the decision that they’re going to let real estate agents hang their
license under them as the broker, and every deal that actually takes place, they’re gonna
charge a fee. We’re with a flat-fee brokerage, and our brokerage
charges us $395 per transaction. Now, if you think about the amount of money
… So let’s say you do a $10,500 deal, if … You know what, again, I say it all the
time, I love math, so let’s do the math on this. I’ll tell you about our last brokerage and
what that would have cost us. So, a $10,500 deal at our last brokerage,
which is a franchise brokerage, right off the top before they did anything else, they
took away 6%, so that’s $630. That leaves us with $9,870. Then, because we were actually a producing
agent in that brokerage – you’ve got to understand, they push the pie back together, they take
out their little cut and then they smoosh it back together. So really, $9,870, it’s smooshed together
and then the brokerage takes their cut, minus 10%. Now I’m left with $8,883. Now, what we’re not taking into account whatever
they’re gonna charge you for E&O insurance, which is also a scam, but that’s another discussion. I’m sure, brokers, if you’re listening to
that, you’ll be like “Oh crap, Kris knows,” yeah I do, I know how much it costs for E&O
and I know how much you’re charging your agents, it’s criminal. Anyways, so you’re looking at franchise and
you know, some of them are more expensive than that, $8,883 out of your $10,500 check
that you’re walking away with. So let’s do the math for a flat-fee broker:
$10,500 minus $395 equals $10,105, so you effectively come up almost $2,000. Now, I’m not saying one’s right and one’s
wrong, I need you to understand here. It’s a little bit about education. Who provides what? Flat-fee broker, this is what the flat-fee
broker usually provides: nothing, they ain’t providing you nothing. So you need to come up on your own signs,
your own brand, your own photos, your own business cards, your own printing, marketing,
all that stuff. You need to come up on your own stuff. You can use their brand if it’s a flat-fee
brokerage, and there’s a lot of good ones out there; Allison James is fantastic, Signature
Real Estate Group, there’s a whole bunch of flat-fee brokers now, it’s the new hotness. But if you’re not looking for anything, you
don’t want anything, you don’t need anything, you don’t want any help or education, flat-fee
brokerage is great, you’re gonna keep more of your money. Now, let’s talk about a franchise. The reason why they charge that much, from
what I’m told [laughs], every brokerage is different, but they’re usually giving you
something. So they’re gonna charge you this fee because
the broker is giving you something, so you’re paying $2,000 per transaction so the broker
can give you something. And that’s the first thing I always ask, “What’s
in it for me?” So, if I’m coming over here and I’m giving
you $2,000 per transaction on a low-end house, what’s in it for me? What are you giving me? So, you talk to me, you make me go to a meeting
every week, you make me use your brand (but I’m allowed to put my name on it), you still
make me pay for my signs with your brand on it that has my name and phone number, so you’re
not providing me anything other than the brand. Now that’s where I would start to question,
“So you’re telling me if I go to,” – I dunno, what’s franchise? [unclear] or RE/MAX, Weichert, Weichert especially
– “and you’re telling me I’m paying you $2,000 per transaction for your brand, but you give
me nothing else?” Should you be at a flat-fee brokerage? I don’t know, it depends on what your belief
system is. Personally, I like going out on my own, I’ve
always been kind of a rebel and I like to rebel against things. I personally don’t think I need a big brand,
“I don’t need to bleed blue” to make business. And that’s apparent, it’s true, because when
I look at our boards we’re doing just fine without them. But that’s why we chose to go the flat-fee
route. So, negatives of flat-fee … To me, that’s
the positive of a flat-fee, if you don’t want and don’t need, you save a lot more money. You get more money in your pocket. The negatives of a flat-fee brokerage – A:
you don’t get anything. [laughs] You don’t get nothin’. You might get some stuff depending on the
brokerage; they might create a mastermind group, they might have top producers in there
that you can be exposed to, that you can communicate with, that you can talk with and learn from. You might get some face-to-face and some extra
time, but the big question … I did a video earlier, and it was talking about not getting
hustled by salesmen, right? The first question that always comes out of
my mind is “How are they getting paid?” Because it’s just math, it’s just math to
me. “Okay, so you’re making $395 a transaction. I know how many transactions you’ve made,
so somehow you’ve only made $30,000 to maybe $100,000 this year in your brokerage, because
you’re a flat-fee brokerage. But you’re driving a really nice car, how
are you getting paid? So you need to know the truth. How they usually get paid is they’re building
in other things; they usually own their own escrow company, they usually own their own
lending business, they usually are … So, let’s start there, because there’s more. So, escrow company lending business. If you’re going to a meeting and your broker
is like “You’ve got to check out this lender, they’re fantastic,” I would just ask them,
“Great, I’d love to check them out. Do you have an equitable share in that lender?” The odds are good they do, so you have to
understand, they’re making money off of you. Most new agents, they don’t know any better,
and they haven’t gone out and learned how to leverage based on their return with other
people to get to grow their business, so they’re just giving this money to their broker through
their lending business or their escrow company. Because “Well, they said it’s good,” of course
they did, because they’re making money off of it. A lot of money at that, a lot of money. They’re making a lot of money off that, they
don’t need your flat-fee broker fee. Other things that they’re probably doing to
make money; they’re gonna talk you into … “We’ve got all this space in our office, you should
rent a space, you should have your own office.” They’re doing that to make a profit. Not saying it’s a bad thing, look, none of
these things are bad. I’m not picking on brokers that are a flat-fee
that have these things, or not – a lot of non-flat-fee brokerages own this stuff. It’s a business, it’s a great business model,
it’s a great way to be profitable, and hopefully they provide a really good service. What I’m saying is you have to be aware of
how they make their money, I’m trying to educate you. So, those office spaces are for profit, they’re
looking to make a profit off of those office spaces. They usually will have a transaction coordinator
staff, they’re making a profit off of those transaction coordinators that are working
in there. They’re recommending somebody to you so you’ll
use them as a TC, and they’re making a profit off of that. They’re trying to build you in to all of these
other little sub-businesses that are chipping away at your profit, to where eventually you
kind of gave up $2,000 anyways. That’s what they’re doing, they’re building
other fees. E&O, you know, “It’s like 600 bucks a year
you gotta pay E&O,” here’s the truth: E&O ain’t that expensive. We’re getting ready to stand up our brokerage
and E&O is only gonna cost us about $6,000 a year as a brand new brokerage with a lending
business and a brokerage. You do the math. So, if you have a stable of about 100 agents
and they’re each paying $600 each, that’s roughly $60,000 and they’re only paying $6,000. Where do you think the rest of that money
goes? In their pocket. Now, again, not illegal, it just is what it
is. They’re making a profit, they can’t make a
living off of $395 transaction, not unless they got a whole lot of agents out of producing. It’s just not a profitable model, so they
have other businesses. So, again, flat-fee brokerage – goods: they
leave you alone, you do what you want, you get to brand … Now, let me rephrase, because
somebody’s gonna say “Oh, they’re gonna,” like report me. Let me rephrase. “They leave you alone and you do what you
want” basically means that they’re gonna, you still have to be legal, you still have
to be within compliance, but they’re usually gonna give you a lot more leeway for you,
your brand, your feel, your look, your colors, etc. and you’re just paying them to hang your
license. If you choose to use their other services,
that’s usually where they make their money. That is kind of a negative sometimes, because
a lot of people … I’m not saying they get taken advantage of, but they don’t know any
better, so they end up using those services without being educated that they could be
doing something else better for their benefit. But if you know better, then you do better. You actually talk to other people that’ll
be beneficial to the growth of your business; whether they help you with marketing or open
houses or whatever it might be, help you with education, whatever that might be, right? So, in my opinion, flat-fee brokerages, if
you really are kind of a lone wolf or you want to create a team, especially if you’re
building a team … If you’re building a team, I have a hard time believing that there’s
a better model, to be honest with you. I think the flat-fee brokerage model is probably
one of the best, in my opinion. If you’re just kind of a lone wolf and you
want to do what you want to do and you just kind of want to build yourself, your brand,
a flat-fee brokerage is fantastic. If you know that eventually you want to build
a brokerage, a flat-fee is fantastic. But if you want more and you feel an insecurity,
you want more guidance, you want more hand-holding, you feel like you need a big brand to get
you business, then a flat-fee brokerage is probably not for you, that’s probably not
where you should be. So that’s my take on flat-fee brokerages. If you have any questions, hit me up, write
them down in the comments, I’ll answer whatever I can. I have experience with flat-fees along with
non-flat-fees and franchises, I’m willing to answer anything you’ve got. If you want me to talk about a different type
of brokerage model, I can. If you haven’t and you’re curious about brokerage
models because you might want to open your own brokerage, check out the red book, the
Millionaire Real Estate Agent, Gary Keller wrote it, pretty great book, there’s some
models in there and there’s some other ones. You can ask me about that, as well. I’m here for you, I’ll do whatever I can. Do me a favor: like/share/comment, go check
out the YouTube page, check out the Facebook page, and let me know what you’re thinking. All right, appreciate y’all. Have a good one, and I will talk to you soon.

5 Comments

  • Rachel Drake

    Great video! I’m taking my prelicensing exam soon. After that, I’m affiliating with a flat fee brokerage right away. Love your spirit! Carve your own path.

  • 3 Percent Real Estate

    Great video, but think you actual sugar coated it towards traditional offices in many respects. In the Midwest traditional brokers are still working off 60/40 maybe 70/30 splits. You can get 90% commission on about $1,500 month desk fee. Avg. sales prices in 160k-180k range.

  • Syed Rizvi

    Give a example what are other charges out there with Flat Fee Brokerage where they are trying to make money, do they charge office space fee?

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