How Does a Real Estate Company Work?

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Setting Up a Real Estate Brokerage

  • The requirements for setting up a real estate office differ among the states. In all cases, though, there must be a broker/owner. Whether it is a sole proprietorship or a corporation, if the owner is going to deal with the public in a real estate office, the owner must be a licensed real estate broker. In some states, every branch office must have a full-time broker to manage it. In other states, the broker of the main office can also be the broker for the branch office. The office is required to have a sign visible from outside displaying the name of the company and the name of the broker, specifically with the wording "Licensed Real Estate Broker."
    There are laws in each state that regulate advertising, telemarketing and escrow deposits. Escrow deposits are closely monitored and regulated. Brokerage offices, brokers and agents can lose their license and/or face heavy fines for mishandling escrows. Escrow deposits include good faith deposits on purchases and rental deposits.
    Real estate offices are overseen by a Real Estate Commission and are registered with the state where they are located. The Real Estate Commission comes under a division of the state, which is not the same in every state. The public can take recourse against the broker with the Real Estate Commission.

Salespeople

  • A licensed real estate salesperson must be associated with a real estate broker to engage in the business. The brokers are required by the Real Estate Commission to have an independent contractor agreement with each salesperson. Because the salesperson is paid by commission only, there are no taxes taken out of their pay, and they are known as independent contractors, not employees. The broker and salesperson can negotiate the amount of commission split paid to the salesperson. The independent contractor agreement will state what and how the agent will be compensated for listings, sales that have begun the process and rentals in the event the agent leaves the brokerage. All listings and files are property of the broker, who has sole discretion over how an agent is to be paid. An independent contractor must realize a broker is under no obligation to provide the agent with anything except the use of the name of the brokerage and the assistance of the broker, although most provide agents with everything they need to be successful.

Types of Real Estate Offices

  • There are many types of real estate offices. The most common is the full service office that has its own inventory of listings, belongs to the local Multiple Listing Service and provides agents with all the tools they need to successfully compete in the market. They normally charge a percentage commission to their clients and customers.
    Another type of full service agency gives their agents a much higher percentage of the commission split and charges them a desk fee to work there. These agents normally buy all of their own supplies and pay for their own advertising.
    Some companies charge a flat fee for the work you want them to perform. They may list your property in the MLS for you, but you have to do all your own showings. You can hire them just to do the paperwork after you have made the sale. There are also relocation companies that specialize in people moving from other states and commercial companies that only list, sell and rent out commercial properties.

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