With skyrocketing marketing costs, some agents are wondering whether it's smarter to form a team. If so, there are many questions to consider.

Teams come in many forms. It's not uncommon to see two agents have formed a team, or one dominant agent heads a team of assistants, buyer's agents, closing agents, etc.

Although more difficult to manage, multiple agents can also form a team, as Florida Realtor Jim Curry and several of his associates would like to do.

"The dominant way to form teams with multiple agents is with a team leader," says Curry, "but we want to form a team where the agents are equal. We haven't found a pattern yet."

Curry explains that in his community a few of the major brokers also own a lot of land in the county, making it challenging to compete with them. "We want to team up without being allied to the largest firm with the largest broker," he says.

One way to compete is to pool resources, but that begs the question of whether it's wise to advertise the team or the individual members.

"Instead of branding ourselves and the team, we are gearing toward branding the team," muses Curry. "I have done a billboard but it is expensive to pay for by myself, and we want to do a lot of Internet advertising. We already have more leads than I can handle, yet I wasn't in a position to hire a buyer's agent, and we came up with a simple formula of how to do it."

Curry says the agents who want to team up are about equal in their production, but Curry admits he's assigned higher goals to himself than others have. That raises the question of how to distribute commissions if the team players aren't producing equally.

"I had thought about hiring a buyer's agent and pay them 50 percent of my commission," says Curry, "and 50 percent goes to the team. Whoever gets the listing or the buyer for the contract, if they are the buying or listing agent and they procure the contract, they would get the 50 percent and the rest goes in the pot to pay expenses related to the business. We can control expenses to 25 percent or less, and the remainder we would split between senior members of the team."

But the people bringing in business also use the lion's share of resources. Curry says that could be solved with frequent budget reviews.

What happens to the money that's generated at a profit? "We could buy land together that we couldn't do apart," dreams Curry.

What do you do if there isn't enough profit? "Reevaluate," says Curry. "Each senior partner has to contribute equally, that's where the split is on a quarterly basis, you don't touch the pot for three months, clear the table and ante up again every three months. At the end of three months, if there is $10,000 left over, we take $3000 for investment and the other $7000 is split among the members. We have to have an agreement of what is going to be spent where. We are set on equipment for now." Curry says the group would leave expenses such as automobiles and insurance out of the formula.

That would make the team more of a cooperative than a business entity.

"We were thinking down the road about partnership," says Curry, "but we have to come up with a way to structure it. Long term, we are dating, then we'll go to an engagement period by the end of year, and then we'll look at setting something, an LLC in 2005, maybe. Sit down with an attorney and a CPA."

Florida attorney Hank Sorenson advises, "I have seen several agents pool their resources to take out a full page listings ad in a premier magazine, where alone it would have been a substantial hit just to one of them. The agents typically pay for the pro-rata space that they use in the ad (or for any special graphics that one agent may use), and this works from a legal perspective."

One consideration agents should review is what to do when third-party advertisers such as mortgage companies want to pay part of an ad. "My mother is on a team at Bingemann Realty in Ponte Vedra Beach (next to Jacksonville, Florida)," explains Sorenson, "and they also have other advertisers (e.g. mortgage companies) that want to place a logo and contact info in their brokerage ad. The real legal issue that comes up is compliance with RESPA, so as long as the mortgage company pays for their pro-rata space used in the ad, most problems are potentially avoided."

Another consideration, suggests Sorenson, agents should make before forming a team is whether their broker will consider their commissions in the aggregate or separately when considering the agents' commission schedules.

"This was one of the main factors that caused my mother's team to move from a large franchisor to their current independent shop, where they are much happier," says Sorenson.

Sorenson adds, "I wouldn't recommend forming a team with a reduction in advertising costs being a main focus, although it would certainly operate as a benefit. I have seen it (teams) work best in scenarios where the agents complement each other's strengths and weaknesses."

Published: May 17, 2004

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