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Understanding the Differences of Independent vs Franchise Brokers


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Real estate can be a complicated business with laws and guidelines that change frequently. A real estate broker is a highly qualified expert with knowledge and expertise regarding regulations, negotiations, liability, and more.

There are many advantages to having an experienced, qualified broker on your side when you’re looking to buy or sell your home (or both), but what type should you hire? Let’s look at the differences between independent vs. franchise brokers so you can make the best decision for your needs.

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What is an Independent Real Estate Brokerage?

 

Though regulations vary from state to state, qualified real estate brokers are generally permitted to manage their own brokerages. They are responsible for running the entire businesses and may have other brokers or real estate agents working underneath or in partnership with them.

Being independent means they are not beholden to a corporation above them and do not need to pay franchise fees for the use of a brand name, but it also means they have a greater amount of responsibility for the business as a whole. 

Pros

  • Freedom and Flexibility: Without a larger corporation dictating standards, an independent brokerage is free to manage their business as they wish. They can tailor their services to their customers’ specific needs, unfettered by a franchise’s brand requirements. They may also specialize in smaller, niche markets that franchises might overlook.
  • Pricing and Costs: An independent brokerage may offer lower prices than a franchise because they lack certain expenses such as franchise fees. They can then reinvest this money into providing more services as well as training for their agents. When it comes to negotiations and sales, the agent is free to be as flexible as their customer requires, with no obligation to conform to set requirements.
  • Local Focus: Because an independent brokerage is not associated with a larger corporation, they can focus their efforts on the local community. They can tailor their work for the types of people and businesses in their area, and often invest in the community in other ways, such as providing free seminars for first-time home buyers and donating money to local charities.

Cons

  • Resources: A franchise brokerage is connected to a much larger company with considerable resources at its fingertips. Without access to such support systems, an independent broker is on their own in terms of education, training, and the latest technologies in the field.
  • Scale: An independent broker is responsible for all aspects of their business, with no larger company to fall back on. Therefore, they may need to dedicate more time to facets of their work that are not directly related to negotiating real estate deals and helping their clients. They may need to take fewer clients or need to spend more time and energy managing other aspects of their business than just helping you buy or sell your home.

picture of an excited male real estate agent that will sell your house with a negotiated discount on commissions

What is a Franchise Real Estate Brokerage

 

Franchise brokerages are part of a larger organization with a brand name. A broker who starts a franchise makes a contract with the franchisor and pays a fee in exchange for the right to do business under a brand name and access to other resources.

The franchisor can require the brokerage to follow specific guidelines for marketing, training, price ranges for negotiations, and other factors. They also typically provide training, information, technology, and other resources. A franchise brokerage is less independent but has more support from the franchisor company.

Pros

  • Brand Recognition: Many people simply feel safer working with a brand they know and trust. Because a franchise brokerage has the backing of an established company, the customer can feel confident that they are getting service that will meet national standards set by highly experienced experts in the field.
  • Resources: A larger corporation simply has more assets to offer its franchise brokerages, including the most up-to-date training for agents, wider referral networks, libraries of information, and the latest technological tools for research and communication.
  • Consistency: Franchisors typically have set guidelines for how their brokers and agents should do business. Prices may have set ranges, brokers may be required to go through formalized training to learn to adhere to company standards, and working with different brokerages under the same brand is likely to offer a relatively uniform experience.

Cons

  • Expense: Because of all the fees, dues, and other costs involved, a franchise brokerage may be more expensive to work with than an independent one. They may also be more rigid when it comes to negotiating prices on real estate, unable to go as high or as low as you would like because of company standards.
  • Inflexibility: The price of the consistency offered by a franchise brokerage can be a lack of ability to adapt to your specific needs, especially if they fall outside the norm. Things like business hours and marketing may need to fall in line with company standards, which might not meet every client’s needs.

The Largest Franchise Brokers

 

Now that you understand some of the differences between independent vs. franchise brokers, here is some information on some of the largest franchise brokers out there. Many franchises are well-known, and the most successful have thousands (or more) of real estate agents working under their brand names.

Century 21

Founded in 1971 in Orange County, California, Century 21 now has over 11,600 franchise brokers in 83 countries and territories.

Berkshire Hathaway HomeServices

As well as offering real estate brokerage services, Berkshire Hathaway HomeServices also offers related services such as mortgage loans, property insurance, relocation services, and more.

Better Homes & Gardens Real Estate

Marketing itself as a lifestyle brand as well as a real estate company, Better Homes & Gardens has been around for over 90 years. They were named one of the most ethical companies of 2020 by ethisphere.com.

Coldwell Banker

Founded in San Francisco in 1906, Coldwell Banker is the oldest residential real estate franchise in North America. Today it has over 3,000 offices in 49 countries and territories.

Sotheby’s International Realty

Specializing in luxury homes and real estate, Sotheby’s has over 1000 offices in 70 countries. The company began as an art auction house in London in 1744, and the realty brand was created in 1976.

ERA

Sort for Electronic Realty Associates, ERA was founded in 1971 with the goal of using the latest technology to provide the best service to clients. They started with fax machines, and today they focus on using the internet to develop new tools.

Keller Williams Realty

One of the highest-rated real estate companies according to publications like Entrepreneur and Forbes, Keller Williams Realty also advertises itself as the largest. The company was founded in 1983 in Austin, TX, and its headquarters are still located there.

RE/MAX

Short for Real Estate Maximums, RE/MAX is recognizable by its hot air balloon logo – and its fleet of more than 115 real hot air balloons, which are often used by local offices for fundraisers and charity events.

HomeServices of America

An affiliate of Berkshire Hathaway HomeServices, this company, headquartered in Minnesota, also provides a variety of services, including brokerage, mortgage, and insurance.

Compass

Founded in 2012, Compass is a relatively young company. Though not actually a franchise brokerage, it is the largest independent brokerage in the US, with over 17,000 agents. The company focuses on innovation and using modern tools to provide the best possible service to their clients.

eXp Realty

Unlike other franchise brokerages, eXp uses a cloud-based model; its franchisees interact with the company entirely online in virtual spaces. It is one of the fastest-growing real estate firms and has more than 35,000 agents in the US, UK, Canada, and Australia.

picture of an excited female real estate agent that will sell your house with a negotiated discount on commission

Common Features of Both Types of Broker

 

Although there are some important differences between franchise and independent brokerages, there are certain things they all have in common.

Qualifications

Although people often confuse the terms “real estate agent” and “real estate broker,” a broker is actually a more highly qualified professional. A broker has completed more education in the real estate field and passed an exam to receive their real estate broker’s license. Whether they are independent or part of a franchise, you can be sure your broker is competent and proficient.

Realtors®

Another term that is often conflated with agent and broker is “Realtor®.” These real estate professionals are members of the National Association of Realtors (NAR), an organization with a code of ethics and a set of standards that all its members agree to follow. A broker who is also a Realtor® can offer an increased sense of security and trust.

Information

Although independent and franchise brokerages may have different resources, they all have access to the Multiple Listing Service (MLS), an online database of real estate listings for the entire US. You needn’t worry that your choice of broker will dictate which listings are available to you when you are looking to purchase real estate.

Development

Real estate is an ever-changing field, and to be successful, brokers need to keep up with new laws and regulations, technologies, and education. Whether your broker is independent or part of a franchise, they are always continuing their education and training to keep up to date on all the new developments in the field.

How to Find a Top Local Real Estate Broker

 

When you’re looking to buy or sell your home, it’s essential to find the right broker for your specific needs. Here are some tips for finding a top real estate broker in your area and making sure they’re the right fit for you.

Start Early

Don’t wait until the last minute to begin your search for a real estate broker. Even if you haven’t yet fully decided whether you want to buy or sell a home, it doesn’t hurt to find a professional who can help you with the entire process and guide you towards making the right decisions. The last thing you want is to find yourself scrambling to find someone within a short time frame.

Word of Mouth

It sounds obvious, but asking friends, family, and coworkers for recommendations is a great place to start. When you know someone has had a great (or terrible!) experience with a particular broker, it can help you narrow down the search. However, keep in mind that just because you get a good recommendation from one person doesn’t mean that a specific broker is guaranteed to be the right fit for your needs. You should always shop around before making a decision.

Online Databases

These days it’s easy to simply go online and search for brokers in your area. If you know you want a Realtor®, for example, you can go to the NAR web site and get a listing of Realtors® in your area. National databases will allow you to narrow your search to your local area.

Online reviews can help you determine whether a particular broker is right for you. Be wary of relying entirely on online information, however, and make sure you stick to trusted web sites and listings.

Do Some Interviews

When you hire a real estate broker, you are the boss. It’s important to interview each potential broker just as you would if you were managing a company and hiring a new employee. Even the most highly qualified and experienced broker with glowing ratings from all their previous clients might just not be a good fit for you and your needs. An interview can give you the information you need to make the best possible decision.

picture of a group of top local agents ready to sell your home with discounted fees

Final Thoughts on Independent vs. Franchise Brokers

Buying or selling a home or piece of real estate is a significant life decision. Given the complexities of the real estate field, it’s always an advantage to have an experienced, highly trained professional by your side. But do you want a highly flexible, locally-focused independent broker, or a franchise broker backed with the resources, technology, and information of a larger corporation?

Armed with the knowledge of the differences between independent vs. franchise brokers, you can make the best decision about what type of broker is best for your needs.

 

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