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The Importance of Drafting a Real Estate Team Agreement

By Britton Sanchez on December 20, 2018
Britton Sanchez

Real estate teams are becoming more popular, as evidenced by a recent survey from the National Association of Realtors. Great teams feature a collection of individuals bringing their own strengths and skills to the operation. Under the guidance of a team leader, everyone works together toward a common goal: closing more deals, selling more homes, and earning more commissions.

But for a team to be truly effective, it needs strong agreements in place. Without something in writing, differences of opinion can arise on who is responsible for what, as well as how much team members are compensated. Here is a closer look at why drafting real estate team agreements is so essential for teams that want to achieve success.

Why You Need Team Agreements

By definition, a team is more than one person working together. A real estate team accumulates varied talent that may include listing specialists, buyer’s agents, support staff, marketing coordinators, transaction coordinators, and administrative managers. Members collaborate and, hopefully, embrace the team concept and form tight bonds with coworkers. However, at the end of the day, a real estate team is still a business, and as such, must operate as one within a framework of policies, procedures, roles, and responsibilities. Drafting real estate team agreements cements that framework and gives teams a blueprint not only for operations, but also for growth.

Although some teams manage without set-in-stone agreements, chaos can easily ensue for teams without guidelines in place. You never want to encounter a situation in which team members thought someone else was responsible for a task—and you lose a client or deal because of the confusion. Also, you never want to get into disputes about commission splits and compensation. Problems such as these aren’t just bad for the bottom line; they can sap morale and destroy friendships. Drafting real estate team agreements provides a sense of assurance for the team as a whole, as well as the individual members within it.

What to Include in Team Agreements

Although real estate team agreements don’t need to be too elaborate, what you draft must be precise and unambiguous. Solid agreements should include:

  • Team titles, definitions, and responsibilities: This is the “who does what” mentioned earlier so that everyone’s role is clearly spelled out. Although this inclusion doesn’t mean someone can’t step in for another coworker in a pinch—one of the strengths of teams is that people can go on vacation and not leave a void in the operation—it does solidify responsibilities so that tasks are completed efficiently and competently.

  • Licensing policies: This defines what licenses team members must carry specific to their roles.

  • Disclosure requirements: Agreements should include guidelines for what client information can be shared among team members, as well as what information must be kept confidential, particularly with other clients.

  • Compensation structures and commission splits: Perhaps the most important element of a real estate agreement, this defines how much team members will be compensated. Commission splits are commonly set as fixed, graduated, or 100 percent.

  • Recruiting policies: Include guidelines for how agents and support staff will be recruited to the team—particularly if the team is part of a larger brokerage.

  • Separation procedures: This is another essential part of a team agreement—what happens when someone on the team leaves, either voluntarily or by being severed? Can that person take clients to his or her new job? Who gets the existing listings? What fees will be owed? These policies should also cover the grounds for dismissing a team member.

  • Confidentiality policies: Include language in the agreement to protect team information, including potentially proprietary information.

  • Referral fees: Establish how much team members will earn by bringing in referral business.

  • Expenses: Define how much, if anything, team members on commission contribute to rent, marketing, office fees, and other miscellaneous expenses.

Go Team Go!

Real estate teams offer a tremendous opportunity for agents who are ready for a new challenge and want to take their careers to the next level. However, without drafting the proper agreements, teams can set themselves up for trouble. A team-centric brokerage can deliver resources and guidance to set up agreements and many other facets of your new business. Partnering with such a brokerage helps you and your team members agree on something else: a shared drive to realize great success.


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