1. finance
2. investing
3. brokerages

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Virtual Brokerage:
How to Do It
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GENERAL
CONTINUING EDUCATION
SERIES
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Virtual Brokerage:
How to Do It
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This publication is designed to provide accurate and authoritative information
in regard to the subject matter covered. It is sold with the understanding that the
publisher is not engaged in rendering legal, accounting, or other professional
advice. If legal advice or other expert assistance is required, the services of a
competent professional should be sought.
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President: Dr. Andrew Temte
Chief Learning Officer: Dr. Tim Smaby
Executive Director, Real Estate Education: Melissa Kleeman-Moy
Development Editor: Jennifer Brandt
VIRTUAL BROKERAGE: HOW TO DO IT
©2014 Kaplan, Inc.
Published by DF Institute, Inc., d/b/a Dearborn Real Estate Education
332 Front St. S., Suite 501
La Crosse, WI 54601
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All rights reserved. The text of this publication, or any part thereof, may not be
reproduced in any manner whatsoever without written permission from the
publisher.
Printed in the United States of America
ISBN: 978-1-4754-2080-7 / 1-4754-2080-3
PPN: 3200-4275
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c o n t e n t s
1
Unit 1
Today’s Virtual Brokerage 1
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What is a Virtual Brokerage? 1
Evolution of Real Estate 2
Evolution of Brokerages 4
Advantages of a Virtual Brokerage 10
Challenges of a Virtual Brokerage 11
Advantages and Disadvantages of a Virtual Brokerage for the Agent 13
Unit 1 Review Questions 14
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Unit 2
Technologies Necessary to Run a Virtual Brokerage 15
Communication Systems 21
Agent Technologies to Operate Your Own Business 23
Unit 2 Review Questions 24
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Unit 3
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Technology and Communication 15
Unit 4
Managing Risk 25
Risks 25
Issues for Brokerages and Agents 27
Changes in Staffing Needs 28
Social Media 28
Managing a High Performing Agent Sales Force 33
Federal, State, and Local Fair Housing Act Compliance 36
Risk Management Survival Basics 39
Unit 3 Review Questions 41
The Optimized Virtual Brokerage 42
Culture 42
The Virtual Brokerage’s Value to Agents and Customers 43
A Day in the Life of an Agent in a Virtual Brokerage 45
Unit 4 Review Questions 48
answer key 49
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1
u n i t
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Today’s Virtual
Brokerage
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learning objectives
Upon completion of this unit, you will be able to
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recognize the evolution of virtual brokerages and client expectations; and
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identify the advantages and challenges of a virtual brokerage.
■■ What is a Virtual Brokerage?
What is a virtual brokerage? How does it differ from a traditional brokerage? Why
are virtual brokerages becoming more popular? Are traditional brokerages on the
verge of extinction? These are just some of the questions surrounding the existence
of virtual brokerages. First and foremost, what exactly is a virtual brokerage?
A virtual brokerage emulates a traditional brokerage by creating the same services, same technology, same performance, and same communication. Essentially,
virtual brokerages should provide the same experience as traditional brokerages
when it comes to their relationship with the agents and consumers, the effectiveness in productivity of the agents, and providing a seamless transaction.
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However, with virtual brokerages there is no physical location or office; the company only exists in cyberspace. This is accomplished through the development
and implementation of technology. The emergence of the internet and digital capabilities have fueled the rapid growth of mobile agents and have lessened the need
for physical brokerage space.
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unit one
Technologies affect the way brokerages manage information, how agents perform
their duties, and how the public interfaces with the real estate world. Technology
has virtually altered all aspects of real estate and has forever changed the methods
of communication, supervision, training, and business operations.
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Changes in consumer expectations were equally responsible for changes to the
industry. The public adopted and adapted to the internet earlier than the real
estate industry. Consumers got used to immediate access online and demanded
the industry provide it to them. They also demanded a faster response time and
didn’t want to rely on an aging industry for housing information. It was the
advances in technology and the pressure by consumers that changed the real
estate industry and allowed for the development of virtual brokerages. Regardless
of whether a brokerage is virtual or traditional, a real estate licensee’s responsibility to ensure consumer protection concerning fair housing practices and ethical
and legal agency representation remains essential while also becoming more difficult to monitor.
■■ Evolution of Real Estate
It’s important to look back and to see the roots of the real estate industry in order
to better understand where virtual brokerages came from and how they evolved.
This historical overview is designed to provide insight to some of the cultural pressure that created the industry and how the advent of technology forever changed
the real estate practices.
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Technology is not the only thing that impacted how real estate business was practiced. 100 years ago, the real estate industry was completely different from what
it is today. Home ownership was rare, and there was no regulation of real estate
professionals or real estate transactions.
Home Ownership was Rare
Unless you come from a wealthy family, your great-grandparents probably did
not own their home. Real estate was purchased using only cash, and the majority of Americans did not have the amount of cash needed for a home purchase.
Even though the automobile did exist 100 years ago, cars were not used like they
are today. People did not commute to work by driving 30 or more miles. If you
worked in the city, you lived in the city. If you worked on a farm, you lived in the
country. There were no suburbs then, but the cities were expanding at a rate that
would put suburbs on the horizon.
No Real Estate License Existed
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With no regulation of the real estate industry, any person off the street could call
themselves a real estate dealer. Some people would essentially set up shop on the
sidewalk, then called a curbstone, and solicit real estate investors. These people
quickly became known as curbstoners and didn’t have a good reputation for business ethics. They were looking for people who were easy to fool into investing in
real estate that didn’t exist. As you can expect, this didn’t set a very good precedent for people who wanted to legitimately deal in real estate.
No Regulation of Real Estate Transactions
Simple contracts common laws were the only laws that applied to real estate transactions 100 years ago. This meant that as long as there was a buyer and a seller and
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they had an agreement, a real estate transaction could occur. If something went
wrong, the only laws that applied were those simple contract laws, which very
often left little recourse for those involved.
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For more than 50 years, people had seen a need for some type of real estate industry
organization as the population grew. Previously, land was typically only passed in
one of three ways, making it a very simple business. A person could purchase land
at auction, receive it from the government, or have some sort of agreement with
another person to transfer the land. Eventually, this land that had been transferred
so simply needed to be divided into smaller parcels, and the owners wanted to
capitalize on the growing population by selling those smaller parcels.
As real estate transactions became more complex over time, it became evident
that real estate specialists might be a good idea. In areas where there was a lot of
real estate activity, people who specialized in real estate transactions formed local
organizations. They would use the organization to find out about properties and
pieces of land that were for sale. They also used the organization to network with
other people who were calling themselves real estate practitioners.
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The first real estate organization was formed in 1847 and was call the New York
Real Estate Exchange. It only last about a year. Then, in 1858, the Baltimore Board
of Real Estate Brokers and Property Agents was formed. It later morphed into
what is now known as the Greater Baltimore Board of REALTORS®. According to
its constitution, this board was formed to “regulate the business of the real estate
broker.” As long as the members respected the other members and the rules of ethics, they had a centralized place where they could advertise and find properties for
their clients. If a member did not abide by the rules of the organization, their name
and the reason for being kicked out of the group would be published in the local
newspaper, essentially ending that person’s career as a real estate practitioner.
As news of Baltimore’s board success traveled across the country, other communities formed organizations for their local real estate markets. Soon after that, the local
organizations decided that it would only be right to form a national organization,
just as so many other professions had their own organizations as well. However,
a want to have a national organization proved a little trickier than expected, as it
took a few attempts to find an organization that worked on that national level.
The National Real Estate Association was formed in Birmingham, Alabama in
1891. Even though it did not last long, it showed that real estate practitioners were
interested in a national organization that could provide support and educational
resources. The National Association of REALTORS® was originally formed as the
National Association of Real Estate Exchanges on May 13, 1908. However, at that
time, brokerages still remained independent from each other, and it wouldn’t be
until the 1960s that the brokerages would become more formally organized and
cooperative.1
The Book
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In the 1960s, the National Association of REALTORS® (NAR) created multiple listing services (MLSs) to help local professionals bring buyers and sellers together.
Initially, this took the form of “the book” of listings. It was several inches thick and
Stacey Moncrieff, 100 Years in Celebration of the American Dream (National Association of Realtors, 2007).
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unit one
contained the active listings for each area, and each area guarded them fiercely.
These books were not shared with agents in different areas and were not given to
consumers for any reason.
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The book featured one black and white listing per page and had only one exterior
photo. It had the address, price, year built, room dimensions, and other details
about the house. It was organized by a numerical identification of a geographic
area, from lowest to highest price. It could not be filtered by number of bedrooms,
baths, or square feet. Price and area were the only ways to identify properties,
which meant many hours were spent by agents looking for potential homes for
their buyers.
Best of all, it was published every two weeks. Even though new properties were
listed all the time, the only way agents knew what was for sale on the market was
from the book. If an agent was late getting a new listing to the office administrator
for publication, it would be two more weeks before the listing was in the book, so
the publication deadline was monitored closely.
This deadline was also used to pressure sellers into “listing today” or lose precious
marketing time. It was a great way to close the deal, get the listing, and eliminate
the competition. This may be where the concept of “time is of the essence” was
originated.
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The contents were not to be copied and certainly not given to the public. There
were strict policies regarding how the book was to be protected from unauthorized
use, and agents were severely reprimanded if they failed to follow the guidelines.
It was the book that gave real estate agents power and consumers a reason to seek
professional assistance in buying or selling a home. There was nowhere else to get
housing information; the real estate industry had a captive audience. The book
defined what a real estate agent was: the keeper of the information.
Buyers did not necessarily choose which homes they were going to look at and
possibly buy. The agent made that decision for them. The agent would listen to
the buyer’s housing needs and decide which neighborhood was best and which
homes would be viewed that day. The agent may allow the buyers to look at the
photocopy of the listing but would never allow the buyer to take it home. Buyers
had little input and even less information if they did not employ a real estate agent.
This was exactly how the real estate industry wanted it to be. They were needed
not necessarily for expertise or experience but for access to the housing information. Information was the commodity, and brokerages had it all. This may very
well have been the golden age for real estate professionals. If you had the book,
you had the clients.
■■ Evolution of Brokerages
In the Beginning
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As real estate became more complex, so did the companies and individuals who
serviced buyers and sellers; an industry evolved and grew. Like most service
industries, the relationships were based on the needs of the consumer. It was the
consumer who helped design and define the real estate companies of their time.
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The Traditional Brokerage
From the 1950s to the 1980s, agents had very few options regarding their workplace. They could be sole proprietors or work for a large brokerage. Brokerages
grew and prospered during this time, as they had all the information and resources.
Agents needed the brokerage just as much as buyers and sellers needed the agent.
Brokerages had the books in the resource room, and agents had to go to the office
to gain access. There were no home copiers or faxes, so agents had no choice but to
join a “bricks and mortar” company if they wanted to be competitive.
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The sales boards, office administrators, phones for cold calling, and meetings all
were housed at the office. Hours were generally business hours, and the building
was closed on nights and weekends. All the services and functions of being a real
estate agent were found in an office setting. Agents absolutely needed the company in order to survive.
Agents had to go into the office to get trained, to go to sales meetings, to talk to
each other, and to network; this was the only place it was going to happen. It was
easier for brokers to supervise agents in this manner because they were contained
in one place. The brokers could watch the agents, listen to them on the phone, and
see their paperwork; the ability to supervise was greatly enhanced.
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Every agent had their own dedicated space, either an office for the top producers
or a bull pen area for the less producing agents. Commission splits were very low,
but the brokerage paid for the lion’s share of expenses. Advertising was usually
taken care of by the company as were day-to-day expenses like copies and listing
signs. And, of course, the large expense of the office space and supporting staff
was also taken care of.
Agents filled out their MLS forms and handed them off to a staff member for processing. The same was true for listing contracts and purchase agreements. Agents
did not manage their own files and had to use the company’s system to track progress and ultimately get paid.
The appointment desk was also handled by staff members who would receive a
telephone request for a showing, call the homeowner, get confirmation, and call
the selling agent back. There were no lockboxes, in many cases, and the keys were
kept at the brokerage’s office. Agents had to go to the office, pick up the key, and
return it after the showing.
The brokerage, not the agent, was what the public viewed as the entity responsible
for selling their home. There was no personal promotion by the agents, and the
company is what was branded. The brokerage had all the power because it had all
the information and all the resources.
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During this time, several traditions began to evolve, many of which are still in
effect today. They were born out of necessity and used by brokerages to control
their agents. The broad categories of communication, training, and supervision
were fulfilled by the implementation of these traditions.
Sales Meetings Agents were required to attend a sales meeting once a week,
usually on a Tuesday. There was a sales board generally present that showed new
listings, sales, and closed transactions. Managers would give a motivational speech
intending to propel agents to pursue higher levels of production. Top producing
agents would talk about their new listings and accomplishments.
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unit one
Sales meetings were one of the only methods available to communicate company
policy and expectations. Managers could supervise their agent’s activities in real
time as well as train them on sales techniques. After-hours sales meetings were also
common, and agents were instructed on how to cold call potential clients. This was
the beginning of scripted presentations, or scripts, as they became known. Their
purpose was to help agents overcome objections and stalls by potential sellers.
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Tours After the sales meeting, agents would form a caravan and visit the new
listings from their office. The book of listings was published every other week, so
this was the only way for agents to find out what was new on the market. There
was also very little cooperation between brokerages; agents from XYZ Realty went
to their own listings but not to those from other brokerages. A sense of community
was created through these weekly meetings and tours.
Floor Duty Agents were asked to spend specific time periods at the office in
order to gain clients. Potential clients would either call or walk in to the main office
looking to either buy or sell a home. Agents on duty would meet or have a phone
conversation with the consumer in order to gain them as a client. This was the
primary way for consumers and agents to get together. There was very little selfpromotion for the agent, so consumers went to the brokerage and got whichever
agent was available. Other than open houses or sign calls, floor duty became one
of the best ways for agents to get new clients.
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Open Houses Open houses became one of the best methods for agents to show
and sell their own listings. These were usually on the weekend; agents put signs in
the neighborhood and ads in the newspaper with the time and location. This was
the only way consumers could view a home without having to hire an agent and
make a commitment, so open houses became a mainstay of the industry. Savvy
agents also used this opportunity to develop relationships with consumers to
become their agent.
Newspaper Advertising Newspaper advertising was one of the best ways for
consumers to find homes and for agents to find new clients. The Sunday newspaper classifieds section was page after page of homes for sale and represented
a major marketing tool for the real estate industry. Brokerages purchased advertising space by the page and strongly encouraged their agents to submit their
listings. In general, the company with the most pages of newspaper advertising
was believed to be the dominant market leader, so companies spent a majority of
their marketing budget on the newspaper.
Sign Calls Consumers often drove through neighborhoods looking for houses
to see and possibly purchase. Not all homes were advertised in the newspaper,
so this became a primary way for potential homeowners to find homes. Agents
installed signs in the yards and put information boxes stuffed with highlight sheets
for drive-by buyers. This was one of the few personal promotion opportunities for
agents during this time frame. Even today, sign calls represent approximately 15%
of lead generation opportunities.
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Offer Presentation Once an offer was written, the agent would make an
appointment to present the offer to the sellers. The presentation was generally
done at the seller’s home, but occasionally it was at the listing agent’s office. Present were the listing agent, the sellers, and the selling agent.
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The purpose of the presentation was to convince the sellers on the merits of the
offer. The buyer’s strength and desire for the house became part of a long presentation. Price, terms, and conditions were all presented by the selling agent. The agent
used all forms of persuasion to get their offer accepted.
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Then the selling agent would be excused and would wait patiently in the car for
the seller’s decision. The agent would be called back in to the house to hear what
the sellers had decided. If the sellers made a counteroffer, the agent would drive to
the prospective buyer’s location and present the counteroffer and get the appropriate signatures. This back-and-forth process continued until an agreement was
reached or the offer was rejected. The process was very lengthy, especially in multiple offer situations.
Agency For years, all agents represented the sellers exclusively. Agents who
brought buyers into a transaction actually represented the seller through subagency agreements. There were no buyer agents or buyer agency like there is today.
A widely known national study was performed by the federal government that
clearly showed most buyers believed they were being represented by their agent
when in fact they weren’t. The agents were representing the seller but not disclosing who they represented. It wasn’t until the mid-1990s that agency relationships
had to be disclosed, and buyer agents came along.
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Cooperation For many years, there were multiple real estate boards, and each
board had their own MLS. They published their own books and guarded them
from other boards. Agents from one board did not have access to another board’s
listings, so it was impossible for them to sell their listings. They were geographically constrained to a specific area and could not effectively sell in other areas.
This was the beginning of the “neighborhood specialist” concept; agents could not
work globally, so they worked locally.
Technology Changed Everything
You may be wondering why we’re spending so much time looking at the past. It’s
critical to understand the real estate industry before the 1980s in order to really
comprehend the sweeping changes made possible with the ever-evolving world
of technology. Agents became mobile, home offices became a possibility, and consumers had access to the internet. This access to information was a driving force
in the changes that were about to unfold. This consumer demand for information went hand in hand with technological advances and forever changed the real
estate industry.
Computers In 1985, computers were primarily used by corporations, were not
portable, and were extremely slow. Dial-up modems using telephone lines were
the norm, and very few people had a home computer. Advances in technology
slowly improved the quality and quantity of the computers used. The price went
down and dramatically increased the use of computers across the board.
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Scanners At the same time, scanners and printers became more sophisticated,
reliable, and affordable. High-speed internet was becoming more accessible, and
home offices became a reality. Faxes were being replaced by digital mediums, and
electronic storage became cheaper and had more capacity.
Cell phones Agents became more accessible with the advent of cell phones.
The once shoe-sized phones started becoming smaller, smarter, and more affordable. Agents were no longer tied to a landline and could effectively work from
anywhere at any time.
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Home offices The advent of computers, scanners, and cell phones spawned
the creation of the home office and lessened the necessity of the brokerage’s bricks
and mortar office space. Agents had access to the same capabilities and resources
they used to only find in an office. They could work from the car, the home, or
at virtually any location. They were mobile. What this also meant is agents were
no longer dependent on the company. The agents who adopted technology had
a huge advantage over agents who failed to recognize the advantages of being a
mobile agent.
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Internet With the general public now having greater online access, the real
estate industry quickly realized that they were no longer the gatekeepers of information. Consumers could now get the same information online they used to get
from the real estate community. Consumers no longer needed an agent with the
MLS catalogs to find properties for them. Real estate agents would need to find a
way to bring people more value or they would be in danger of becoming extinct.
Today
Today, there’s an application (app) for everything. A cell phone or tablet serves as
a complete office. Contracts can be written and signed without pen or paper. Complete business records can be stored in the cloud. Advances in technology have
created an environment where individuals cannot only perform all the functions
of their profession but can do it faster and more efficiently than ever before.
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The need to be tethered to a physical location is a necessity long gone in the real
estate industry. There is no need for cubicles or corner offices. Sales boards have
been replaced by email, and the book has been cast aside by the internet. Floor
duty has become obsolete because the online world is where clients find properties
and agents.
Initial client contact now often occurs online versus face-to-face as it has for
decades. This creates new challenges. For example, when first contact with a customer occurs, especially what is referred to as first substantive contact, new issues
arise. First substantive contact goes beyond greeting the customer and identifying
oneself as a licensed real estate professional. For example, a customer sends an
inquiry about a property you have listed. When do you ask if they are currently
being represented by a real estate agent? The customer also wants to know what
the property is listed at and if price reductions are on the horizon. The customer
continues to tell you they are moving to the area where the property is located and
need to start a new job in the next thirty days. You now have inadvertently learned
about the motivation from the potential buyer before you have identified yourself
as the seller’s agent. At what point is the line drawn that you do not provide more
information or stop reading the voluntary information from the inquiring party?
These and issues of similar nature unfold as we examine the virtual brokerage
world.
Technology Makes Virtual Brokerages Possible
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The explosion of technological advancements created an environment where
agents were mobile and the need for bricks and mortar diminished. More and
more agents began to establish an office in their home, moving away from the
traditional office environment. They also demanded higher commission splits
because they felt they were not using the company’s resources to the same degree.
This change created problems for the brokerages that were used to their old ways
and now had to figure out a new way to interact with agents. The brokerage had
the same responsibilities of supervision, training, communication, and transac-
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tion management, yet the agents were not in the office. Some of these challenges
are detailed shortly. These four basic elements were fairly simple to manage in a
traditional brokerage. Agents, managers, and staff interacted on a daily basis, so it
was a controlled environment. However, mobile agents away from the office were
a whole different story.
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Initially, there were no systems in place to effectively communicate, train, supervise, or keep proper control of the transaction process. Technology had made life
easier at the agent level, but there were no tools for the brokerage. What used to
be done person to person was now supposed to be accomplished in cyberspace.
Brokerages initially demanded that the agents return to the traditional form of
running a brokerage. Fees were not reduced, and managers tried to keep agents in
the office. Some companies insisted agents be in the office for a certain number of
hours per day, attend sales meetings, and do floor duty. Many agents refused to do
so, which opened the door for low-fee virtual companies to establish themselves
in the marketplace.
The early virtual brokerages offered agents high commission splits and autonomy.
Agents were free to conduct business in their own fashion and to promote themselves rather than the company. Virtual brokerages were not interested in creating
a consumer-facing company brand because their clients were real estate agents,
not the public. Agents had very little supervision or support but got to keep more
of their commissions.
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The first virtual brokerages processed files for agents, and that was the only service
they provided. There were no offices and minimal staff. Many of these companies
started as husband and wife teams who wanted additional revenue from agents
but none of the responsibilities.
One such broker in 1989 recalls “I owned and operated the only virtual brokerage
in my state. At that time, it was probably one of the only virtual brokerages in the
country. My wife and I owned it together and had numerous agents working for
us. At one time, we had more than 300 agents. We had no offices for agents, only
a small office for ourselves, barely large enough for two desks and a file cabinet. It
cost us $125 per month, utilities included. We were transaction based and didn’t
offer supervision, training, or any additional services. Agents brought their files
to our office, and we had the bookkeeper down the hall cut checks and do our
accounting. Our overhead was minimal, and our profits were outstanding. We
didn’t start the company with the idea of inventing the next generation brokerage.
We saw agents who were willing to pay us to hold their license and process their
paperwork for a fee. It was purely a more cost effective way of running a profitable
brokerage. We never intended to change the real estate industry.”
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This was true of many of the original virtual brokerages. It was an economic benefit to the brokerage as well as the agent. It was a win-win relationship. Technology
had created an environment that made agents mobile and productive. Technology
also allowed for a brokerage to conduct business outside of the traditional business model with lower costs.
This was and is the primary reason that virtual brokerages exist. It is a more cost
effective way to conduct business, both for the agent and the brokerage. There
is less overhead, fewer staff, and fewer office space requirements. Landline telephones are no longer a necessity; digital scanners replace paper-hungry copiers;
and cloud computing eliminate the need for files and storage.
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unit one
The downside to these original brokerages was the lack of communication,
training, supervision, and data management: the basic elements of operating a
full-service brokerage. Without these capabilities, both agents and brokerages will
ultimately suffer. Agents are not allowed to work without a broker; they need the
support of a broker and brokerage because they are not experienced enough to
handle every situation independently. Initially, agents were not getting this, and
the industry suffered.
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Eventually, advances in technology caught up with the brokerage. Training
became available online, video bandwidth allowed for face-to-face communication between broker and agent, and a whole new set of communication tools
surfaced. Virtual brokerages finally had the capability to perform the same function as traditional brokerages to serve their agents. This, in its pure form, is what a
full-service virtual brokerage is all about: offering agents and the public the same
experience they would get from a full-service traditional brokerage.
There are still companies that have not embraced technology and cling to the original business model of low fee and no services. Only time will tell on how they will
survive in a changing world of technology and consumer expectations.
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Many other brokerages have embraced technology and implemented it into their
culture. Brokerages now can duplicate what a traditional brokerage has to offer.
Virtual sales meetings can be held online with agents actively participating online
with each other. Social media makes instant communication a reality. Training
webinars can be taken in real time or recorded for later use. Video email has made
communication more personal, and Skype lets supervisors keep in touch with
agents without having to leave the office. The four basic elements of running a
business can now be accomplished with the use of technology.
■■ Advantages of a Virtual Brokerage
Lower operating cost is the goal of every virtual brokerage. In theory, there are
fewer staff members, smaller offices, and lower overhead costs. The efficiencies
of proper use of technology results in lower expenses as well. Improved financial
status remains the number one reason for a brokerage to become virtual.
Because there is no physical presence or finite office space, virtual brokerages can
add a large number of agents to its roster without increasing costs. True, in some
instances there are some limitations regarding capacity, but the remedy is generally along the line of buying a larger server or adding to an existing voicemail
system. For the most part, a larger number of agents can be absorbed into existing
systems without additional cost.
Virtual brokerages can expand into other geographic areas or states without having redundant costs. Once the systems are in place, it’s relatively easy for the
brokerage to move into other markets using the same technologies that already
exist.
E
Because virtual brokerages exist in cyberspace, they do not have to consider office
space, furnishings, parking, locations, competitor’s locations, public areas, Americans with Disabilities Act (ADA) restrictions, and so forth in their business plan.
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To d a y ’ s V i r t u a l B r o k e r a g e
11
■■ Challenges of a Virtual Brokerage
Technology has expanded the definition of how a brokerage operates to a staggering degree. However, the broker’s essential responsibility for the four basic
fundamentals remains. Those fundamentals are supervision, transaction management, training, and communication.
Supervision
SA
Supervision of agents is more difficult in a virtual brokerage. Traditional models
allow for significant interaction between staff, management, and the agent. This is
not necessarily the case in an online company. Audit systems need to be in place
to ensure files and contracts are compliant with all regulations. Preventive steps,
processes, and practices will be discussed in Unit 2.
How does the broker ensure the agent’s behavior is ethical? The broker no longer
overhears conversations agents are having with potential clients or customers in
the office and must rely on the adage “no news is good news” when no complaints
are filed against the broker based on the agent’s unethical behavior. How does the
broker ensure the agent is not offering opinions or advice to a client who has a representation contract with another brokerage? Daily interactions inside the office
walls used to provide this insurance. Unless daily or regular contact is created,
adequate supervision is questionable. Supervising behavior is only one element
of supervision.
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Transaction Management
The broker’s responsibility for transaction management or supervising transactions is another element of supervision. Overseeing timely paperwork completion
such as agency disclosure, representation agreements, processing purchasing
agreements, earnest money, and all associated documents are elements of responsible supervision that all brokers are liable for. This blurs into the area of transaction
management. In the past, the front desk staff receiving calls for agents would
know very quickly if an agent did or did not return customer calls in a timely manner. Today, that mechanism no longer exists. Additionally, ensuring time-sensitive
steps involved in, for example, inspection and contingency management, need to
be monitored in some manner, which generally defaults to an electronic system
that time stamps transaction steps. In any event, someone must still monitor the
completion of these steps in the overall process, and that responsibility ultimately
resides with the broker.
Training
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More important than ever, brokers must adequately train agents who will be acting on the broker’s behalf, with liability rolling up to the broker. As brokers do not
and cannot physically observe how the agent exercises his business knowledge
and conducts himself, the broker must take precautions to ensure agents have both
the sound technical knowledge of real estate and appropriate business ethics, as
well as motivation, to work independently with less direct supervision. Additional
training in other areas such as how to legally advertise using social media tools
prevalent today is one example of necessary training. Training programs should
include not only the basics on how to practice real estate but also what not to do to
avoid violating fair housing laws inadvertently.
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12
unit one
Communication
SA
A broker must have adequate communication with the agents to guarantee agency
representation is communicated at the correct time, which is at first substantive
contact, and communicated accurately and clearly defined for the customer. The
broker must be accessible to the agents and available when necessary to discuss a
potential client issue the agent does not feel capable of handling. The broker must
have regular communication with all agents to ensure current changes to required
forms or legal rulings associated with real estate are received, understood, and
implemented appropriately. Finally, at the end of the day, the broker must have
evidence that client issues are being handled timely and professionally.
Technology
Keeping up with technology is one of the biggest challenges facing virtual brokerages. Since the whole company is based on technology, it is paramount that
everything must be current, efficient, and user-friendly. However, technology is
constantly moving forward at a blinding speed. What is considered state-of-the-art
technology today may become obsolete in a very short time. The cost of training
staff and users should also be considered when looking at new systems. Change is
expensive, so it is critical to analyze all aspects before implementing.
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Building an integrated system of interlocking technologies can be a massive
upfront expense but may be worth it in the long run. Once it’s in place, it will need
to be maintained but not necessarily completely overhauled for many years. The
integrated system harnesses everything together to operate at optimum efficiency,
providing all supporting programs that interface seamlessly for quick, accurate,
and safe processing and retention of documents containing extremely sensitive
personal and confidential information.
Staffing and National Operation
Staffing a virtual brokerage is not the same as a traditional office. There are some
similarities, but the profile is more technical than administrative. A fairly common
virtual brokerage today is multi- or tri-state offices, adding another level of complexity. Staffing with an appropriate professional who screens, verifies credentials,
and applies consistent hiring practices is essential. A wider breadth of knowledge
is necessary to ensure laws from state to state are complied with regarding hiring,
continuing education, and licensing requirements. Remember that real estate laws
vary from state to state.
In regards to staffing, accounting and transaction systems replace a bookkeeping
department, trainers are replaced by online webinars, receptionist positions are no
longer necessary, and managers become salespeople.
Creating a Meaningful Culture
E
In place of the traditional brokerage staff are web designers, help desk coordinators, programmers, and curriculum developers. Online, not in person, is where
staffing needs have to be addressed and filled. There are not necessarily fewer
employees, but their profiles have changed significantly. More details about staffing changes are discussed in Unit 3.
Creating a real and meaningful culture is another issue faced by virtual brokerages. There is less personal interaction making it more difficult to have the shared
experiences that help create a culture. This may be one of the biggest challenges
facing online companies. Salespeople are gregarious by nature and need to inter-
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To d a y ’ s V i r t u a l B r o k e r a g e
13
act with fellow agents. The need to belong is strong in agents, so extra attention is
necessary in creating a meaningful culture. Some tactics for creating a team culture
are discussed in Unit 4.
Hand in hand with the lack of culture is having too sterile of an environment.
Agents who spend too much time away from an office and in front of a screen
tend to become isolated from the rest of the world. They could become withdrawn
and less productive. This is not the case for all virtual agents, but it is something
of which to be aware.
SA
■■ Advantages and Disadvantages of a Virtual Brokerage for the Agent
Once again, the underlying factor of why an agent would choose a virtual brokerage over a traditional brokerage is money. Agents usually get a higher commission
split with the virtual brokerage than with a traditional company. Less overhead
and operating costs allow the brokerage to pay the agent a higher commission
split.
Agents generally have more independence and have more opportunities for selfpromotion. They are not tied to floor duty or assigned office hours. They can work
from any location at any time.
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These agents generally have more control over their business and the ability to
grow their business. They are not competing against the company’s brand and can
develop their own. In many cases, the agents are free to negotiate their own fees
and are not constrained by corporate rules and policies.
On the down side, agents may not get the training, supervision, and support they
could get from a traditional brokerage. This is not true in all cases, especially if they
work for a full-service virtual brokerage. Agents need to self-assess their capability of and commitment to conduct themselves ethically when no one is looking
over their shoulders. They need to interact with clients in a professional manner,
ensuring verbal and written communication, including documents, are complete,
accurate, and timely. They may need to rely on written policy and procedures that
the virtual brokerage authors to ensure consistent and legal actions occur on the
client’s behalf. Another important element the agent should consider is how much
interaction they feel they need with the broker. Is the agent very experienced and
only needs to access the broker periodically and in nonurgent situations? Is the
broker accessible by the agent when needed?
Depending on the brokerage, one of the biggest disadvantages for an agent is data
entry. Full service brokerages generally have sophisticated back office transaction
systems to keep production and financial activities accurate. Someone has to enter
huge amounts of data into the system for every transaction.
E
Most agents are not good at paperwork and details. That’s why they are agents,
not accountants. When they are required to enter lots of data into a system, one
of two things generally happen: (1) either it is entered incorrectly or (2) it’s not
entered at all. As the saying goes, “garbage in, garbage out.” Asking agents to perform this function can be a nightmare. Some companies hire additional staff to do
data entry; others hire trainers to teach agents how to do it.
Obviously, the lack of personal contact affects the ability to network and socialize,
and it can lead to a sense of isolation. There may be add-on fees for errors and
omissions insurance or technologies. Agents may be asked to purchase their own
technology and support systems. Every company is different, but there is a potential for these disadvantages to exist in any of them.
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14
unit one
■■ Unit 1 Review Questions
SA
1. What is the main difference between a virtual
brokerage and a traditional brokerage?
a. A virtual brokerage has no physical location.
b. A virtual brokerage only serves sellers.
c. A virtual brokerage only serves buyers.
d. Virtual brokerages have a limited number of
services they provide.
2. What is different about real estate from 100 years
ago?
a. Home ownership rates were high.
b. Home ownership was rare.
c. The real estate profession was highly
regulated.
d. Real estate transactions were highly
regulated.
8. Lowering operating costs is an advantage of
traditional brokerages.
a. True
b. False
9. An advantage of a virtual brokerage is
a. increased supervision.
b. better transaction management.
c. enhanced communication.
d. none of these.
10. What is a disadvantage of the virtual brokerage
to the agent?
a. Lack of personal contact
b. The ability to work from home
c. Reduced data entry
d. Competing against the company’s brand
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3. In the 1960s, what did the National Association
of REALTORS® (NAR) create to help local professionals bring buyers and sellers together?
a. Multiple booking services (MBSs)
b. Multiple real estate services (MRSs)
c. Multiple association services (MASs)
d. Multiple listing services (MLSs)
7. In 1985, computers were primarily used by
a. individuals in homes.
b. the government only.
c. schools.
d. corporations.
4. What was the early form of the multiple listing
services (MLSs)?
a. “The listing search”
b. “The directory”
c. “The book”
d. “The agent’s guide”
5. Between the 1950s and the 1980s, agents could
work for large brokerages or
a. be sole proprietors.
b. be virtual agents.
c. work for the association of REALTORS®.
d. form limited liability companies with other
agents.
Virtual_Brokerage_How_To_Do_It.indb 14
E
6. Between the 1950s and the 1980s, agents were
asked to spend specific time periods at the office
in order to gain clients. What was this called?
a. Open duty
b. Tour duty
c. Floor duty
d. Office duty
10/17/2013 1:21:34 PM
Virtual Brokerage: How to Do It
Features
Career-Building Titles from Dearborn™
• E nd of unit review quizzes test a student’s retention of
the reading material.
General & Specialty Continuing Education
• A discussion on the history of the real estate industry
illustrates the evolution of virtual brokerages.
SA
• An explanation of required systems and technologies
helps would-be virtual brokers identify what they need
to start their virtual brokerage business.
• A unit devoted to risk management ensures that new
virtual brokers understand the challenges they’ll face.
• Includes tips for starting a successful virtual brokerage.
• Fair housing topics related to the operation of a virtual
brokerage are discussed throughout the text.
Contents
Today’s Virtual Brokerage
Buyer Representation in Real Estate
Commercial and Investment Real Estate: Tools of the Trade
Fair Housing
Foreclosures, Short Sales, REOs & Auctions
Know the Code: Real Estate Ethics
Mortgage Fraud and Predatory Lending
Property Management and Managing Risk
Real Estate and Taxes
Real Estate Finance Today
Red Flags Property Inspection Guide
Reverse Mortgages for Seniors
Sustainable Housing and Building Green
The Truth About Mold
Title Insurance for Real Estate Professionals
Understanding 1031 Tax-Free Exchanges
Professional Development & Reference
21 Things I Wish My Broker Had Told Me
Managing Risk
Before Hitting Send: Power Writing Skills for Real Estate Agents
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Technology and Communication
The Optimized Virtual Brokerage
Power Real Estate E-mails & Letters
Sales and Marketing 101 for Real Estate Professionals
The Big Book of Real Estate Ads
The Green Guide for Real Estate Professionals
The Insider’s Guide to Commercial Real Estate
The Language of Real Estate
Up and Running in 30 Days
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332 Front Street South, Suite 501, La Crosse, WI 54601
www.dearborn.com, 800.972.2220
For comments or queries about this product,
please email us at [email protected].