Before Redfin and Zillow and 3-D video tours became the techno-tools for finding a property, real estate agents guided clients through the minefields of buying and selling a house. [Editor’s note: This blog post has been updated as of August 2018 to reflect the latest salary statistics from our 2018 Real Estate Agent Income Guide.]
Today, 90 percent of home buyers rely on the internet as a primary research tool, according to a market trends report co-sponsored by the National Association of Realtors and Google. Searchers may find a home on Realtor.com, view the property on their smartphone, and figure out how to write a sales contract on YouTube. The agent still plays a role in the sale, but he’s no longer the gatekeeper who can regularly and unquestionably command a 6% commission.
Hello, hybrid real estate brokerages, a sales alternative that, in some cases, replaces commissions with flat fees and offers a menu of a la carte services. Mainstays of traditional brokerages, like manning a Sunday open house or printing a glossy brochure, are hybrid line items that determine how much a client pays for services rendered.
The “hybrid” part of the title admits that these brokerages also offer some services pioneered by their traditional and discount predecessors, like advising on price and negotiating a sale. And in reality, traditional shops have always adjusted commissions in a down market or for loyal customers. So there aren’t as many differences between the two models as each might want you to think.
“Indeed, the relationship between hybrid and traditional brokerages may be more symbiotic than adversarial,” says an Inman report titled How Hybrids Brokerages Are Changing Real Estate. “The two types of brokerages are feeding off each other, breeding new business models that offer something from both worlds.”
There are large differences between real estate brokerages, including the company’s structure, operation and philosophy—and according to our 2018 Real Estate Agent Income Guide—income.
Hybrid real estate brokerage difference
There’s no National Association of Hybrid Real Estate Agents, so it’s hard to define “hybrid brokerage,” determine how many exist, or know precisely how they operate.
“There is no hard and fast definition of hybrid brokerages,” says Colby Sambrotto, president and CEO of USRealty.com, a hybrid brokerage based in New York City, New York. “It’s a hybrid between a traditional residential brokerage and a For Sale By Owner’s approach to selling. But basically, ‘hybrid’ is a code word for a brokerage that’s willing to negotiate on commissions.”
Hybrids typically veer away from traditional broker commissions that hover at 6% and are split between listing and buyers’ agents. Hybrids often discount the listing commission from 3% to 1% to 2% (it can’t mess with the buyer’s agent commission or risk a punishing shun). Or they charge a flat listing fee – sometimes thousands – and provide a commission rebate. Redfin, the largest and most famous hybrid brokerage with agents across the country, hands 15% to 45% of commissions back to buyers.
Pros and cons on becoming a hybrid real estate broker
During 24 years as a real estate agent, David Sande, associate broker with Realty 2000 l.c. in Reston, VA, has used some hybrid techniques, like flat fees and limited service agreements to attract clients.
“It is a marketing tool for the brokerage and the agent, but unless you do very high volume, it’s likely the low margins will not sustain your business,” says Sande. “For instance, if you spend six hours preparing and maintaining a flat fee listing for a few hundred dollars, you have to ask yourself, ‘Is it worth it?’ Many times it’s not.”
Except, when it is.
On average, real estate agents earn $44,488 annually, starting their careers at $42,000 and peaking at $68,000 with more than 20 years of experience. Redfin, however, says that with commissions and bonuses in 2011, its agents earned 31% more than the 85th percentile of full-time agents. On Glassdoor, Redfin real estate agents earned on average $77,152 in total compensation, which includes cash, and in some cases, stock bonuses.
Here are more pros and cons of working for a hybrid real estate brokerage.
Hybrid real estate brokerage pros
- Flat fees and low commissions can attract a volume business that lets you begin relationships with many, and hopefully, life-long clients.
- Techno-advanced hybrid brokerages easily connect with millennial buyers ages 18 to 34, half of all home buyers. Millennials do a tremendous amount of research for homes and agents online, then hire an agent to shepherd them through the buy/sell process, according to Zillow.
- Some hybrid brokerages have a division of labor—a field agent shows the house, another draws up documents, a third may handle closings. If you’re a people person, you may be able to land a job as a field agent and never have to fill out a disclosure statement.
- Many hybrid brokerages reel in customers and feed them to their agents. You won’t have to cold call looking for listings.
- Some hybrids, like Redfin, pay agents a salary plus benefits. This is nice for risk-averse agents who like knowing when their next paycheck will arrive.
Hybrid real estate brokerage cons
- Some people love the thrill of the chase and the possibility of earning big bucks on huge sales. If you’re going into real estate for the adrenaline rush, then hybrids aren’t for you.
- At some hybrid brokerages, agents have set work schedules and don’t have to skip church on Sunday to show a house.
- Teams and mentors are old-school sales approaches, but they can teach a new agent the ropes and launch careers. If you want to be under an experienced broker’s wing, hybrids won’t be a good fit.