How Big Should Your Real Estate Agent’s Firm Be?

Take a careful look at how the size of a real estate brokerage may impact your agent's experience, time and marketing capabilities.

U.S. News & World Report

How Big Should a Real Estate Firm Be?

Asian family shaking hands with real estate agent next to house

Your choice of real estate agent should focus on the individual's experience and trustworthiness, but how his or her firm operates can also affect a transaction.(Getty Images)

Does the size of the firm that your agent works for matter when selecting between two great real estate agents – one at a smaller, boutique agency and another at a large firm? After much thought and consideration in selecting a real estate agent to represent the sale of your most valuable asset, your home, it is time to make the final decision.

In major cities like New York City, firm size can vary from 150 agents in a small firm versus more than 2,000 agents in a large firm. In smaller cities, a boutique firm could have just a handful of agents. Does the size of the real estate brokerage matter when it comes to picking an agent? Here's how the differences break down:

Selectivity and Economics

First and foremost, it is important to note that real estate agents are independent contractors, and the firm is the broker who “holds” an agent’s license, and is ultimately responsible for their conduct.

In smaller firms, one often finds a higher concentration of experienced, thoroughly trained agents. Why? Office space is a very valuable commodity and smaller firms have to be selective about who they hire. Every agent needs to be a high-performing, full-time agent. There is a lot of attention to agent development as the success of the agent is meaningful to the firm, because it has invested valuable time and money into the individual, as opposed to some of the larger firms who have a sink-or-swim mentality.

There are many, many excellent agents at large firms, but it is always harder to manage and supervise agents who are independent contractors, so more variation in experience and less training may occur.

On the flip side, a compelling consideration for marketplaces in areas like Texas, Florida and Arizona, are large, nontraditional firms such as Redfin. With specialized roles for marketing, showing and closing on a house, you're working with multiple team members. Additionally, many nontraditional brokerages offer discounted commission rates, which can make a difference to the seller's bottom line.

Access to Leadership

Boutique firms are high touch and the head of the firm typically owns the company and has a vested interest in the success of the agent and the deal, regardless of the size. Larger firms have many more deals and agents to monitor.

You never know how good your doctor is until you are sick and really need them. The same can be said about any professional, and it is important to know there is reputable leadership at the helm of the firm you select, just in case.

If you know your transaction will be fairly straightforward, this may not be a part of your concerns in selecting an agent. A large, well-known, licensed brand name might feel like a powerful advantage.

Marketing

It is indisputable that large firms have significant marketing budgets that smaller firms cannot compete with and as a result, they have most likely created stronger brand recognition.

This is the consideration that most sellers focus on, yet many sellers do not realize that it is not how homes are sold. It is important to understand that most advertising is really branding for the firm. Although it can happen, listings don't often sell from a New York Times or Wall Street Journal advertisement. Nonetheless, this is still meaningful to many sellers.

The vast majority of properties are sold when agents or customers search for homes through an online listing property search such as Streeteasy in New York City, or national databases like those on realtor.com, Redfin or Trulia. Counterintuitively, in a smaller firm, agents actually have a higher likelihood that their listings will be featured in print media, as there are fewer agents and listings to compete against for the available ad slots.

Representation

Real Estate agents are typically hired to represent either a buyer or a seller in a transaction. Each side deserves a fiduciary, and it is impossible for an agent to represent both sides in a transaction – think of an attorney representing both sides in a legal dispute.

This gets tricky when both agents work for the same firm or broker. Therefore, the broker is representing both sides and a disclosure form must be signed by both parties. When a firm is so large, and the market is flooded with agents from one firm, there is a higher likelihood that they may “co-broke” with another agent from the same firm. Dual agency is not an uncommon occurrence in the marketplace, but it has a higher likelihood of creating a scenario for discomfort and distrust.

In the end, selecting the right real estate agent is about important qualities such as trust and expertise. The firm that is supporting the agent should be evaluated as well.

Wealth of Knowledge Podcast

Wealth of Knowledge is a weekly podcast featuring tips and expert insight on all things money: personal finance, careers, investing, real estate and more.

Wealth of Knowledge logo