Over the past 15 to 20 years, the emergence of the mega-team has made headlines. However, these large teams aren’t the only ones making a profit – a profit that overshadows most real estate brokerage profits. Teams of all sizes have average gross margins more than double the brokerage firm average compared to 2021 data Actual trends 500 best brokerage firms and RTC advice reference data. The profitability of the real estate team is breathtaking.

“Many believe that teams were the foundation of real estate brokerage firms about 60 years ago,” says Steve Murray, senior advisor for RealTrends. “Back then, the prime brokers who formed a business hired agents to help them deal with referrals. “

Back in 2017, Actual trends in partnership with the California Association of Realtors to study real estate teams. By this time, teams had become commonplace and brokerage houses like Keller williams built important training and organizational resources around the teams, while Compass was building a brand aimed at consumers in part on the basis of a team usually led by a prominent local agent.

In this study, we looked at what team leaders value about their broker. The result? The main benefits mentioned were legal and regulatory support, the brokerage’s brand name, and low costs and fees.

Fast forward to today, when the team concept explodes. While it’s not known how many real estate teams exist today, we do know that the top 1,000 teams ranked by side of transaction in the RealTrends 2021 America’s Thousand and Top Real Estate Professionals have seen their Average transactions increase 49.7% in 2020 compared to 2019. The average team in the ranking closed 252.9 teams in 2020 compared to 106.9 in 2019.

Production vs profitability

The numbers in our rankings show us how productive the teams are. However, brokerage firms have often speculated on the performance of teams from a profit and loss perspective. In the RealTrends 2021 Team Business Case, we answer this question.

First of all, we’ll talk about income. RealTrends polled 2,000 top teams nationwide based on the 2021 RealTrends The Thousand and America’s Best Real Estate Professionals rankings. Survey teams generated an average of $ 3.33 million in gross commission income, have been in business for an average of 10.9 years, and have an average of 13.9 agents and 4.5 employees.

Brokers can dispel any doubts that well-managed teams are, in fact, income-generating businesses. Compared to brokerage firms, the teams surveyed averaged $ 6.4 million in sales volume per agent. The average of the largest brokerage firms in the country, according to the 2021 RealTrends 500 ranking, showed a sales volume of $ 3.2 million per agent.

For closed parties, the chasm was deeper, with teams doing nearly three times as many trades per agent as brokerage firms. In our study, teams had an average of 20.2 closed transactions per agent. The largest brokerage firms had an average of 7.4. Brokers looking to increase their productivity per agent would be wise to review some of the team practices.

Profitability reigns supreme with the teams

In previous studies, we have made an educated estimate of the profitability of teams compared to brokerage firms. But with the 2021 Actual trends study on teams, we discovered the truth. The results are astounding.

In the study, says Murray, we found that teams maintained an average gross margin of 61.8%, while the brokerage firms that RealTrends compares (of all business models) had an average gross margin of 13.8%. %.

While smaller teams had higher margins, the difference between smaller teams and larger teams was infinitesimal. “As teams grow their margins tend to shrink, but only a little,” says Murray.

We also looked at expenses, and it’s no surprise that in three categories – occupancy, employment, and administration expenses – brokerage firms spent a higher gross margin percentage than teams. However, the teams spent 18% of the gross margin on advertising and marketing; while brokerage houses spent around 2.4%.

Are the teams scalable at the national level?

We also sought to determine if the teams are scalable at the national level. Of course we have clues that they are based on the growth of companies like Red tuna, which is essentially a team at scale, according to Murray. “Can big teams triple their size? Certainly. Can they get the capital to do it? Absoutely. So we think it’s going to happen, ”Murray said. “You have Marc Spain, Robert slack and Ben kinney who have all found a way to develop their teams.

More than just numbers, this new study shows the power of lead generation and delivering business opportunities to clients and clients in terms of value to realtors. It provides a powerful benchmark for teams to assess performance and for brokers to determine value-added services to offer their agents.

For full team profitability numbers, check out the full RealTrends 2021 Team Profitability Study here.