How to sell my real estate brokerage? It can be an intimidating question.
You’ve prepared and gotten into the real estate business. Now it’s high time that you kick back and reap the benefits. Well, selling a real estate brokerage is pretty complicated. So be ready to roll up your sleeves one more time.
It will be advantageous if you have some time to prepare before selling your real estate firm. The more time you have to prepare for your transition, the better. If done correctly, a year or two is usually adequate.
Finding another agent who is compatible with the way you operate your business is the most critical aspect here.
The continuity of marketing is the second most crucial component of the puzzle. If your clients know you by your first name (rather than a “group” name), that’s something to think about.
For starters, you should start joint marketing with your name and the name of the agent who will be taking over. It would be safe to do so before you officially sell it and retire.
Consider this: If you’ve been conducting business as your first and last name throughout your whole career, the cash flow stops with you.
That’s wonderful if you’re actively working in the business and connecting with your customers. However, what happens if you sell it?
What happens if you leave everything in your name and a long-time client has a problem with a transaction? You wouldn’t want to be bombarded with phone calls once you’re on your permanent vacation.
Plus, you don’t want someone else tarnishing your impeccable reputation, which you’ve worked hard to earn over the years.
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How To Sell My Real Estate Brokerage
The Matter of Valuation
Although they can be challenging, there are two factors to consider when selling your real estate company: price and conditions.
Clients account for the majority of the value in your company. Your database, as well as a bit of goodwill, are the most valuable assets in your brokerage.
When folks can no longer interact with you directly, there will almost certainly be some fallout. However, this will be minimized with some education and a smooth transition.
After all, the amount someone is prepared to pay for your firm is predicated on the potential for future transactions. Therefore you want to make sure those transactions are protected if at all possible.
When you sell your real estate company, the buyer may pay cash upfront, make monthly payments, or both.
A popular structure is a one-time charge plus a commission percentage for the next few years.
You should expect a substantially lower overall price if you pay in total cash upfront. You can expect a larger overall fee if you are happy to accept payments for years to come.
There is no such thing as a “one-size-fits-all” solution. Therefore being open to unique alternatives is beneficial.
You should also consider all of the “what if” scenarios.
- One of you dies before the term of your contract expires?
- The buyer’s broker goes out of business before the contract expires?
- The buyer decides to leave the real estate industry for other reasons?
There’s no way to account for all possible snafus. But you can evaluate the most likely circumstances and make plans appropriately.
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What Potential Buyers Look For in a Real Estate Brokerage
A lot of real estates brokerages aren’t suitable investments. One of the main reasons is that the success of many firms is dependent on the owner.
Potential purchasers are concerned that if that owner leaves, the business will suffer.
As a result, purchasers are hunting for assets that can be transferred. They’re on the lookout for businesses that are dependent on the success of the agents rather than the owner.
That means business owners must be able to demonstrate effective and transferable ways for attracting, training, and keeping agents.
Residential firms should use marketing systems to identify and secure listings and attract potential homebuyers.
In addition, potential customers want to see a recognizable brand. This includes a successful track record and possibly a niche where the organization can continue concentrating its efforts.
A company that deals in vacation homes for a particular area for three decades is more appealing than one that has done a little bit of everything for 40 years.
The Difference Between Residential Brokerages and Commercial Brokerages
There is a significant distinction between commercial and residential brokerages. Commercial businesses use a more typical business model for prospect generation, customer leverage, and customer retention.
An owner will still want to show off the firm’s marketing engine. However, it’ll be more about how the commercial practitioners establish relationships and promote the brand.
These tasks are comparable to those in non-real estate enterprises.
Where To Start Once The Decision Has Been Made
It’s crucial to remember that selling a business is a lengthy process. It could take years to be in a position to sell a business. It, of course, depends on the structure and health of the company.
Having stated that here are some big-picture considerations:
- All of your company processes should be documented.
- Remove yourself from your company’s day-to-day operations.
- Ensure that your financial records are accurate, precise, and up to date.
- Create a strategy for the next five years.
- At least three years of steady economic performance is required.
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The Common Mistakes When Selling A Business
Acting on a whim is the worst thing you can do. If the seed has been planted in your head, divorce your thoughts from the money you’ll make from the sale.
One pipedream isn’t enough to drive your future unless you’ve previously made moves toward a sale and the plan is genuine.
Another common blunder made by consumers who have already begun the process of selling is allowing their brokerage to falter.
It would be best if you continued to be successful.
Seasonal changes in real estate brokerages are to be expected. However, allowing the business to dwindle while focusing on the sale or your next project can reduce your profits.
Ideally, real estate agents advise their clients to keep emotions out of a transaction.
Although, many of them make the same mistake when selling their own agency.
Other Things To Consider When Selling A Real Estate Brokerage
Because you want to control the situation, potential purchasers should sign a confidentiality agreement before learning the sale details.
You want your agents and workers to know about the transaction so you can respond to their questions.
Furthermore, selling your brokerage takes a significant amount of time. You’ll need to develop sales presentations, locate possible buyers, respond to their inquiries, and negotiate a letter of intent and acquisition.
On top of that, you must oversee due diligence. This transaction, I estimate, takes 500 to 1,000 hours to complete.
These are massive and complicated transactions. It’s beneficial to have an experienced professional helping both parties through the process. In a way, it’s precisely what you do for your customers when they’re dealing with intricate real estate deals.
Also, keep in mind that leaving your business behind would be difficult. You’ve put in a lot of effort to make it a success. You’ve made promises to people who work with you.
The emotional component of selling the brokerage is significant because of all of this labor and these relationships.
How To Find Potential Buyers
These types of transactions, like most sales transactions, are frequently the result of personal connections.
Potential buyers could come from within your company. For instance, an agent working toward her broker’s license could be the candidate.
Similarly, an agent who is looking to take on more responsibility could be an option too. Discuss it with your team, not as a formal offer, but as an opportunity to discuss it.
If your firm doesn’t have any takers, cast a wider net. Make a list of other local brokers and rate them in order of possible interest in your company.
It would be wise to make choices based on your knowledge of their operations. If that fails, make contact with non-real estate friends in the business community.
You can also advertise your company for sale on business exchange markets.
Tips on How To Vet Potential Buyers
The majority of small-business owners are concerned about two things: getting paid and protecting their legacy.
Ask buyers to describe their financial capabilities and detail how they will finance the deal.
They should also be able to disclose their sources of capital to ensure that they can pay you.
It’s more challenging to predict how people will treat your company if you’re no longer involved. You hope they’ll build on your work, but nothing is guaranteed.
You can do a background check and inquire about references.
However, because protecting your legacy is a subjective matter, you’ll have to trust your instincts. You’ve managed to keep a successful business for this long.
You must have a gut feeling towards dishonest people.
Who Can Walk You Through This Process?
The best place to start is with trusted advisors familiar with your brokerage. I’m talking about folks like your attorney, CPA, or banker.
You can also contact local business brokers and mergers & acquisitions advisors.
Buyers are primarily interested in future cash flow, so keep that in mind. They are more willing to acquire if the future cash flow appears to be secure.
Lastly, buyers are more inclined to spend more for a business if they can plainly identify growth potential.
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Final Thoughts –
Take your time when negotiating the sale of your company. Examine the proposals you receive before accepting them, and if necessary, make a counteroffer.
Ensure that your staff learns about the business sale from you rather than from someone else.
Whether you tell them before or after you sell, some of your employees may decide to seek work elsewhere.
Be aware of this potential and prepare for it to lessen the impact on your company’s sales.
Consider this your last leg of the race. You’ll be off to the beach in no time. Good luck!