Does the Name of Your 100% Commission Real Estate Brokerage Matter?

Real Estate agents spend a lot of time comparing commission models, office amenities, and company policy when they consider joining a brokerage. Equally important is the name of the brokerage. Consumers have access to nearly all the data, so it is incumbent for agents to prove their value. Agents prove their value by building trust and credibility with their prospects. This brings us back to the company name. If you are a well-established agent, and your name is already very recognizable, then the name of your real estate brokerage takes a backseat your name. However, that is very rare, some tiny percentage of agents, much less than 1%. For the rest of us, the question will come up with clients, “what brokerage are you with?” These prospective clients are sniffing around. They want to know about your support system and if they are reputable.

So, you can choose a reputable name, like Keller Williams and be done with this, right? Yes, but you also are factoring in what the brokerage will charge you when you close a transaction. Let’s say you want to save the most commission for yourself, so you look at 100% commission model brokerages. This is a different segment of the brokerage world. Again, you will have to look at a list of companies, what they offer, and, of course, the name.  So, Balboa Real Estate fits the bill as a 100% commission brokerage, and we don’t charge monthly fees. We are partial to our name because rather than something generic, like “First Home Realty,” or something abstract like, “Cyber Broker.” The name Balboa is a California icon. In each county of California it has different geographic landmarks and meaning, it sounds familiar.

Agents often call our office because they heard we offer a 100% commission program and they like our name. That is the conversation starter. Agents join our company because our reputation gives agents the credibility they need to win over clients. Agents stay at Balboa because we offer great support and take care of them.

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Is a monthly brokerage fee worth it?

In some real estate offices agents have to pay a monthly brokerage fee. Not every realty brokerage charges a monthly fee to its agents. For example, Balboa Real Estate does not charge its agents a monthly fee. Now, even though we don’t charge a monthly fee, we aren’t universally opposed the concept of charging a fee in certain circumstances. Some real estate agents like to hang around an office. If you like to go down to an office, and jump on the company wifi with your laptop, as you drink a Keurig coffee, sitting in an auxillary desk, under an AC vent, as your print out an email, then a monthly real estate brokerage fee is indeed intended just for you. Also, you should happily pay it, because all the overhead created by the office ammenties you like to utlilize cost the company money.

Real estate brokerages that offer the “100% commission” model have a thin profit margin, so they must be careful when budgeting. The understanding is that the monthly fee is in place to help cover the overhead, ideally a break even. All the charges to an agent’s commission should be added revenue, to pay salaries and such. Balboa Real Estate offers 100% commission, a low flat fee per transaction, but no office to hang around. The reason is that we did have an office – for years- and it was barely utilized. Why was our big beautiful office not utilized? The answer is that it’s more convenient for agent to meet the sellers at the listings, buyers at the prospective properties, and conduct research/paperwork from their computer than to drive out of the way to our office. Agents that keep busy and focused know this, and many see no point in paying a monthly fee for an amenities that they do not use. Agents like this come to Balboa Real Estate for 100% commission, our broker supervision, and not our office.

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Is Errors and Ommission Insurance (E&O) Insurance Required?

Many agents ask if Errors and Ommission Insurance (E&O) insurance is required by law. A real estate broker, once licensed by the Department of Real Estate, can broker real estate sales without E&O insurance. They aren’t required by law to have a policy, but any legitimate professional would not conduct business without E&O insurance. So, while an E&O requirement isn’t enforced by the state, it’s still an unoffical requirement to properly conduct real estate brokerage. The implications of listing and selling real estate without E&O insurance are catastrophic. Also, clients deserve to have an agent that is insured.

Now, since we have established that E&O insurance is needed, let’s talk about cost. If you are a lone or independent broker you simply need to call an insurance company and tell them that you need a policy and they will send you a quite for hundreds or maybe thousands of dollars (based on your sales volume) for a year-long policy. For most agents that hang their license with a brokerage, the company has a blanket policy that covers the agents. Every type of transaction, residential, commercial, agent-owned, dual agent, sales price….you name it, affects the cost of the company’s E&O insurance policy. Most companies pass this fee on to the agents in the form of a per transaction risk assessment for, or some sort of charge assessed randomly.  Either way, agents have to come up with money to pay a fee for E&O Insurance. This is one important way that Balboa Real Estate is different than other real estate brokerages. Our E&O insurance is included in our transaction fee. This means that agents do not have to pay anything additional out of pocket for E&O insurance. It’s included in our flat fee plan. So, if you want to avoid paying an E&O insurance fee then join a brokerage that pays it for all the agents, might we suggest Balboa Real Estate?
Learn more about Balboa Real Estate’s 100% commission plan here. 

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What is a non-independent broker escrow company?

Have you heard of a non-independent broker escrow company, also known as a broker-controlled escrow? These are different from other escrow companies, and I’ll explain the difference. To conduct escrow business in the state of California, you must have a license. Interestingly, there are three different types of licenses that allow you to perform escrow. The reason there are three is because there are three different licensing bodies that oversee escrow activity.

  1. The Department of Insurance.
  2. The Department of Business Oversight.
  3. The Department of Real Estate.

Naturally, one license is harder than another to obtain. The Department of Insurance license is basically for title companies that have escrow divisions. This is an expensive and very regulated license to have and maintain. My personal opinion is that title companies are the safest places to have escrow conducted.

The Department of Business Oversight is for independent escrow companies. For example, let’s say an escrow officer that worked at a title company wanted to start her own escrow company. She could start an independent escrow company by obtaining a license through the dept. of business oversight. She would have to show 5 years of escrow experience for her escrow manager, maintain liquid asset reserves, pay into a surety bond to protect consumers, and have her financials audited, among many other screening mechanisms designed to maintain safety standards for the escrow company.

So where does the non-independent broker escrow fit in? A non-independent broker controlled escrow is licensed by the Department of Real Estate (DRE). However, there isn’t a special escrow license issued by the DRE. The license needed to conduct escrow is just a real estate broker license. This means that if you are a real estate broker you can open up an escrow trust account and, just like that, have an escrow company. While the the other types of licenses require all sorts of protections, assets, and audits, you can skip that as a non-independent escrow company. To be clear about how low the barrier of entry is, a real estate broker can file a “doing business as” (DBA) name i.e.. “Wild West Escrow – a non-independent broker escrow,” with the Department of Real Estate, then open an escrow trust account, and they are now ready to accept your wire transfers. This real estate broker is now in complete control of an account with people’s life savings swirling around in it.

What happens if an escrow officer makes a mistake at an non-independent escrow? Let’s say the escrow officer accidentially wires the seller’s equity money to a fraudulent account – it happens – then what? Does the non-independent escrow company have cash reserves to remiburse the seller- provided they would even be willing? Because there is no requirement to have reserves. Remember, a broker licensee started this company by registering the name and opening a business/trust bank account. However, there are zero guarantees that if something goes wrong they will have the means to fix it or even the obligation if they did.

A personal contact confided that she sold their home with a non-independent broker escrow and their sale proceeds were wired to a fraudulent account. She went after the escrow company and they settled for pennies on the dollar.

Additionally, escrow is supposed to be a neutral third-party. However, if one of the brokers in a real estate transaction controls the escrow and represents one of the parties, then that is a conflict of neutrality. The other party is supposed to trust that the other party’s broker will conduct escrow in a neutral manner.

A non-independent broker escrow company should always be avoided. Considering that credible, safe escrows are often cheaper and easily accessible, it’s extremely poor judgement to settle for a non-independent broker escrow company . We highly suggest using a title company for title/escrow because it’s safe and efficient. Second to that, an independent escrow company licensed through the Department of Business Oversight.

 

 

 

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Are Agents Required to do an Agent Visual Inspection Disclosure (AVID)?

There is a lot of confusion around filling out the cumbersome Agent Visual Inspection Disclosure (AVID) form. California Civil Code 2079 requires that an agent must conduct a reasonable competent and diligent visual inspection of real property in order to disclose to the prospective buyer and material facts affecting the property’s value, desirability, and intended use. Agents do not have to inspect:

  • Areas not reasonably accessible; 
  • Areas off the site of the property; 
  • Public records or permits concerning the title or use of the property; or 
  • The common area if the property is in a common interest development 

Since we know that California law requires agents to performs a visual inspection, we will determine what document to use.

First let’s establish what is a “material fact” from other facts, since that is what we agents are expected to disclose.

An online legal resource defines material fact as: A fact that would be important to a reasonable person in deciding whether to engage or not to engage in a particular transaction. Based on this definition, many cosmetic issues, like scratches on wood, for example, would not need to be mentioned. In fact, what if there are no material facts to disclosure? Do agents still have to do a disclosure? The answer is yes.

The good news is that there is a place in the transfer disclosure statement (TDS) Sections III and IV for agents to fulfill disclosure duties.

If there are more material facts to disclose then an AVID form can be used to give a more comprehensive account of the inspection.

If you don’t have access to an AVID form then you can you use a substitute form.

In no case should an agent leave the visual inspection section of a transfer disclosure statement empty and not do any other form. If this happens, and a buyer is adversely affected by a material fact that was missed by the agent then that buyer may pursue the agent for negligence.

 

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Do Real Estate Agents Need an Office?

The question arises from agents, “do you have an office?” This is an important question because a big difference between many tradiitonal brokerages and 100% commission brokerages is access to an office. In order to answer, it’s only fair that we give some background information. When proespective agents would call or visit the office to inquire about Balboa Real Estate, the answer to the question whether there was an office to use was an unequivocable “yes!”  Agents were mostly concerned if a prospective client wants to meet then where could they host a meeting. For years, our company had professionals offices and a conference room with company signage and nice furnture, basically everything that an agent would need in a professional office. All this was set up for our agent and then….nothing. By nothing I mean agents never used the office. I shoudn’t say never, because once every 3 or 4 months the conference room was used and maybe an agent would use an auxiliary computer to print something on occasion.

We realized that agents meet sellers at their home, the home the agent would list. Agents would meet buyers at the properties they were interetested in viewing. If an agent needed to to talk to a client somewhere other than the propsective listing or purchase properties, they would meet at the most close and convenient coffee shop. I was told there was no reason for an agent and their client to drive several miles out of their way to meet at an arbitrary location.

When agents need to create a listing agreement it is created online, then either sent through Docusign or a PDF is emailed. The client will sign online or print/sign/scan back to the agent. The same process is used for purchases. It seemed that since the paperwork was done online, there was no point in going to an office to print and fill out paperwork. The concept of the office has changed drastically. At this time our office had over 100 agents, did hundreds of transactions a year, yet the office was always quiet with very few visitors.

As most real estate tools are web-based, and agents can easily have a printer and scanner at home to use as needed, there is no reason to go into the office. In fact, a case can be made that it is less time effcient to run to the office for a few tasks, than to do then from your home office. It’s also inconvenient to request your clients to drive over to your office for paperwork or a discussion. Clients are better served at the home they are listing or interested in buying.

There is one last factor to consider, and that is commission. If an agent doesn’t need a brick-and-mortar office to consistenly go to, then they will keep more commission. 100% commission real estate companies that have limited office recources for agents allow agents to keep far more of their commission than tradition companies. If an agent can save thousands of dollars on a transaction at a 100% brokerage, then is it worth it to invest some of this money in home office? We say yes.

If you are interested in finding out what Balboa Real Estate has to offer. please CLICK HERE

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Can Agents be Paid Directly from Escrow?

We are often asked if real estate agents can be paid directly from escrow.

The close of a real estate transaction often marks the culmination of months of work to earn a commission. Naturally, agents want to be paid that commission as fast as possible. Any reputable company has requirements to be met before the agent is paid. Namely, that all required documents are in the file. At Balboa Real Estate, we want agents to be paid as soon as possible. Our corporate office is in San Diego Cuunty, but we have agents all over the state of California.  Therefore, it will save agents a couple days if agents are to be paid directly from escrow. If an agent has a complete file with all required paperwork on or before closing, then we will send dibsursement instructions for escrow to pay the agent their portion of the commission directly.

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