“We have met the enemy and he is us.”

Pogo, 1970

History nerds may argue over where the introduction of the real estate brokerage model took place — in New York City (1847) or in Chicago (1855) — but a sure bet is they’d agree that little has changed in the nearly two centuries of real estate brokerages in North America.

What else hasn’t changed? The keyboard (1870) you’re using and the ballpoint pen (1888) on your notepad may very well have been the first technology welcomed by early salesmen.

The sector has some big, longtime problems

Richard Montgomery, in his column “Dear Monty,” identified the sector’s biggest problem in 2020: the glacial pace of change to the brokerage model, including low entry levels, misdirected training, and marginal supervision.

We have both been managing brokers and worked in the real estate regulatory space, and we both now work in the organized real estate side of the profession. We’ve also both shared observations in REM about the challenges that managing brokers face and the risks for the sector if the status quo continues — including lack of succession planning, inability to attract new talent into the role and forced change by regulators.

We’ve shared everything from obvious observations like compensation for the role not commensurate with the responsibility, accountability and liability that comes with it, to more complex aspects like brokerage sustainability when incentives are offered but not supported by a sound business model. 

Those earlier articles discuss some of the things that got us to this point.

The introduction of teams: Adding pressure to brokers and risk to the sector

One of the things we both feel contributed to pressure on the role of the managing broker and the resulting risks for the sector is the introduction of “teams.” Before teams, many realtors, especially top producers, were motivated to branch out and form their own brokerage because of financial/taxation benefits, the desire to create a different culture or general displeasure with their brokerage.

Today, they form a team — no fuss, no trust (account) and no brokerage license or franchise purchase. This simplicity has also impacted motivations. They may see an opportunity to provide specialized services, seek a structure that accommodates work-life balance, pool resources for economies of scale or just generally be more collaborative and, thus, competitive.

Evolution in regulations for teams: A B.C. snapshot

Recent research including confirmation from the BC Financial Services Authority indicates there are 1,703 registered teams in the province of British Columbia but no information about the total number of team members. Currently, there are about 27,000 real estate sales licensees. The minimum number of team members is two.

Therefore, teams make up at least 12 per cent of the licensees in B.C. Assuming an average of four members per team increases the percentage to 25 per cent. Although unlikely, an average of eight members would mean 50 per cent of B.C. real estate licensees are team members. 

The regulatory environment around teams has evolved to some extent. Koot recalls attending an international real estate regulator conference in the mid-2010s thinking there’d be an opportunity to plagiarize teams regulations from another jurisdiction, only to find out that everyone else attending the conference had the same intention.

Still, not all jurisdictions identify teams. Until 2023, the only reference to teams in the B.C. regulator’s rule book dealt with advertising. Other jurisdictions require the team leader to have regulated qualifications, and in several jurisdictions, unlike B.C., team names cannot include or be connected with the word “realtor” nor use the words “group,” “realty” or “associate.”

As in B.C., teams may not indicate in any way that they are a brokerage and remuneration can only be made through the brokerage. The brokerage name must be used in all advertising and the font must be the same size as the team name.

Brokerages seem to feel they cannot be successful without attracting teams, but we need a recalibration

These rules and limitations for the team and “team lead” do not, however, hold any significant expectations that would transfer liability from the broker. An environment has been allowed to evolve (by both sector and regulator) where teams operate with an element of autonomy, giving them the perfect scenario to build a business with many of the benefits and very little of the associated accountability.

From a regulatory perspective, teams cannot exist or succeed without being attached to a brokerage. From a business perspective, it seems brokerages feel they cannot be successful without attracting teams. To ensure the broker role continues to be an aspirational endeavour for realtors, thus solidifying the viability of the brokerage model under the existing regulatory framework, there needs to be a recalibration of what each — the brokerage and the team — receive from the relationship.

In the absence of a major sector overhaul to a single-license environment — which would see the extinction of the broker role altogether (as has been discussed in the regulatory world) or the creation of a joint accountability model where team leads and brokers share the regulatory burden — it’s up to the industry to self-correct.

Teams and individual realtors alike need to recognize the value the broker role brings to their success. Brokerages need to ensure that this recognition translates through resources and compensation. And everyone involved needs to adopt policies and procedures that distribute compliance responsibility throughout the organization. We may not be able to displace all the liability, but we can certainly create an environment where it’s mitigated.

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