Why A Real Estate Business Can Be Better Off With Principal Agent Model

Ever since their inception, real estate investment companies like HomeUnion Investment have reached a certain level of achievement and recognition in the industry. The initial desire of a real estate agent is to build a team because there is a general belief that the more members of a team, the greater will be their success. However, there are pros and cons to having a larger team compared to the better and less-known option called the principal agent model.

A real estate agent usually hires an assistant to handle paperwork and administrative duties so that he can leverage his time to generate more sales. Buyer agents are also hired in order to take care of clients usually for a 50% commission. On the surface, everything looks okay because the team leader has more time on his hands to deal with pressing matters. However, issues can occur after the honeymoon period is over which can be after a few years or even sooner. Once the team grows larger, there are different personalities and expectations begin to clash. Management of a big team requires a strong personality and mindset.

On the other hand, the lesser known principal agent model may not be as impressive as building a team but for many realtors it is a better option to leverage and get the most from their real estate business. In principal agent model, leveraging is still the primary focus but instead of team members, independent contractors are hired. Independent contractors include administrative assistants, home inspectors, photographers, listing appointment coordinators, social media experts, SEO consultants, website admin and graphic designers. These experts are only hired when needed and the primary real estate agent remains to be the central nervous system of the business.

If the volume of sales has reached about 75 to 100 transactions, hiring a full-time assistant can be justified as well as some buyer agents. A long term benefit gained from principal agent model is the ability to maintain long term relationships and connections with clients. This will ensure client retention and increased referrals. Many real agents are most likely operating on this model but they do not actually realize it.