The Key Legal Terms for Every Real Estate Team Agreement

According to the National Association of Realtors, approximately 30% of real agents work in a partnership or with a team and, these days, many teams are not using appropriate team agreements or a team agreement at all.

If you are working within a real estate team structure, it is imperative that team members understand and appreciate their roles, responsibilities, and obligations, all of which should be included in a real estate team agreement. Through your real estate team agreement, you should consider including the following provisions:

1. Identifying a Team Leader: In most instances, the team leader is the “rainmaker,” i.e., the individual who brings in the business. Oftentimes, the team leader is the agent who handles the listings. And, other team members work with buyers. In some team formats, all members are encouraged to pursue listings.
2. Compensation: Pay can range from a flat rate for a salaried team member or a portion of the team leader’s commission. Or, it can be a combination of both a flat rate and a commission. According to the National Association of Realtors, the most common compensation arrangement for teams was a fixed commission split. In this type of arrangement, the splits stay consistent between the lead agent and the other agents on the team. For example, on a two-person team, the team leader might receive 70% of the commission and the other team member might receive 30%.
3. Termination: The parties must identify the date upon which the team agreement terminates. And, upon termination, the parties need to determine what will happen to any pending escrows and what will happen with leads generated by each of the parties during the course of the team agreement.
4. Confidentiality and Non-Solicitation: The parties may wish to attempt to restrict a departing agent’s ability to “copy” the methods of the team leader and/or to communicate with prior clients of the team. In drafting such a provision, the parties should address the confidentiality of materials, what items constitute personal property owned by each of the parties, and the parameters of future communications with referrals and leads.

Real estate team agreements should also include, among other provisions, the classification of the parties (i.e., whether agents are independent contractors or employees), and who pays the various costs associated with creating and maintaining the team structure.

If you need a sample team agreement that contains all of the items noted above or have any questions about your team agreement, feel free to email me at patrick@mandglawgroup.com. I look forward to hearing from you.