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3 Must-Have Secrets For A Real Estate Team Agreement To Avoid Conflicts

Updated: Oct 3, 2023

Today I'm going to give you 3 "MUST HAVE" clauses for a Real Estate Team Agreement. Please note that a "typical" agreement will have anywhere from 8-12 pages of content, but if you cover these 3 core areas, you're off to a great start.

Why are these 3 items so important?

When a team member leaves a team (or is terminated) 90% of disputes between Team Leaders and Team Members come down to two things: Lack of communication and/or misinterpreted/non-existent expectations.

This is why you need a team agreement with these 3 essential clauses. Having them in your agreement could save you a TON of unnecessary stress (and/or money) if/when the divorce happens.

Unfortunately, if/when the shit hits the fan, a large percentage of team leaders are currently in a world of hurt from a legal standpoint. Why/How is this, you ask?

Most teams don't even have a real estate team agreement

Yes, you heard that correctly...If you're currently running a team and you don't have a team agreement in place, you are asking for trouble. Please, do yourself a favor and get it done. Ask your Broker for a sample/template, and get SOMETHING in place.. PRONTO. If your Broker doesn't have one, reach out to me and I'll help you out.

For those that DO have team agreements in place, the majority are missing at least one of these 3 critical core elements:

1) Roles & Responsibilities:

Clearly define the roles and responsibilities of each team member (Including the team leader) to avoid any confusion.

Be sure to be very clear when it comes to expectations, both for the team leader and the team member. What does the team leader provide (training/mentoring, accountability, leads, vision/culture, etc.), and what is expected of each of the team members in each of their respective roles? Describe each role in detail (Buyer Agent, Listing Specialist, Administrative Assistant, Transaction Coordinator, ISA, etc.) and clearly describe the duties of each role (think job descriptions).

Very important note: Please be sure to include language that makes it very clear that the agents on your team are independent contractors, and shall be treated as such. As an independent contractor, you absolutely cannot REQUIRE team members to be at events, meetings, work specified hours, etc. This is very important, and I highly recommend you speak to an attorney when it comes to employment law matters.

2) Compensation Structure:

Outline how the team members will be compensated, including the commission splits (for both sales and leases), brokerage fees, referral fees/splits, bonuses, profit-sharing programs, etc.

Be as detailed as possible here. I always advise my coaching clients to be as simple as possible, but extremely specific. Oftentimes I see commission split agreements that require data scientists to figure them out. My advice is to stay away from multiple split structures (I.e. sliding scale based on volume, number of homes, % increase over last year, etc.). Just keep it as simple as possible.

3) Termination Provisions:

Include provisions for terminating the agreement, such as the notice period and any penalties or consequences for breach of contract. You'll also want to be VERY clear about who owns leads (team-generated vs personal leads) and the procedure for handling deals that are in escrow at the time of termination.

This is probably the number one problem area when it comes to disputes between team leaders and team members. You need to be very specific and try to cover as many possible scenarios as possible, and please please, please...

DO NOT try to be cute and put in a non-compete clause for leaving your team before a certain date. In 24+ years, I've yet to see one of them actually enforced, and most attorneys will tell you that you can't take away an agent's livelihood. I'm also not a fan of penalty fees for leaving a team before a certain date. While it may be legal, in my humble opinion, putting crap like this into a team agreement screams "I'm in it for me", and as we all know, word travels fast through the real estate world.

I hope you've had as much fun reading this diatribe as I've had writing it...As always, as Coach Prime says "I'm easy to find" if you need me for anything real estate team-related..

Until Next Time...

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