risk-management

Best Practices to Manage Team Risk

risk-managementSuffice it to say, real estate teams have become incredibly popular. They give agents a competitive advantage, an extended revenue source, and the ability to leverage the skillset of several people instead of just one. As Kate Beckman—director of Independent Contractor Relations at NRT LLC—says, “There is strength in numbers.”

But real estate brokers and agents face a variety of issues and challenges related to teams. During the Risk Management Forum at the REALTORS® Conference & Expo in Chicago on Friday, experts and real estate professionals discussed legal and regulatory concerns of team leaders and brokers who oversee teams at their companies.

While a team leader is an independent contractor, most team leads are also supervising other independent contractors and employees. Brokers can be at risk if the team lead treats independent contractors like employees, say by requiring agents to be in the office at certain hours, or to complete duties and tasks in a specific way. “The main factor is control,” Beckman said. “The only thing we worry about with an independent contractor is results and production. We don’t worry about how they do things; we just worry that they get them done.”

Here are a few tools that can help brokers protect themselves from risks associated with teams.

Written agreements. Clearly define the relationship between the broker and team leader, as well as the relationship between team members. Include how leads are distributed, how commissions are split, and a dissolution clause outlining what happens when team members leave. Be sure to include an indemnification clause, Beckman said, which holds a broker harmless if a team lead is treating independent contractors as employees.

Professional resources for team leaders. Recommend payroll services to help ensure taxes are being treated correctly. Point team leaders toward legal resources, business coaching and other support. Offer human resources information for those who truly have employees and resources on independent contractor relations for those who are managing agents, and make sure team leaders understand the difference, she said.

Best practices. As a broker, you’re in an excellent position share your knowledge and experience with the team leader. Suggest additional coaching resources for leaders specifically. Help them build their business, Beckman said.

Appropriate compensation. Help team leaders understand different compensation structures and hybrid models. Talk to them about offering benefits, and what state law requires.

Two of the most important things a broker can do to mitigate risks associated with teams are to communicate and get involved, said panelist Nina Fotopolous, senior vice president for Coldwell Banker Residential Brokerage DuPage Corridor and Milwaukee Regions. Brokers should fully understand how their teams are operating, how they’re evolving, and what their own role is with the team, she added.

“From my experience, it’s very important that you’re a part of the rainmakers’ team in general,” Fotopolous said. “Outside coaches are great, but if they’re outside of your state, it doesn’t do much good. They don’t know the policies of your company, nor the laws that must be followed.”

The most ideal situation is when brokers serve as a coach to the rainmaker or team leader, Fotopolous said. That way they can meet regularly with the entire team, follow their improvement, and get a second set of eyes on their business.

“Brokers often bring a level of business mindedness to a group, she said. “If you’re the coach, you’ll keep the team engaged and moving forward.”

Erica Christoffer

Erica Christoffer is a multimedia journalist and contributing writer and editor for REALTOR® Magazine. She can be reached at echristoffer@realtors.org.

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