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Retirement Planning Benefits Agents and Brokers

Coach retiring agents to sell their book of business to younger agents

(Boonton, NJ, February 16, 2016) — Chances are your company is filled with graying agents who plan to retire in the near future. If you hope to keep some of their business after they step down, you need to help agents start thinking about succession planning now, says Chandra Hall, owner of Colorado Mesa Realty in Colorado Springs.

Hall notes that the median age of Realtors is 57. Most say they expect to retire in the next 10 years — and many plan to simply walk away from their business with no formal exit plan.

"It’s very scary for our industry," Hall says. "Seemingly overnight, millions of dollars of volume just vanishes."

The alternative is to create a business the retiring agent can sell to a younger agent. The typical sale price for real estate practices is 1.5 times past 12 months’ revenue, Hall says. So if an agent brought in $200,000 in gross commissions, the sale price would be $300,000.

Because the buyer of a business is likely to be an agent who doesn’t have $300,000 lying around for acquisitions, the seller probably will work out an arrangement whereby the buyer repays the seller gradually, from the future revenues created by the seller’s book of business.

That means that once an agent has gussied up the business for sale and found a buyer, the seller’s work isn’t over. To make sure the buyer retains the seller’s clients, it’s wise for agents to stay on for a period of months or years to smooth over the transition.

In the February issue of Real Estate Broker’s Insider, Hall explains how to help agents prepare their business for sale.

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