How to Sell Your Business and Actually Retire from Real Estate

How to Sell Your Business and Actually Retire from Real Estate

Imagine sipping on a hot cup of coffee cuddled up in a blanket, hearing crashing waves in the distance.  After a full night’s rest, you take a deep breath of fresh ocean air and relinquish in the tranquility--a moment you have earned after many years of sweat equity in the residential real estate business. This is the ultimate destination: peace. It’s peaceful because someone else is handling your real estate legacy, when you decided to retire. 

Aside from typical ideologies of IRA or 401K investments, owning investment property, and basic retirement planning from a financial advisor, information that comes up after googling “retirement strategies for Realtors” is sparse. So we decided to tackle the topic as a brokerage, and find solutions for our agents not only to help them retire, but to retain business for our company that could be lost if we weren’t thinking ahead.

According to NAR, the median age of all Realtors is 55. As real estate is a popular 2nd, or 3rd career for many, full time agents in their 50s and 60s are most of the time far from actually retiring. Over the years, we have seen occupations dissipate with the tech boom, but Realtors continue to ride the wave and are more valuable than ever.  

If a future of serene moments like the one I described above are on the horizon, you may want to start thinking about it more seriously, whether you’re 25 or 75. There is so much more to it than the rough outline below, but timing, identifying the right candidate, systems, processes, valuation, and brokerage involvement should be considered when selling or buying a book of business. 

Timing 

The question of timing can typically be answered by asking yourself “why?” Maybe you’d like to move to be closer to family. Maybe your spouse’s job is taking you across the country, unexpectedly. Maybe you’re tired of the daily grind and keeping up with this fast-paced, ever-changing industry. Any way you look at it, start planning ideally two to three years out from your target retirement date. If you haven’t been planning so far in advance, all is well. We have a working RLAH Retirement & Transition Timeline our agents can adapt and follow, and time frames are totally amendable. As far as the business transition goes, there are three key dates to have in a structured agreement: an initial closing date (when the transition process begins and business seller / buyer are working hand in hand), the actual retirement date (when the retiring agent leaves), and final closing date (when any monetary fees back to the retiring agent commence). 

Identifying the Right Candidate

The most difficult and crucial part of selling a book of business is figuring out who you will be selling it to. Do you have a child, niece, or nephew that is showing interest in real estate? The most common type of predecessor is a family member, but there are plenty of non-family member business transitions that take place. First and foremost, choose to align your business with someone who has values and work ethic that mirror those of your own. If you don’t know where to start, ask your broker or leadership team for advice on where to start. No one else knows agents in your company like they do.

Systems & Marketing

Get a CRM (remember, any lists in CRM can start with a simple Google Sheet). Start tracking where your deals come from. Additionally, begin recording past clients’ and sphere birthdays, houseaversaries, referrers, children and pet names. At RLAH, we have a proprietary technology platform which includes regular, consistent content for sphere marketing. Start marketing regularly, 2-3x per month to your CRM database, perhaps beginning with the most simple channels: direct mail, social media, and email. At least 18-24 months out from the target exit date, start a cross marketing campaign to introduce your successor to everyone in your sphere. Start integrating that person visually into all aspects of your business, and presenting them in ways so your sphere gets to know them. This begins building trust. In order for people to utilize someone’s services, trust is more important than ever before. We are a reviews based society. We have an entire idea reel on how to integrate and introduce. 

Document Processes

We have created a “Realtor Business Transition Questionnaire” to help an agent begin documenting their processes. How an agent has gained loyalty and referrals are something you’ll sell along with your book of business. Remember, saleable business metrics apply: are these processes repeatable, scalable, and consistent?  Our company accounting department can easily help our agents access records of  their monthly bills for accounting ease, as someone purchasing a book of business may wonder how much money a business costs to maintain marketing-wise. 

Valuation

The value in any business is typically tied to the client. The goal is retaining as much of that client sphere beyond the target retirement date, and to continue to generate referrals. Let’s keep things simple and say there is perfect harmony. Your sphere has come to know and trust your successor, and you’re ready for the person to take over. Some agents structure a deal so much as a referral fee for a period of time, or a lump sum, or both. Just like a real estate contract, no two saleable business contracts are alike. Ideally, a contractual agreement would have started when the successor was introduced. We provide a spreadsheet, RLAH Real Estate Business Valuation that tracks total volume, closings, average sale price, income generated after expenses, and source of business accounting over a five year period. This can help determine a monetary value for a book of business.

Brokerage Involvement 

As independent and isolating as real estate can be, it is good to know what your brokerage’s experience is in developing groups or teams, or helping agents transition out of the business. Time savings beginning with ideas for marketing content and easy to use systems, are all simple things a brokerage can do to play an integral role. Your brokerage should be able to help source a contractual agreement, and provide a plan for marketing. If your brokerage doesn’t provide these tools, consider aligning yourself with one that does. This year, a handful of agents we have recruited came over to RLAH for this very reason. We realize a business transition is a four-faceted win. The clients win, the Realtor buying the book of business wins, the agent retiring wins, and the brokerage wins by retaining future market share for both the buyer and seller...

Think of Growing Your Own Sphere

On the other side of the coin, if you are thinking about buddying up to a seasoned real estate professional or someone you may look to as an industry mentor, there is tremendous opportunity out there for a younger generation of agents to learn and grow from tried and true practices.  Does the business you are considering purchasing have the qualities above? We realize nothing is ever perfect, however, if you are considering purchasing a book of business, you definitely want to keep in mind the items above.  If you are looking to grow, purchasing a book of business could be a part of your projected business plan. Have coffee with someone you might think you could work well with and propose the idea to them, as you never know where it will go. Personally, I’ve had a few agents approach me over the years about taking over their book of business when they are ready to exit, so the opportunities are out there -- you just have to find them and structure them right.