Depending on who you ask, cobroking means working with a cooperative broker or a competing one. In either case, it’s usually used when agents from two or more brokerages are involved in a deal.
Most agents will work with another broker especially a motivated, ethical one. “No-cobrokers” will tell you there are too many lazy/unethical ones out there but a good agent knows how to deal with those issues. It’s really all about the money. A larger future commission is just more valuable to them than a smaller commission now.
There’s always a risk to wait. Most clients want a timely resolution and will fire an agent who doesn’t perform. Market conditions can change for the worse – and yes, for the better. But upward cycles take a while to gain traction while downward ones seem to come out of nowhere.
I could go on and on about why working with other brokers serves the client better, but any agent who doesn’t cobroke has heard them all before – and isn’t convinced. So let’s look at some data.
This data comes from a regional brokerage and spans an 8 year period. Forty percent of their revenue comes from deals involving cobrokes. Of the total commission available for the cobroked deals, the house captured 47%.
According to a survey by a business brokerage, 90% of agents who responded said they worked with other brokers. The percentage of their total deal volume attributed to cobrokes amounted to 5-15%. So from what data is available, this brokerage is quite cobroke friendly.
The brokerage who conducted the survey also put a system in place to encourage cobrokes. Sales increased by 25%. That’s where the 25% value comes in for the next chart. It shows the change in revenue under the following conditions:
- Lost revenue from refusing to cobroke 25% of the time, i.e., the brokerage refused to cobroke on 25% of the deals on which it had the opportunity to do so
- Waiting out 25% of cobroked deals, i.e., waiting to get the full commission from a deal they cobroked on
- Revenue gained from increasing cobroked deals by 25%, i.e., revenue the brokerage could have captured if they had cobroked an additional 25% of the time
I have no figures as to how many deals were lost because an agent didn’t cobroke – or how many of the cobroked deals they could have captured the full commission on if they had waited.
But you can play with these numbers all you want. The only sure thing is the amount of revenue lost if this brokerage had refused to cobroke on any percentage of the deals it did cobroke on. Assuming they would have received full commission if they waited is just that – an assumption. And you know what they say about assuming…
The point is, waiting isn’t much of an income strategy but actively seeking cobrokes is.