Does a brokerage have any resale value or are you selling a phone list?

Question

First rental is coming so I'm not doing this, but a family friend is winding down a 22-agent brokerage and asked what it's worth. I said I had no idea and went looking. What I found is that people buy brokerages on a multiple of trailing profit, and profit here is the retained share of commissions from agents who can all leave with 30 days notice. The agents own the client relationships. The listings follow the agent. So what is the buyer actually paying for? If the answer is the roster, and the roster is contractually free to walk, that's a strange asset. Is there an earnout structure people use that ties price to agents who stay?

hannah_west29 · Answer

You've described why these trade at low multiples compared to a business with contracted revenue. What the buyer is paying for varies: the MLS market share, the brand and phone number in a specific town, the pending pipeline that closes in the next 90 days, occasionally the office lease if it's below market. On 22 agents I'd want retained dollars per agent for three years running and a tenure table, because a roster with an average tenure of eight years is a different asset than one averaging fourteen months.

Earnouts tied to retention are common in the structures I've read about, usually a holdback released against agent count or retained revenue at 12 and 24 months. The fight is always over what counts as an agent leaving for cause versus the buyer mismanaging them. Any actual deal needs a transaction attorney in that state.

chriswalton8 · Answer

The pending pipeline is the only part of that I'd pay full price for, since it converts to cash without anyone's cooperation. Everything else is a bet on 22 people liking their new owner.

Does a brokerage have any resale value or are you selling a phone list?

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