Protect your investment by uncovering agent concentration risk, normalizing owner production, and verifying state license compliance before you close.
Find Real Estate Agency Acquisition TargetsAcquiring a real estate brokerage in the $1M–$5M revenue range requires scrutiny far beyond standard financial review. Revenue is transactional, agents are mobile, and owner-dependence can silently undermine post-close performance. This guide walks buyers through the three critical phases of due diligence specific to residential and commercial brokerage acquisitions.
Normalize earnings by separating owner production from brokerage split income and identifying true recurring revenue streams.
Remove owner's personal GCI from brokerage revenue. Only commission splits retained by the brokerage, desk fees, and referral income represent transferable business earnings.
Request agent-level production reports for 3 years. Flag if top 3 agents represent more than 40% of total GCI — a key post-acquisition attrition risk.
Identify property management contracts, referral network fees, and commercial leasing income. These recurring streams support higher multiples and reduce cyclical revenue risk.
Confirm the brokerage's regulatory standing and assess liability exposure from E&O claims or state commission actions.
Confirm the qualifying broker license is current and transferable or that the buyer holds an active broker's license required by state law to operate post-close.
Review 5 years of Errors & Omissions insurance policies and claims. Unresolved claims or premium spikes signal compliance exposure that can survive an asset purchase.
Verify all producing agents have current signed ICA agreements. Missing agreements create misclassification liability and weaken non-solicitation enforceability post-close.
Evaluate agent roster stability, owner dependency, and infrastructure that supports a smooth ownership transition.
Interview top 5 producing agents confidentially if possible. Assess tenure, loyalty to the brand versus the owner, and openness to staying under new ownership.
Map daily functions the owner personally performs — recruiting, compliance oversight, agent coaching. Gaps signal transition costs and earnout risk if not addressed.
Audit CRM, MLS memberships, transaction management software, and office lease terms. Transferability and cost structure directly affect post-acquisition margins.
Verify the Real Estate Agency acquisition qualifies for SBA financing, the purchase price is supportable by the verified cash flow, and the deal structure protects the buyer's downside.
Confirm the Real Estate Agency meets SBA 7(a) eligibility requirements: the business is for-profit, U.S.-based, within SBA size standards, and the buyer meets personal financial requirements. Some industries have specific SBA restrictions — verify before LOI.
Model verified normalized EBITDA against projected SBA loan payments at current rates. A $1M SBA 7(a) loan at 10.5% over 10 years costs approximately $13,000/month. The Real Estate Agency must generate at least 1.25x debt service coverage after a market-rate manager salary to pass underwriting.
Confirm the seller note is properly subordinated to the SBA loan and goes on 24-month standby as required by SBA rules. If an earnout is included, define exact measurement metrics, time period, and dispute resolution process before signing the purchase agreement.
Before signing a Letter of Intent, request these documents from the seller. Missing or incomplete items are a red flag — not a reason to proceed without them.
In most states, yes. The qualifying broker of record must hold an active state license. Buyers without a license typically must hire a licensed broker of record or partner with one as a condition of closing.
Independent brokerages trade at 2–4x seller's discretionary earnings. Higher multiples apply when recurring revenue exceeds 20% of total revenue and no single agent represents more than 20% of GCI.
Agent attrition. Top producers are independent contractors with no contractual obligation to stay. Earnout structures tied to agent retention and GCI performance are the primary tool buyers use to mitigate this risk.
Yes. Real estate brokerages are SBA-eligible businesses. Most deals are structured with SBA financing covering 75–85% of the purchase price, with a seller note or equity injection filling the remaining gap.
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