Has anyone here every sold their residential real estate brokerage (or even purchased someone elses brokerage)?

If so, can you provide some insight into:
- the key items that drive valuation and subsequent purchase price,
- what items are typically included/excluded in the sale (and under what type of conditions). For instance, I would assume retention is addressed somehow since the acquirer would want to make sure that goodwill / staff are effectively transferred without too many people jumping ship.
- if there is a "standard" multiplier that can be utilized to determine if the selling price is good, bad, OK, etc.

Thanks

This post may be helpful in the Business Brokers category.

I assume from the nature of your questions that you are the prospective Purchaser ? Several years ago, I attempted to purchase the Brokerage I was then working for. I wrote a detailed Letter of Intent with the help of my Attorney and a CPA Friend. Just like a good BarberShop; the value is in the people and the Good Will of a Real Estate Brokerage. It's not a "Bricks and Mortar Business".

I studied a few books on business valuation like the Handbook of Small Business Valuation Formulas and Rules of Thumb by Glenn Desmond and John A. Marcell. They can give you ideas on how to use:

A MONTHLY NET COMMISSION REVENUE MULTIPLIER; or

ANNUAL OWNER'S CASH FLOW MULTIPLIER;

NET EQUITY VALUATION; or

Et Cetera, Et Cetera BUT; I wound up just using my own formula based upon my assessment of the value of CURRENT LISTINGS; PENDING TRANSACTIONS; CURRENT MARKET CONDITIONS; and then applied a diminishing asset factor based upon the likelihood that properties on the books would actually close; and for Good Will I rewarded the Sellers with a diminishing % of Gross Profit over the next 10 years. And I refused to pay to acquire any Debt ! The biggest factor in Valuation is the Motivation of the Seller. Every Owner has a piece of themselves rolled up in that Business; but often, when they depart the scene, there is no residual value left.

In the end, pride got in the way and My Sellers simply closed the doors and I created a new Agency from scratch. It was a good exercise. I don't think any formula more than 18 months old will apply in this market ! Good Luck.

real estate brokerages are worth next to nothing unfortunately unless you have solid value. MOST brokerages are just a small office with some independent contractors that could leave at anytime, very few want to but that type of company

I own a small brokerage in Orange County California, and it is hard to create "value". One thing that helps is software you actually own. For example different types of CMS or databases are a huge help and build value.