Negotiating a brokerage platform vendor contract is not a daily occurrence for real estate brokerage owners, so we are exploring some key terms within most contracts, and the issues you want to be aware of when negotiating or reviewing such a brokerage platform vendor contract. Last time, I examined the agreement term, ownership of data and technology, and support-related issues. In the final part of this series, we will discuss what to watch out for when negotiating setup fees, monthly fees and termination clauses.
Setup Fees
Brokerage platform vendors often charge setup fees to configure the platform to your brokerage’s branding and workflow needs. These fees can cover a wide range of services and fees, such as license fees, hourly professional service fees, design fees, project management fees and development fees. The more templated your solution is, the lower these upfront costs, if any, typically will be. Conversely, the more custom-designed the solution, the more upfront efforts and costs will be.
Some factors that can impact setup fees include the size of your brokerage (setting up your roster or agent websites may take more time), how much existing content you want to use (see last month’s discussion of data ownership for more on this), and how many MLS IDX feeds are required to power custom real estate brokerage websites. If you are having the vendor create new content for you, then expect to pay for these services as well.
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Regardless of the cost structure, find out what kind of project management system the vendor uses. There are a lot of fast-moving parts to a launch, so staying in sync with your vendor is critical for a successful launch. Ensure you have contractual access to the project management system for the duration of the agreement. Some questions to ask are:
- Is there a task list for things the vendor and the brokerage must do to have a successful launch?
- Do you have a dedicated project manager throughout your setup/launch process as a contact?
- Can you see who’s spending time, and how much billable time, on your website project so there’s no billing surprises?
- Is there a central place for communication on the many tasks that need to get done?
- What does the launch-day process look like from the vendor’s and brokerage’s perspective?
Monthly Fees
Ongoing support, website hosting, data management, platform upgrades and bug fixes are all expenses typically covered by your vendor’s monthly fees. If you’re a smaller brokerage on a semi-custom solution, your vendor may charge a flat monthly fee for your firm. Typically, monthly fees are based on the number of users you have. More than one MLS feed can also increase your monthly costs. Some issues to be aware of include:
- When does monthly billing start?
- How are monthly fees calculated, and on what date? Agents can come and go throughout a month, so it’s worth learning how the vendor charges per user.
- How do I pay for monthly fees: credit card, ACH transfer, check, invoice? And what are payment terms?
- Will nonpayment automatically result in website coming down until the bill is resolved?
Termination
Sometimes a brokerage platform vendor contract can be like visiting a Las Vegas Strip casino — getting in is easy, with moving walkways, escalators, enticing exteriors to lure you in, but it’s a long walk back to the boulevard when you leave. With a brokerage platform vendor contract, sometimes the terms can be a deterrent to cancelling, by design. You can’t get your data out, or your custom platform only works on one vendor’s platform. The psychic cost of leaving can be very high, since you’ll have to recreate your data and restart on a new website. So you’re stuck with a vendor with whom you’d prefer to separate. Not ideal for the long-term prospects of that vendor/brokerage relationship.
The good news is you can plan for your painless termination before you begin. Some terms to consider are:
- Under what circumstances can you terminate for cause? For no cause?
- What are the economic costs of terminating? You may be responsible for the balance of monthly fee payments until the end of your term, so your term’s duration and where you are in that term can impact the separation costs.
- Does the vendor have a contractual obligation to assist with your transition to a new platform (assuming you’ve honored your payment terms)? This means providing you with your:
- Customer data
- Transaction data
- Blog and website content (not the website theme or design unless you’ve paid for that in a custom solution)
- Photography (if you own it or have license rights to it)
- Any other content you or your agents or staff have created
All this content will need to be in a format that’s easily importable into a variety of other systems, such as CSV files. A PDF of all your data is useless! I’ve spoken to brokerages who are held hostage by their current vendor, and suffer below-par service because they cannot get their data out and the pain is too high. Consider this to be a red flag if you cannot reasonably get your data out upon an effective termination of your brokerage platform vendor contract.
As with any advice of this sort, consult with your attorney about your specific agreement. Hopefully this roadmap of real estate brokerage platform vendor agreement terms helps you navigate the negotiation of your next contract with your new vendor, and that it will be a smooth and beneficial relationship for you both!
