REAL ESTATE LICENSING
Should I Become a Real Estate Agent?
Are you considering real estate as a career or a gig to earn extra cash? After all, over 1.5 million Realtors and over 2 million real estate licensees in the US have become rich working as a real estate salesperson. Right?
Well…not precisely. But it is possible to earn a decent living as a real estate agent, whether working full-time or making extra cash part-time.
Benefits From a Career in Real Estate
Scalability. It is your business and it can be scaled to suit your personal goals. Whether your goal is to create a lucrative career or perhaps a part-time gig for extra money, it’s your choice.
Unlimited income potential. That might not be entirely correct; individuals in the residential real estate industry can make 7 figure incomes. But that is a rare exception, not the rule.
It’s a social job. Real estate agents constantly pursue leads and meet potential clients. To succeed, agents need to become a part of the community through volunteer work, school functions, and sponsoring various fundraising events.
Set your hours. Agents aspiring to the highest incomes possible will work incredibly long hours. Those agents make up about 10% of the agents in any office. Many part-time agents are happy to have the opportunity to work only a few weeks per year. Their goal is to have extra money for vacations or Christmas gifts.
Independence. If you work for a traditional office broker, you will likely be classified as an independent contractor. There is no need to sit at a desk from 9 to 5 every day, and no supervisor will hover over your daily routine. It is an excellent field for individuals who can work without much supervision or direct oversight…however, you will be required to attend regular sales meetings.
Real estate transactions occur in good and bad times. Anyone who remains in the real estate field for more than ten years will likely experience a downturn in the market. The good news is that real estate is selling in good and bad times.
What's the Downside to Becoming a Real Estate Salesperson
It’s Hard Work. Earning a living selling real estate is hard work. Do not underestimate the skills necessary to be successful. The ability to communicate with potential clients effectively is paramount. Today, agents spend hours each day looking up sales, creating marketing materials, and setting up CRMs, just a few of the daily functions. Because all listings and forms are online, a new(er) computer will be helpful, and the desire to become computer literate will make life much easier. There is a lengthy learning curve, but it just requires dedication.
Organization. It would help if you were organized and able to keep track of legal documents, meetings, and tasks in multiple listings.
No regular paychecks. The work is commission-based, and you must learn to live without knowing when your next closing will happen. If you don’t sell, you don’t earn. I’ve been in the business for over 40 years and clearly remember my first year in the industry. It was a struggle for about eight months.
Timeclocks. You will not be required to punch anyone’s time clock; however, you never get to punch out once you start as a real estate salesperson.
How Do I Choose the Right Brokerage?
Types of RE Brokerages. The National Association of Realtors states that real estate brokerages fall into five basic categories. I’ll focus on three of them that make up most offices. Deciding which brokerage is the best fit is much more than asking a friend where they work. If your decision is wrong, it will take significant time and effort to change your office…not to mention expenses (fees to the local Board of Realtors, changing all of your marketing materials, web page, etc.). The best advice is to take a few hours, in the beginning, to research which office best suits your professional goals and needs.
Traditional. Each agent is an independent contractor at these brokerages and will be asked to sign a contract before joining the office. Many topics are covered in the agreement, not the least of which is the commission split. The commissions paid on each transaction are split between the broker and the agent. Splits range between 50/50 for new agents and up to 90/10 for experienced agents (90% of the commission goes to the agent). Your split will be determined by your sales experience and experience as an agent.
100% Commission. In this office, the agent is also an independent contractor. Some brokerages allow the agent to keep 100% of the commission; however, there are no free lunches (so to speak). In these offices, the agent is responsible for all their expenses. These can include desk fees (basically rent paid to the broker to occupy a desk), marketing fees, transaction coordinator fees, software fees, and possibly Errors and Omissions insurance. These fees will likely be due monthly whether you close a transaction. Generally, this is not the best choice for a new agent.
Traditional with Cap. Some traditional offices offer a hybrid of the two. In these offices, the commission split might be 70/30 until the broker’s fee exceeds a specific dollar amount (say $35,000). At that point, the agent goes on a 100% plan.
As with all of these variations, the agent must close a deal to earn any commission.
Other Differences to Review
Business Structure
National Franchises. Working for a national franchise such as Coldwell Bank, Berkshire Hathaway Home Services, and Keller Williams has some significant benefits. Each offers national name recognition and flexible and instant credibility, which can be a big plus for new agents hoping to grow their business. In addition, they each have a strong internet presence.
Independent. Independent real estate brokerages comprise almost 50% of the country’s offices. New agents in these offices may have more access to individualized training and less “inside” competition.
Virtual Brokerage. Indeed, the two significant advertised benefits of working for a virtual brokerage are better commission splits and lower desk fees. Getting your hands on any empirical evidence is difficult, but it should be accurate. If you are one of those agents who enjoys the social benefit of working in a large office, it is doubtful that you will find a virtual office attractive.
Things to Discuss with Your Prospective Broker
E&O. Errors and Omissions insurance provides comfort if the transaction does not go well. The most critical question about E&O insurance is who pays. The broker offers the policy in many offices and then collects a portion of the premium from agents through desk fees or a charge against the agent’s commission split.
Advertising. Will the broker help with marketing expenses such as For Sale signs, business cards, mailers, etc.?
Training. Training is critical for new agents. The forms required for each transaction can be very complex. Many offices offer regular training sessions that cover the essential issues agents may face.
Lead generation. The lifeblood of real estate sales is lead generation. Does the broker share leads from the internet or “walk-ins?
Personal website. Does your broker provide a free website? It is a reasonably typical benefit given by brokers; however, you should ask the question.
Email. Does the broker offer a company domain-based email address? It’s not critical, but it may provide some credibility.
Steps to Getting Your Real Estate Salesperson License
Real estate agents always work under the umbrella of a licensed real estate broker. Eventually, you may want to become a broker, so you must meet additional educational and experience requirements. When you have acquired your broker license, you can work independently and hire sales agents to work for you.
The Steps Are:
- Completing all the education requirements. The first step is to contact your state’s real estate licensing department. They will be able to delineate the criteria for salespersons and broker’s licenses. To save time, companies such as The CE Shop have licensing programs for almost every state and can advise which courses to take and whether classes you may have taken will qualify for credit. The courses are online and can be completed at your own pace. In addition, they have exam prep materials and can guarantee passing the exam.
- Passing the state exam. As previously mentioned, it is worthwhile to take an exam prep course. Just knowing the material may not be enough. Exam prep courses give the examinee insight into the material emphasized in the exam and how the questions are worded.
- Passing the background check. Always keep in mind that passing the exam does not guarantee a license. There may be a background check. The background investigator may ask for clarification if you have items in your background (i.e., delinquent child support and unpaid judgments).
- Paying the licensing fees.
How Long Does It Take to Become a Real Estate Agent?
It depends on the examinee.
Each state has specific and unique requirements to earn your real estate license. The condition that will take the most time to complete is your pre-licensing education, which varies in the required hours. California, for instance, requires 135 hours of pre-licensing instruction. If you were to complete an online course with scheduled classes, that would take you slightly more than a month. On-demand and home-study course options might take you longer or shorter, depending on the time you can dedicate to the coursework.
The goal should be to complete the course requirements as quickly as possible. And then, while all the information is fresh in your mind, take the licensing exam as soon as possible. Do yourself a favor and take an exam prep course (from TheCEShop.com).
Getting a date to take the licensing exam may take 4 to 6 weeks.
If passing the background check takes another few weeks, getting your license will take almost three months from beginning to end. The good news is that you only need to do this once. i
The Bottom Line: Should You Become a Real Estate Agent?
If you enjoy hard work, are a self-starter,
enjoy meeting people, and are not afraid of computers, then a career in real
estate might be right for you. If you sell enough properties, you can earn
a very comfortable living.
A career as a real estate agent or broker will
be challenging and financially rewarding. You might decide to work strictly
with residential properties or pursue one of the other fields of the real
estate industry (lending, property management, appraisal). The learning curve
is lengthy, but it can be rewarding with persistence and determination.
One last observation about starting a
career in real estate. Forty years after
starting my career, I still remember my first year. I had many second thoughts and nearly quit
the field. It was after about eight
months that something clicked.
Suddenly, the deals started closing regularly. At that point, I knew it was going to be my
career.
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