Real estate can be a fantastic career. You’re not punching a time clock, sitting all day at a desk, and you can control your income if you know what you’re doing. So, what are the requirements or what should you know before you take the leap and get that real estate license?
It’s not an easy money job.
Often someone considering real estate is looking at the commissions charged to sellers. They may see as much as a 6% commission, and that’s $12,000 on a $200,000 sale. Wow! That’s good money, or it would be if you got that much.
First, most deals are split between the brokerage that lists the home and another brokerage that delivers a buyer ($12,000/2 = $6,000). If you’re working for a franchise, there will usually be a franchise fee taken off the top of every deal, which can be as much as 7% of your broker’s half ($6,000 – $420 = $5,580).
Then, you and your broker split based on your negotiated deal. This figure varies a lot, but for most new or inexperienced agents, it’s a 50/50 split ($5,580 / 2 = $2,790 for you).
There are costs of doing business.
A brand new agent who doesn’t have a bankroll should consider signing up with a brokerage that pays some of these expenses for them:
• License and renewals
• Continuing education
• Errors and Omissions Insurance
• Marketing costs; business cards, newspaper ads, listing materials, etc.
• MLS, Multiple Listing Service, fees
These amount to thousands of dollars every year, so it is one of the primary reasons for a high new agent failure rate. They don’t make the big money they were expecting, and the costs drive them out of the business.
Your weekends are toast.
No, you do not have to punch an employer’s time clock, but you do have to meet your customers’ and clients’ needs and expectations. Most of them are working for a living, so they will want to meet and check out homes on the weekends. If they’re going to sell their home, they will want you there on the weekend to interview or to start the listing process.
Then there are those pesky open houses. You have to plan them, advertise them, and then man the home to show it to every potential buyer you can get through the door. Those are done on weekends too.
You’re a business and need to act like one.
The IRS has made a particular classification for real estate that allows most agents to be independent contractors, not employees of the brokerage. That is an advantage, as you can operate as your own business and write off certain expenses like business-related mileage.
Being in business for yourself requires that you keep the proper records and track your expenses for your tax return. You will also likely have to make quarterly tax deposits, so you’ll need to be disciplined about holding back money out of every commission.
Shop for the best brokerage for your needs.
You’ll need to affiliate with a brokerage where your license is held. You’ll have choices, as the broker doesn’t have a lot of overhead to get you going. You’ll already have your license at that point, and they usually just give you a desk in a corner somewhere and tell you to go out and get business. If you do, they’re happy; if you don’t, well, you know.
Your commission split can be negotiated but is usually based on the services provided by your broker. Remember those costs of doing business listed above. The more of them the broker pays, the lower your split. If you need a lot of help or education at first, it is often worth a lower split to sign with a broker with an excellent training or mentor program.
Don’t rely on your broker for leads.
Often you’ll get a chance with a broker to take “floor duty.” That’s manning the office for any walk-in business. If there is a lot of that, you can get a few deals, but don’t count on that source. You need to get out and hustle your business.
Hand out business cards everywhere. Meet people and network. One agent got his very first deal talking to the person next to him at Denny’s during breakfast. Go to real estate investment clubs, join local groups and network with business people around the area. Ask everyone you know well to send you referrals if they meet or talk to anyone interested in buying or selling real estate.
If you can, set up your website. You can do this at a very low cost, or even free. It’s not going to deliver business right away, but people these days like to check on a company on the Web, so it’s good to have a presence.
Set up a free Facebook business page, and you can use that in place of a website. Participate in real estate related online discussions and groups on Facebook, Twitter, and LinkedIn. Help people out by answering questions.
The good news is that real estate is a great career.
Now that you know some of the things that contribute to the high failure rate of new agents, you can plan and set up your business to avoid them and succeed. You can even start out parttime if necessary to prevent financial shock. Real estate is fun, and it can be gratifying.
One of these days you could be featured in one of those articles about local real estate top producers.