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So, You Want to Become a Real Estate Agent? You Must Read This First

Experienced Realtor Sarah Davis answers common questions from people wanting to become a real estate agent. How do you break into the business? How much do Realtors earn? Is it practical to sell real estate part-time?


So you want to become a real estate agent? How much money do real estate agents earn? Can I really sell real estate full time?If you’ve been considering a new career or starting a side hustle to earn extra money, perhaps you’ve thought about becoming a real estate agent.

Being a Realtor is great if you like houses and enjoy working with people, but it’s not always the dream job some imagine it to be. It’s a common misconception that real estate agents earn a ton of money for doing practically nothing.

Selling real estate is more work that you might imagine and, although there are some very successful real estate agents, there are many who struggle just to make ends meet.

From somebody in the business, here’s what it takes to become a real estate agent — and what you should consider before starting down the path to selling homes.

Do you have the time and cash to get licensed?

The first thing you have to do if you want to sell houses is get your real estate license. Go to the website for your state’s Department of Real Estate or Bureau of Real Estate and find a list of approved online or in-person real estate courses. Some people prefer the flexibility of online classes where others focus better out of the house in a classroom. Either way, you can count on studying for at least several months and up to year. Once you’ve finished the classes you can take the state’s official test to become a licensed real estate salesperson. The test isn’t cheap so be sure to study hard before signing up (in California, for example, it’s $60 for the test and $245 for the license).

Where will you work?

New real estate agents almost always work under the supervision of a broker. Real estate brokers offer agents marketing support and legal protections. When deciding where to hang your hat, interview at three different brokerages so you’ll get a feeling of how they work. For example, if you’ll work from home or at an office and who you’ll be working with. Some agents prefer big brokerages because the well-known company names help give them credibility. Other agents like the mom-and-pop shops because they’re more flexible about working from home and choosing your own vendors.

Can you afford the start-up expenses?

Even though you’ll be working under the umbrella of a broker, real estate agents are independent contractors. You may put Coldwell Banker or RE/Max on your business card, but you have to buy those business cards yourselves. Other common expenses include for sale signs, open house signs and a basic website.

Budget about $1,000 for these advertising start-up expenses and as you grow in business you can advertise more. Plan for annual real estate association and board dues as well as membership fees to be part of the local Multiple Listing Service (MLS). Most new agents start working with buyers rather than taking listings. All that house-hunting will mean a lot of gas driving across town.

How are your boundaries?

It can be tough to manage time as a new real estate agent, especially if you have another job or have children.

Showing houses is largely done on evenings and the weekends, so unusual hours go with the territory. That makes real estate appealing as a side hustle or for working parents, but remember that it’s not uncommon for buyers to call up asking to see a property on a few hours’ notice.

I recommend setting boundaries. You can record an answering message on your cell phone that says something like, “Hi, This is Sarah Davis. If you’re calling on a Monday through Saturday from 8am to 6pm, I’m on the other line and will call you back as soon as possible. If you’re calling on a Sunday or an evening I will return your call the next business day.”

Even then, you may have to make exceptions during negotiations. Be prepared.

Okay, so how much can I earn as a real estate agent?

Real estate is a commission-only business. And commission-based based jobs are “feast or famine”.

You can — and will — go months without getting a paycheck. You’ll need to learn how to budget for variable income.

But unlike W-2 jobs, a commission-based job such as being a real estate agent or broker has a limitless income potential. Some agents make over a million dollars a year. You get back in income what you put into it in effort and time. So how much can you really make? Commissions are typically paid by the property sellers and are negotiable by law. Some listing agents get 2.5 percent of the contract purchase price and offer out the same to buyer’s agents, but it varies. For example purposes we’ll use 2.5 percent.

If you sell a $300,000 home, 2.5 percent of the purchase price is $7,500.

Then you’ll have your brokerage split (this is how the broker makes their money for letting you use their offices and branding). New agents typically have to give more to their brokers because they require more training. Let’s say you have a 70/30 split with your brokerage. That leaves you with $5,250.

$5,250 for one house, you’re thinking. Not bad. But don’t forget how long it took to earn that money. Escrows are typically 30 days, and assuming you represent the buyer, you may have spent weeks driving them around all day to look at properties. If you want to earn a modest $60,000 a year, you’ll need to sell an average of one $300,000 house every month.

Can I really sell real estate part-time?

Yes. In fact, I recommend everyone start this way.

The hardest part of building your real estate business is developing clients. It takes a long time. If you dive into real estate full time — putting up all the money for training and start-up necessities — you may find it takes six months to sell your first house.

Selling real estate part-time is a good way to get into the business without going broke while at the same time supplementing your income.

Being a real estate salesperson can also be a great career for mothers of young children because it’s somewhat flexible. You can work from home part of the time (doing emails, making calls, online marketing and other tasks), then have your spouse or a babysitter watch the kids while you go out to showings.

Finally, some people maintain their real estate agent’s license simply so they can buy and sell their own properties and represent a family member every now and then.

Questions? What else do you want to know about becoming a real estate agent? Ask me anything. 

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website RealtorSD.com.

Comments

  1. Hi Sarah,
    Do you have to have a car? In that so you meet clients at a specific residence or do you drive there together like we see on HGTV shows?

    Thanks.

  2. Thanks for the summary. I had always been curious about the broker/agent split. Will probably be looking into this more in the next year or so :-)

  3. Sarah Davis says:

    Good question Kate. Theoretically you could do it without a car but you need reliable transportation. I typically meet my clients at the house and if they want to see more than one at a time they follow me there. This is better in my opinion for several reasons. The first is if you get in even a minor accident with clients in the car your liability is increased. The second is for my own personal safety and the third is that many of my clients have children and need to utilize their age-specific car seats.

  4. Hi Sarah,
    Thanks for the article! This really painted a picture for the many questions I had about becoming a real estate agent on the side. What tools does an agent use to know what similar houses in the market have sold for and how long they have been listed?

  5. Maybe in California will a new agent get a 70/30 split. In Virginia, where I sold houses, and, I would say, in most states the new agent split is 50/50 or maybe 55/45 -agent/broker. Only until the new agent generates (better) sales numbers will the broker allow the split to change. And, generally, you have to threaten to leave to get it (better have a place to go if they call your play).

  6. Sarah Davis says:

    Hi Nick. Most agents and brokers use the local multiple listing service since it’s by far the most comprehensive, however its not free. We pay regular dues in order to have access.

  7. Sarah Davis says:

    Nancy, I agree. Many new agents start at 50/50 but only for a little while or until they reach a certain number of sales, then it tends to get more reasonable ;)