It's getting close to the end of 2016 and with US mortgage rates at their lowest in some time, things are looking better than ever for the housing market. A large amount of cities are seeing declining Days on Market even into the winter, while growth forecasts predict continuing 5-6% price increases for the next year at least – as long as mortgage rates hold steady. So why not turn to a career in real estate? Because it's not as easy as you may think to be a successful agent, despite the robust housing market and array of tools that are at agents fingertips nowadays. Read on if you think you have what it takes, and want to find out more. It's not the easiest career, but it can be one of the most rewarding.
What is a Realtor exactly?
In the US a Realtor is someone who is licensed to assist buyers, sellers, landlords and renters in any real estate transaction. In return for their assistance, they are normally paid a commission as a percentage of the price of the property purchased, sold or lease – though rates vary dramatically from state to state and at different brokerages.
Do I need to be licensed?
In short, yes. Although some transactions where people work only for one builder do not require licensing. Licensing is done at the state level, and again varies on the requirements. Some states do have reciprocal agreements however, that make it easy to sell real estate in multiple states.
How many real estate agents are there in the US?
According to the Bureau of Labor Statistics there are currently 339,400 real estate agents and 82,600 real estate brokers across the United States, or a total of 422,000 people currently licensed to sell real estate.
What’s the difference between a Realtor and an Agent?
All real estate agents are licensed, but do not necessarily belong to the National Association of Realtors - which charges dues to agents for exclusive access to tools and technologies and access to discounted personal insurance and health/dental services. They also syndicate Realtors listings automatically to websites like Realtor.com, hold agents to a higher level of ethics and standards, and offer specific training and certification programs. The NAR also advocates politically for Realtors at a national level, and lobbies for home owners and agents' interests.
How many Realtors are there in the US?
The National Association of Realtors reported that as of October 1 2016 it had 1,180,561 members, which is significantly more than the figure above of 422,000. So why is that? The number predicted by the Bureau of Labor is merely a projection based on assumptions, where as the NAR figure is a real membership count of people who are engaged as salespeople, brokers, appraisers, property managers etc. Basically, it's not just Realtor salespeople – it's everyone!
What does the average real estate agent make?
According to the BOLS, the average median pay for a broker/agent is about $43,000 per year. Remember however, that a LOT of Realtors just work part-time to supplement their income. This means that in reality if you are a full-time agent with some experience then you should be making a lot more than this. At my brokerage that I ran, if you weren't billing at least $5K per month then you were considered a part-time agent.
Anything else I should know before I consider getting my license?
The top two reasons I saw agents fail in their first year were that they hadn't saved up enough money to get them through the first 3-6 months with NO INCOME, and also that they weren't prepared to work 7 days a week, every week. This is a job that is 100% commission based so you get out of it what you put into it. Marketing yourself and your services is not cheap, and if you can't advise your clients to walk away from a deal that's bad for them because you NEED the commission, then you don't need to be an agent.
Technology is changing fast, and home buyers and renters don't need Realtors as much as they used to. If you can adapt with the industry however, adopt new technologies and strategies and also build a reputation for yourself as an honest, hard-working agent then you should be fine.
How long does it take to become a real estate agent?
This really varies by state and also whether or not you have a 4-year degree. I had a friend with a degree manage to get licensed in under 2 weeks, which is the fastest I have ever seen and he's a very smart, intense guy. Most states will require between 60-150 hours of approved classes, but most of these can be taken via correspondence course or even online which cuts down significantly on the actual time it takes. For more info on this, contact a local real estate school or state licensing authority.
How much does it cost to become a real estate agent?
There are 2 parts to this, actually getting licensed and joining the NAR and local board of Realtors. These will be based again on state requirements, and whether or not your broker actually requires you to join the board or not. For instance, as a property manage in some states you do not need to be a board member.
But you'll still have costs like E&O insurance, marketing expenses, brokerage fees, the cost of lock-boxes and signs etc. You really need to find out what it is you want to do, where you want to work and who for to answer this question.
What are the consequences if I fail the real estate exam?
Not a problem. I failed first time, then passed again 2 days later. Some states limit the amount of times you can take the test, but most allow you to re-take it within a certain amount of time.
What happens if I practice real estate without a state license?
This is a big no-no. Don't even try it. You could face huge fines, sanctions and even jail time.
What else do I need to become a real estate agent?
As a Realtor you will need to find a sponsoring broker (that's what we specialize in here at BrokerFire.com). You can either do that before you take your test, or after. For new agents, I recommend you find your broker first so you can find out what your actual out of pocket expenses will be. Also, in states like Texas, finding a broker first will actually speed up your licensing time.
What’s the difference between a real estate agent and a broker?
Brokers are also licensed by the state, but generally have more experience, more responsibility and also are actually the ones who sponsor other Realtors so they can practice real estate. The licensing requirements are stricter to get a Broker's license, and you normally need at least 1-3 years experience as an active agent to even apply for a license.
What questions should I ask a sponsoring broker?
These are the main things you should ask a sponsoring broker about:
What commission split do you offer?
Do you offer training and support?
Do you offer access to a CRM or other real estate software?
Do I have to pay my own E&O insurance?
What are your monthly office fees?
Are there also transaction or franchise fees?
Do you provide signs, lock-boxes or marketing materials?
Do you offer leads to agents?
Do I get an office space or desk?
Do you offer phone time?
Getting answers to those ten questions will allow you to make a pretty detailed pro/con list for each broker your interview.
For tax purposes, am I considered an employee or an independent contractor?
There are a few brokerages that actually pay agents a salary, Redfin springs to mind, but most require you to be a 1099 contractor. Personally, seeing as this is a sales business, I would never agree to be on a salary. I'll make more money and SAVE more money on my taxes if I'm on a 1099.
And that's it. Being a Realtor can seem glamorous and fun (which it is if you're successful), but it can be a hard journey getting to that stage. I hope we've shed a little light on what it takes to get to stage 1, and if you follow our blog or social media channels we'll share some more articles in the future about how you can go from being a new agent to a top producer.
And remember, if you're thinking about becoming an agent and want to talk to potential brokers, please feel free to use our FREE job search tool on BrokerFire.com!