You Just Passed Your Real Estate License Test. Now What?
I remember the feeling. Finishing the last question on my exam to qualify for my real estate salesperson license, and hitting “Submit”. Moments later, I felt the great sense of relief finding out I had passed. But, now what?
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I know there is tons of debate on whether or not you should get your license as an investor, but I’m not going to argue that point in this article. Let’s just assume that you are on the side of the debate that believes it is worth it.
I also want to mention that things may be a bit different from state to state, however, I believe the overall arching concept is true. In the state of Michigan where I have my license, after passing the exam….
The very next thing you need to do is find a “sponsoring broker”.
What is a “Sponsoring Broker” in Real Estate?
A sponsoring broker is someone who has their employing broker's license. An employing broker is an agent with years of experience, who has taken additional coursework and tests to prove their knowledge of real estate laws and practices. As your employing broker, they are responsible for your actions. They also help guide you through your first years as an agent.
In exchange for this, you pay to work for them. So how much are they going to charge you?
(Side note: I've seen the term "broker" and "sales agent" mixed together, but here in Michigan, there is a massive difference. A broker is the head of the office, a sales agent is a licensee (the exception being lawyers.)
Real Estate Brokerage Cost Structures
There is really no point in discussing “how much” you are going to pay since there is a virtually unlimited amount of prices, but the key component you will need to consider is what structure do you want? There are two primary structures a sponsoring broker uses to determine their fee.
- Flat Fee. As the name implies, you pay your broker a flat amount every month. It’s a fixed number so your monthly planning for ‘cost’ is much easier.
- Commission Split. This option really varies from broker to broker, but a popular one split is the 70-30. Meaning, for any commission you bring in as an agent, 70% goes into your pocket, and 30% goes into your broker's pocket.
What is the best path for you? If you plan on selling lots of houses and making a core component of your business “revenue from commission,” then I’d just pay the Flat Fee. If you obtained your license more for the freedom it allows and access to the data, then I would go with the Commission Split option as that usually carries no flat fee or one considerably lower than the Flat Fee option.
Real Estate Brokerage Education Services
This may seem out of place, but getting your real estate license does not teach you anything about how to “do real estate.” Sure you’ll learn about all the laws and state regulations and requirements… but… how to fill out a purchase agreement? How to run a market analysis? How to work the MLS? How to market/advertise? Forget about it!
If you’re just starting out in real estate, consider the education available to you. Whether online courses, pamphlets, or actual sit-down classes, having access to education should be a factor in your decision. Your broker wants you to succeed (remember, it puts money into their pocket when you do!) so there should be some education options available.
You Are the Interviewer, Not the Real Estate Broker
No two brokers are alike. They all have their own structures and policies. Just like getting multiple bids on a rehab project, the same strategy should be used here. I’d sit down with a minimum of three brokers before making my decision. Brokers are competing for you, so they will be selling themselves and their business to you. You don’t need to sell yourself to them. This doesn’t mean you should walk in without brushing your hair and with food stains all over your clothes, but assuming you show up and conduct yourself in a professional manner, they want you a part of the team (again, they make money off you!)
To this day, I still get post cards in the mail from various brokerages marketing to me to switch from my current broker and go with them. It’s very common place for brokers to compete for agents, so when you sit down with them, don’t be shy! Ask questions regarding their fees, education, and whatever else you deem necessary.
Brand Name Real Estate Brokerage?
ReMax? Century 21? Keller Williams? Do you need to go with a big name company? There is no right or wrong answer to this. Each has its pro’s and con’s. The brand name places are going to have higher fees and such; however, the flip side is they are brand names, so when you hand someone a business card with their name on it, you’ll look much better than someone with a little brokerage that no one has heard of.
I personally am with a little brokerage made up of four people – the broker and three agents. For me, I don’t care about the name recognition. At the end of the day though, if you come across as a caring professional, the name of your brokerage isn’t going to matter. Treat people right and the rest will take care of itself.
Real Estate License Hidden Fees
Paying for the coursework and splitting your commission with your broker are obvious fees, but wait, there’s more! Outside of those, you’ll need to factor in the fees that go with the organizations/associations/groups. For example, I have fees that I must pay to the Grand Rapids Association of Realtors (GRAR). I also pay for access to my local MLS. It doesn’t matter ‘what’ brokerage I am with, these fees are paid regardless.
Point being, when you are setting up your spreadsheets and/or bookkeeping software, don’t forget to add in these numbers when doing your financial forecasting and planning.
Did I Miss Anything?
Did I leave anything out that would be helpful to the person who just passed their real estate license exam? I’m sure I did! Please leave your suggestions below in the comments section. Maybe you have a great question to ask brokers when you are interviewing them? Please share with us all!