Thinking about becoming a real estate agent?
Do you want to make thousands of dollars doing absolutely nothing? Me, too! That’s why I became a real estate agent. Now I just list houses for sale on the MLS and sit back and watch the cash roll in!
(Pro tip: That’s not really how it works.)
A few weeks ago, I wrote about How to Become a Real Estate Agent. In the beginning of the article, I talked about the steps to getting your license, and toward the end, I discussed the qualities you need to become an agent.
Now let’s talk about if you SHOULD think about becoming an agent.
Stop. Let’s clarify something. I’m talking about becoming a real estate agent, someone who works with clients and helps them find and buy houses, as a job. I’m not discussing getting your license — I think you should if you’re an investor. Having your license opens up so many doors, no pun intended. (Ok, maybe a little pun intended.)
Once you become licensed, you are required to work under a more experienced agent for at least two years, and in many states three years. But there are all sorts of ways to “work” for a more experienced agent.
Your larger, nationwide real estate firms are going to want agents who plan on working full-time as an agent. Smaller brokerage firms may allow more flexibility in how much business they require, if any.
Before you start your coursework to become licensed, find a brokerage where you can be the kind of agent you want to be.
So let’s get back to whether you should think about becoming a real estate agent.
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Becoming a Real Estate Agent: What Characteristics Do You Need?
While thinking about becoming a real estate agent, I did not appreciate all that real estate agents are expected to do. This is probably because I found some of the worst real estate agents on the planet to work with. After paying cash for a home, I contacted the agent who represented me and asked her to let me know if she came across any more of this type property. Her response? “Well, I can sign you up to get emails.” Well, don’t strain yourself. I’ll go find an agent who likes it when their client pays cash and comes back multiple times.
There are a lot of little things — and some pretty big things — that agents do behind the scenes, including coordinating schedules to make a contract work for all parties, making sure documents are signed and submitted on time, and chasing down weird little bits of information and documentation that are different for every single transaction.
The BEST real estate agents hustle.
They’re always looking for more clients to help buy or sell a property, they’re clever when it comes to marketing, and they are always on the lookout for new ways to get business.
Think about your local market. Is there a face you see ALL THE TIME? On billboards, shopping carts, yard signs, web site ads, and newspapers? That agent spends a significant amount of money on advertising. That agent also has a significant client base.
The BEST real estate agents are knowledgeable.
They’re experts on their local market. They can recommend the best title companies, the best home inspectors, and a great lender, lawyer or any other professional you would need during the buying or selling process.
This isn’t the type of knowledge you get out of a book — this comes from experience. I know a newer agent in my area who has lived here his whole life. He KNOWS this area. He knows the good towns and the good parts of those towns. He knows how to get places and what developments aren’t quality. He’s only been an agent for a short time, but his knowledge of the area puts him leaps and bounds above other agents who may have had their license longer, but aren’t as familiar with the area.
The BEST real estate agents do this full-time.
You have to be able to show a property to your client when it fits their schedule. If they’re only available after work and on weekends, guess when you work? If they’re here for a whirlwind house-hunting trip, guess what you’re doing for the next 24-36-48 hours?
It’s difficult to do this while working a full-time 9-5. I have a super-lenient boss who understands real estate transactions and is willing to work with me when I have a closing or a showing or an inspection (thanks, Josh Dorkin!) but I don’t like when the two overlap. I also don’t have many clients, and those that I do have are friends who know this isn’t my full-time gig. (I also don’t do it to support myself; I just really love real estate.)
Being a successful real estate agent isn’t something you can do part-time. But when you’re first starting out, being an agent is sort of a Catch-22. You only make money when you sell a property, so you need to keep your day job until you can support yourself with your real estate earnings. But you need to be available at the drop of a hat — especially in a hot market where properties go under contract instantly — to show houses to your clients.
Notice I said a SUCCESSFUL real estate agent is full-time. When becoming a real estate agent, you can certainly do this part-time, but to truly be successful, you have to be available all the time.
The BEST real estate agents treat this like their own business.
Thinking about becoming a real estate agent? Better have an entrepreneurial spirit. There are very few salaried opportunities for real estate agents. The traditional arrangement is that you work under a more experienced broker, and you actually pay them when you sell a property. The amount you pay them varies — and typically decreases as you sell more and more.
You have to go out and get your own business. You may get a referral here and there, but the crux of your business will be a steady stream of new business, especially if you are working with retail clients.
Advertising, networking, more advertising and more networking is how that happens. The best agents are aggressive — they have to be, because there is so much competition amongst agents.
Real Estate Agent Duties
While thinking about becoming a real estate agent, remember that you’ll have responsibilities to your client. You have a fiduciary responsibility to hold their best interests above your own — if they find a property they love, but the seller isn’t offering the type of commission you want to earn, you can’t steer them in another direction.
You are required to work toward getting the highest price/best offer for your sellers and the lowest price/best offer for your buyers. You advise your clients and give as much information as you can about the property and any factors that may affect it.
You have the duty of honesty. Pretty self-explanatory — don’t lie, misrepresent or defraud your client. Really, this should be a no-brainer in all aspects of your life.
You have the duty of accounting, which means you must timely and accurately account for all money received and provide records of such upon request.
You have the duty of confidentiality, obedience, and loyalty. Meaning, you keep their information secret, obey their directions as long as they are legal and ethical, and hold their interests first.
In addition to all the legal stuff, your day-to-day duties are always different, yet always the same. No two properties are the same, so no two transactions are the same. But they have similar components. Let’s look at agent duties when you are working with a buyer.
Confer, Then Translate
If you’re working with retail clients, you’re now going to have to translate what they are asking for and set realistic expectations. A client looking for a 4-bedroom penthouse apartment overlooking Central Park with a budget of $150,000 isn’t going to find too much.
I like to ask my clients questions about their minimums. What is the minimum number of bathrooms they can have in the house? What’s the minimum number of bedrooms, square footage, yard size, garage space, etc.? Next I ask about their max. What’s the maximum amount they want to spend? What’s the maximum monthly payment, etc.?
Then I plug those basic parameters into the MLS and see what shows up. Realistic expectations will have a longer list of results, while unrealistic expectations may turn up nothing. If the list is too long, then we can narrow down further. “I’d like 2 bathrooms, but 3 would be even better.”
Show Properties: MLS Listings
After you have narrowed down what your client is looking for, run a list of all properties that fit their needs and let them browse. My local MLS (Multiple Listing Service) allows me to send listings to a sister site called MySite. There, my client can view all the pictures from the MLS, read the basic information from the listing sheet, and categorize the properties from the Inbox into “Favorites,” “Maybes” and “Trash.”
Once they’ve sorted the listings, I go through and double check to make sure they have the criteria my clients have said they want. Retail clients can have a difficult time getting past the pictures, and sometimes agents try to highlight a feature in a way that makes it far more attractive than it happens to be in real life. Think wide-angle lens.
Your client may have said they want a house with 3 bedrooms on one level because they have small children. That won’t stop them from adding a home to their list of must-sees that has 2 bedrooms upstairs and 2 bedrooms downstairs. A quick check of the listing sheet can save you a half hour of showing time.
A big part of becoming a real estate agent is learning to correctly read people. While you are showing properties, pay attention to what your client is really after. Body language is so much more telling than what they say to you.
When becoming a real estate agent, your duty is to your client and helping them get the best deal. Knowing why an owner is selling can help your buyer make the best, most attractive offer.
Knowing your market comes into play here yet again. Knowing what aspects of the contract can be negotiated, and then negotiating them for your client’s favor — or for the seller’s favor if they aren’t important to your client — is a mark of a great negotiator.
You’ve heard the term “real estate is local.” Local is relative. It isn’t always a city, or even a neighborhood — sometimes it’s block by block. But not all agents get this and may use inappropriate properties to arrive at an initial asking price for a home.
Explain the Contract and Procedures
Buying a home is not something regular people do frequently. They don’t know the steps, and if it’s been a few years since their last purchase, they have probably changed anyway. You can bet the contract has changed.
There is an excellent contracts class available in the Denver area. The class covers the best ways to fill out every real estate contract — and at the end of the class, you take home a reference binder with different sections for each different contract. I took it at my broker’s suggestion, and it was so worth it. There’s a new contract for 2016 (of course), and I’m taking it again in February.
Your client may completely trust you and not question any part of the contract. You may also get a client who questions everything. Having a thorough understanding of the contract and being able to answer questions quickly will help gain your client’s trust and help the transaction go smoothly. It will also go a long way toward having them refer you to their friends and family — one of the best ways to get new business when becoming a real estate agent.
Work with a Seller
You still have all the same basic duties when you are working with a seller — loyalty, honesty, accounting, confidentiality, obedience and fiduciary responsibility. But there are also duties specific to a seller.
Prepare a CMA
A CMA is a Comparative Market Analysis — which is where you analyze the market immediately surrounding your subject property. Houses will appraise for what other, similar houses in the area have sold for recently, for the most part. No two houses are the same, so no two appraisals will come back the same. One home may have better carpet or a newer kitchen. Another might have more bedrooms or a finished basement.
Preparing a CMA for your sellers will help give them a more realistic expectation of what they can sell their home for.
Set Realistic Expectations
Going through your client’s home and giving them pointers on how best to declutter and stage it will help them get top dollar for their house. But it is best to set their expectations at a realistic level. If they have an outdated kitchen, they can’t hope to get the same price as their next-door neighbor with his completely remodeled home.
Likewise, if there is an unpleasant odor in the home, they will be receiving lower offers. Don’t suggest masking the scent — buyers can smell through that.
The seller is ultimately responsible for determining the asking price, but if they want to list it higher than you think is realistic, it’s best to let them know this up front.
Take Great Pictures
I like to take multiple photos of each room of the house and choose the ones that best represent the home. I say I like to take them, but actually my husband takes the pictures. He takes high quality pictures that rival a professional photographer.
But be honest with yourself. If you take bad photos, hire this job out. One podcast guest suggests going through Craigslist and asking all the photographers for a quote.
Remember, take honest pictures. Wide angle lenses might make the house look better, but no one is going to buy a house that looks great in pictures and terrible in real life.
Fill Out ALL the Forms
There are a multitude of forms that need to be completed before listing a house. Houses built before 1978 need a Lead Based Paint Disclosure. Sellers who have occupied the home should fill out a Seller’s Property Disclosure. Source of Water is required in Colorado.
Market the Property
Listing a house isn’t just taking the information and pictures and posting it on the MLS, then sitting back and waiting for offers to roll in. Becoming a real estate agent involves learning about marketing. Marketing the property includes websites, signs, postcards, flyers, social media, email, newspaper ads, open houses, yard signs and much, much more.
Compare and Translate Offers
In my local market, real estate is hot, hot, hot. Almost every property receives multiple offers within days of being listed.
As an agent representing the seller, you need to be able to translate these offers to your clients, to give them the entire picture of the offer. Know the difference between an FHA loan and a conventional loan, and why one is better than the other. Know the benefits of having a no-contingency offer and be able to explain the entire contract — and compare them all.
Your seller might be super experienced, organized and on top of everything. But probably not. The contract is a legally binding agreement with dates and deadlines that must be met. When becoming a real estate agent, you have to stay on top of your sellers to make sure they are keeping up with the deadlines. A missed deadline can cost them quite a bit of money, and the buyer is under no obligation to extend deadlines.
Real Estate Agent Salary
This is probably the part you are most interested in — who wants to spend hours and hours driving clients around to see houses for free? You are thinking of becoming a real estate agent because you want to make money, right?
The thing is there is no typical real estate agent salary. Real estate is local — your market and your competition will help determine your clients and your end results.
Essentially, you own your own business when you’re becoming a real estate agent. The amount of marketing you do is a huge factor in your success and your real estate agent salary. If you choose to sell only one house a year, you’re not going to be bringing in a ton of cash, unless you sell to the rich and famous.
It is a violation of the Sherman Anti-Trust Act to state a going rate for real estate agent commissions — it’s called price fixing. Real estate agent commissions are negotiable as far as the agent wishes to negotiate. But an good estimate is 2.5% – 3.0% per side — that is, the buyer’s agent and the seller’s agent.
But wait, there’s more! When becoming a real estate agent, you have a couple of different ways to work under an employing broker. There are the commission-split brokers, with whom you share your commission. I’ve seen splits as high as 60% to the employing broker, meaning that $10,000 commission is now $4,000 to you before your costs are figured. I’ve seen splits as low as 10%, meaning that same commission puts $9,000 in your pocket. Typically, those lower splits are going to agents who are producing more volume.
There is also the flat fee commission, where you pay a set dollar amount no matter what the commission. I work for a brokerage like this. I pay $499 per transaction for any home where the list price is less than $3 million.
There are advantages and disadvantages for working for both types of agencies, so you’ll have to decide which one is right for you.
The average real estate agent salary is $39,800. Or $43,860. Or $76,000. But it might also be $33,000. These are the results I got back when I Googled “What is the average real estate agent salary?”
The thing is, you get out of it what you put into it. Are you willing to be on call round the clock? You’re probably not going to be getting phone calls at 2:00 a.m., but you might get one at 5:30 or 6:00 a.m. from a client who is dying to see a house that just popped up on the market. You might also get one at 10:00 p.m. at night for the same reason. Remember this when considering becoming a real estate agent.
The agents making top dollar in their real estate salary are the agents answering their phones all the time. The agents who are working all the time.
How to Find Real Estate Clients
Finding a client takes work. Everyone already knows an agent or twelve. Clients don’t bust down your door — they don’t have to because they are inundated with flyers, mailers, magnets, postcards, etc. You have to make yourself memorable. What can you offer that another agent can’t? Why should someone hire you?
Your marketing budget can make or break you. In the beginning, your success literally depends on it.
One of the top tips I have seen is also one of the simplest. Get a name tag proclaiming your real estate agent status and wear it everywhere. People won’t know what you do until you tell them.
Related: The Simple Way to Find Listing Leads as an Agent Without Leaving Your Computer
Your “For Sale” sign that you plant in the yard is a marketing tool.
An open house is one of the best ways to put your face in front of potential buyers, many of whom are not currently working with a real estate agent. When they walk in your door, be prepared to wow them with your expertise.
There are all manner of clever marketing ideas online — one agent has water bottles printed with her name and information and passes them out at the gym. Another agent puts a dog treat inside a doggie-doo bag and attaches a business card with a ribbon to the bag, then leaves a box of treats outside the fence at the dog park. Yet another one puts 9-volt batteries in a bag, along with a note to change their smoke detector batteries around the time the clocks go back.
A successful agent is always looking for their next client. After reading this, do you think you have what it takes to be a successful agent? Are you still considering becoming a real estate agent? Are you already a successful agent? What tips do you have?
Let’s have a conversation in the comments section below!