When starting out as a real estate agent, you must work under a broker for a certain amount of time. The time you have to work under a broker varies depending on what state you do business in. While working under a broker, you also have to pay that broker. Working as a real estate agent is not a job where you get paid hourly for the work you do. You are self-employed and must sell houses to make money. The broker of the office does not make any money unless you sell houses as well. How the broker makes money is by taking a percentage of the commissions you make or a flat fee for houses you sell. The amount you pay to the broker varies widely based on the training, the office, the broker, and the work you do.
How important is the broker you choose to work for?
Real estate agents can make a great living if they work hard and smart. The average salary is not very high when you look at employment statistics, but those numbers can be very deceiving. Many agents only work part-time, some people are not able to motivate themselves without a boss, and most agents do not get proper training. If you want to be one of the agents who makes an awesome living, you will have to work for the right broker. The right broker will have a great training program, lead generation sources, and teach you the best ways to make money in your market.
Too many agents start out in the business by choosing the broker who charges the lowest fees and forget about training. Learning how to sell houses is vitally important to actually selling houses. Many brokers will not offer much in the way of training, especially the low or flat fee brokerages who are simply trying to get as many agents as possible, and hoping a few sell houses.
What do real estate brokers offer agents?
Real estate brokerages charge different amounts based on the training and services they offer. Here are a few of the services that some brokerages provide:
- Office space
- Administrative staff
- Floor duty
- Lead generation
- Mentor programs
- Marketing materials
- Office meetings and networking
- Training classes
Some offices and brokers will offer all of these services, other offices will have a few, and some will offer nothing. Many of these services are vitally important to being a successful real estate agent. Most agents fail in their first year because they have no idea how to sell houses. Real estate classes do not teach you how to sell, they teach you how to avoid breaking the law and be ethical. Once you take real estate classes and pass the exam, most are very unprepared for how to actually find clients and sell houses. The agents who I see do the best in the industry, get intensive training, work in successful offices, and are in the office a lot.
If you are interested in getting your real estate license, I recommend Real Estate Express. The newest agent on our team just passed his exam on the first try using them. We have had multiple agents use Real Estate Express and successfully get through their education quickly.
How much do real estate brokers charge their agents?
The rates that brokers charge their agents can range from 50 percent or more of the commissions the agent earns plus monthly fees, to a flat fee of $200 or less per closing and no monthly fees. As you can see there is a huge difference in what brokers charge and some brokers have different programs in their office depending on the agent. You can see why many agents choose the cheap broker. On a $100,000 sale of a house, the agent might earn a $3,000 commission (all commissions are negotiable). Here is what the agent may earn after paying their broker in a high-split scenario:
- $3,000 times 50 percent = $1,500
- $1,500 minus $300 a month in desk fees = $1,200
Keep in mind this is a very high commission split and desk fee scenario. On my team, we take 50 percent of our agent’s commissions, but we pay their desk fees and many of their other costs. For brokers that offer very little training or services, they may only charge $200 per closing, which means the agent takes home $2,800 instead of $1,200.
Some offices will work on a 70/30 split with their agents. Some offices will work on a 90/10 split, but usually the better the agent is, the better split they can get. If you start working with a broker who will only offer a 50/50 split when you are a brand new agent, they may offer you a much better split when you prove you can sell houses and bring in money to the broker.
However, I like to use the saying 100 percent of nothing is still nothing. Many agents who choose the broker that charges low fees fail because they never sell any houses. We have multiple agents on my team making over $100,000 a year on low commission splits because they sell a lot of houses. We taught them how to find their own clients and we give them leads that convert into sales. A couple of those agents were working with other offices before they joined our team and doing much worse because they had no idea what they were doing.
The best thing you can do is interview multiple brokers, break down what they offer, and choose the broker with the best training.
For more information on becoming a real estate agent and what it takes to be a successful real estate agent, check out my book: How to Make it Big as a Real Estate Agent.
Becoming a real estate agent is not rocket science, but many people fail because they have no idea how to get clients and sell houses. Choosing the right broker is one of the biggest decisions any agent will make. Remember that superior training beats a higher commission split every time.