Real estate agents can make a lot of money and have a lot of freedom. That does not mean it is an easy career or that everyone succeeds. It takes hard work, dedication, and perseverance to become a successful real estate agent. To become an agent, you must take classes, pass a test, and find a broker to work for. Once you get your license, the work is not over. You must learn to sell houses, which they do not teach in real estate school. If you can make it through the licensing process and the first few months, real estate can be a wonderful business to be in.
What are the basic steps to becoming a real estate agent?
Here are the basic steps to become an agent. I go into more detail on each of these steps later in the article. It may seem like a lot of work, but most things that are worthwhile take work.
Most states require that applicants be 18 or 19 years old. Most states also require background checks and applicants to be fingerprinted. There are no set regulations for what crimes would be considered okay or not okay to get your license. Each state has different rules. Some states have thought about requiring a college degree as well.
The education requirements vary in each state, but most states require a certain amount of classroom hours. Most states also allow the work to be completed in person or online. The number of hours can vary from around 40 to 80 for each state with a few requiring less and a few requiring much more (up to 200 in Texas). Not only do you have to take the classes, but you must also pass quizzes and tests along the way.
Once you have taken all of the required classes, you must take a test. Most states have a state and national test. The test is not a cake walk, and many people fail it the first time. Some people are never able to pass it. Even with extensive real estate knowledge, you need to study for the test since it is very tricky.
Finding a broker
Once you pass the test, take the classes, and pass the background check, you need to find a broker. You cannot become a real estate agent on your own. Brokers must complete more education and be licensed as agents for at least two years in most states before they can become brokers. New agents need to “hang” their license with a broker who will oversee them and make sure they do not mess anything up. Each broker has different guidelines for how they pay and charge agents.
Finally, you get to actually sell houses and make money! Don’t get too excited—it takes a while to sell a house. Even if you get a deal put together your first month in the business, it can take 30 days or longer for the deal to close (sell). Real estate agents typically do not get paid until the deal closes since they work primarily on commissions.
How much money do real estate agents make?
Why would anyone go through all of this with no guarantee they will make any money? While there is no guarantee you can make money as an agent, there is the chance you can make a lot of money. I have been an agent for almost 20 years and have made over $300,000 in multiple years. At least three other agents in my office made that much money or more in multiple years as well. That kind of money is not typical, but it is possible.
The median salary for agents is from $40,000 to $50,000 depending on which source you look at, but that number includes part-time agents. There are many agents who will never sell a house or put hardly any effort into the business. They bring those averages down from the full-time hard working agents.
I am mostly an investor now, and being a real estate agent/broker helps me as an investor as well. Once you get past the first licensing process to become an agent, keeping your license is not nearly as difficult.
How long does it take to become a real estate agent
It can take months or even longer to take all the classes and get your license. How long it takes often depends on the person and how much time you have to dedicate the process. I am in Colorado, which has one of the toughest licensing processes with over 160 hours of education required. It is common for people to take 6 months to get their license. That assumes you are taking classes in your spare time and not going to school full time.
Besides getting the license, it takes time to become successful. I have seen many agents get a great start to their careers and many struggle. One of the biggest challenges to being a real estate agent is the way agents are paid. Most agents only get paid when they sell a house. The house buying or selling process can take as little as a week, but in most cases, it takes at least a month. When real estate agents first begin their career, they most likely will not have clients lined up to buy or sell, so they must find those clients as well.
One common rule in the industry is that new agents should have 6 months of living expenses saved up before they become a real estate agent. It can take time to sell your first house, and it can take even longer to create a steady stream of sales. I have seen some agents do amazingly well their first few months in the business, but it is rare. I think it is a great idea to have at least 6 months of living expenses saved up before you start. I have seen very promising agents quit the business because they ran out of money before they could gain any traction.
Just having enough money to survive should not be a real estate agent’s goal either. You should want to be making enough money to survive, save, invest, and do the things you love. How much money that takes depends on the person and their needs or goals. It can take a year or two before a new agent is bringing in a steady income. On year three or more, the good agents should begin to see all the hard work pay off, and the good money starts to come in.
How can you start without 6 months of living expenses?
A lot of people are not able to save 6 months of living expenses. What can those people do to start a career in real estate without having to quit right when things start to happen?
- Some people want to be part-time agents and work two jobs. It is really tough to make it work as a part-time agent because clients need help all the time. If you have a flexible schedule, it may work, but otherwise, it is really tough.
- Joining a team can be one way to earn extra income while you learn the business. My team has hired agents to do hourly work as well as sell houses.
- Find another flexible part-time job. One of my agents was also an Uber driver. They could work whenever they needed, and if they had to show a house, they could stop working whenever they needed.
What is the best way to take classes?
Most states give you the option of taking real estate classes online or in person. I have recommended my agents use Real Estate Express when they take classes online. They are affordable and good. Most people will take classes online because they can take them in their free time. However, real estate classes are extremely boring. It is not fun to stare at a computer for 100 hours. You must be very disciplined to take the classes and follow through with them online.
If you have the ability, I would take classes in person because you will learn more, and you will network. When you take classes in person, you have a real person teaching you who knows people in the industry. Not only can they help you learn the business but they also may know people who can help you in the business.
Why don’t real estate agents learn how to sell houses in real estate school?
Real estate agents want to learn how to sell houses and how to make money. That is usually the point of school. However, the real estate regulatory agencies are more concerned with agents not breaking the law than they are how much money they make. The real estate education system was put in place to protect the consumers and make sure real estate agents are abiding by the rules and regulations.
The real estate classes consist of learning the laws and how to avoid getting yourself in trouble. There is education on contracts, appraisals, earnest money, and how to handle the transaction but not on how to actually get buyers and sellers.
How to sell houses quickly
There are many things a new agent can do, but here are the most important steps for any new agent.
- When taking real estate classes, try to take classes in person so you can start networking asap.
- Start networking and reaching out to your circle of influence even before you get your license.
- Choose the broker with the best training and lead sources, not the highest commission split.
- Be willing to spend money on training programs. These programs will teach you the best way to get leads, maintain a database, build income funnels and much more.
- Don’t be afraid to talk to successful agents in your office or area and ask them for any advice and or tips.
- Talk to as many people as you can and don’t be afraid to look like an idiot at first. You have to learn at some point, and the sooner you learn, the better. The best way to learn how to talk to buyers and sellers is to do it. Many agents get stuck in their office researching lead sources or taking as many classes as they can instead of trying to meet people and sell houses.
How do you choose the best broker?
You should not have to learn how to sell houses on your own. The broker you work with should be a mentor and offer training.
There is a huge difference between brokers and real estate companies. Some offer training, mentoring, and guidance, while others offer nothing. I like to tell knew agents 100 % of zero is still zero. A lot of brokers offer 100 % commission splits, which means the broker keeps 100% of the commission they make. That sounds great in principle, but there are other fees that will have to be paid. It is not truly 100%, and they offer very limited training. Most agents who start with those companies do not last very long in the business. That is why I say 100% of zero is still zero. If you don’t sell any houses, it does not matter what the commission split is.
Other brokerages may offer 70/30, 50/50, or any other number of splits. Some offices may require agents to rent an actual office in the brokerage while others allow work-at-home arrangements. Some brokerages charge fees for everything you use while others include those items. Every office is different, and even some national franchises will have different structures with different office locations. When looking for a broker, it is all about interviewing the local offices in your area to find the best fit.
I think it is important to go with a broker who will offer training since real estate classes do almost nothing to teach you how to actually sell houses and make money.
What expenses do agents have?
Real estate agents do not get to keep their entire commission with most broker agreements, and there are other costs as well.
- Most agents will need to pay for access to the MLS system, which varies greatly in different areas.
- Most agents will need professional insurance called E and O.
- Many offices will charge a desk fee.
- Some agents will choose to be Realtors instead of just agents, which adds to the costs.
- Agents may need to pay for signs, marketing, advertising, lockboxes, and more depending on the brokerage.
- Agents will need a decent car and may be driving much more than they would at a normal job.
- Agents are self-employed and must budget for taxes since they are not deducted from their paychecks.
There can be more or fewer expenses depending on your situation. Count on at least a couple hundred dollars a month to be an active agent, even with low-cost brokerages. You can spend much more.
What is the difference between a Realtor and a real estate agent?
Many people think that a real estate agent and a Realtor (pronounced: Real – Tor, not Real – a – Ter) are the same thing. However, there are some big differences. Realtors technically have more ethical responsibilities than real estate agents, but does that really make a difference to a buyer or seller? I have been both a Realtor and just a real estate agent in the last five years. I am a Realtor now, but I don’t think you must be a Realtor to be successful.
Being a real estate agent involves getting licensed in the state you want to work in and hanging your license with a broker. Being a Realtor comes with many perks besides just being able to say you are a Realtor. Many MLS boards require their members be a Realtor to gain access to the MLS or charge more for those who are not Realtors. About half of all agents are Realtors.
Being a Realtor also gives you access to many organizations.
- NAR: National Association of Realtors.
- State Board of Realtors: most states have a state board of Realtors.
- Local Board of Realtors: most areas have a local board of Realtors specific to your market location.
I am in Northern Colorado and belong to CAR (Colorado Association of Realtors) and GARA (Greeley Area Realtor Association). I can attend local meetings, luncheons, classes, and charity events put on by those boards. I could also run for leadership roles on those boards. I have access to the Realtor hotline, which offers free legal advice. I also get to use the fancy “R” logo that Realtors use.
How much does it cost to become a Realtor?
One drawback to becoming a Realtor is it is more expensive than being just a real estate agent. These fees will vary on the board you belong to and the state you are in:
- NAR: $120 per year
- NAR: $35 special assessment per year
- CAR: $165 per year
- GARA: $209.17 per year
- Total: $519.17
These fees are separate from any MLS dues and fees that must be paid. As you can see, it is expensive to become a Realtor, and I also pay for the agents on my team to be Realtors as well, so it costs me thousands of dollars a year.
Why become a Realtor? Realtors are also supposed to be held to a higher level of ethics.
Below are the pledges a Realtor makes that a real estate agent is not required to make:
- Pledge to put the interests of buyers and sellers ahead of their own and to treat all parties honestly.
- Shall refrain from exaggerating, misrepresenting or concealing material facts; and is obligated to investigate and disclose when situations reasonably warrant.
- Shall cooperate with other brokers / agents when it is in the best interests of the client to do so.
- Have a duty to disclose if they represent family members who own or are about to buy real estate, or if they themselves are a principal in a real estate transaction, that they are licensed to sell real estate.
- Shall not provide professional services in a transaction where the agent has a present or contemplated interest without disclosing that interest.
- Shall not collect any commissions without the seller’s knowledge nor accept fees from a third-party without the seller’s express consent.
- Shall refuse fees from more than one party without all parties’ informed consent.
- Shall not co-mingle client funds with their own.
- Shall attempt to ensure that all written documents are easy to understand and will give everybody a copy of what they sign.
- Shall not discriminate in any fashion for any reason on the basis of race, color, religion, sex, handicap, familial status, or national origin.
- Expects agents to be competent, to conform to standards of practice and to refuse to provide services for which they are unqualified.
- Must engage in truth in advertising.
- Shall not practice law unless they are a lawyer.
- Shall cooperate if charges are brought against them and present all evidence requested.
- Agree not to bad mouth competition and agree not to file unfounded ethics complaints.
- Shall not solicit another REALTOR’S client nor interfere in a contractual relationship.
- Shall submit to arbitration to settle matters and not seek legal remedies in the judicial system.
Realtors are able to market themselves as abiding by these standards, while real estate agents may not have to abide by these standards (depending on state laws). In my experience, I have seen many Realtors and real estate agents act ethically. I have not seen a difference in one or the other being more ethical. When we have had problems with Realtors being unethical, the boards did not do much to help us out.
While Realtors can advertise that they are held to a higher level than agents, I do not think it makes much difference to a buyer or seller.
Why be a Realtor?
I was a Realtor for almost 15 years, dropped my membership in 2016, and started up again in 2018. Being a Realtor was costing me thousands of dollars a year but was not giving me much benefit. Most buyers and sellers do not care if I am a Realtor. However, I started my own brokerage, and many agents would prefer to be Realtors. Access to the MLS is cheaper as a Realtor, but I don’t have to be a Realtor to have access. Some MLS’s do require agents be Realtors to use them. I don’t think you must be a Realtor to be successful, but the decision to be one or not will depend on your location and the rules.
How do agents make money?
Many people think of real estate agents as chauffeurs. Agents drive prospective buyers all around town, show them houses for sale, and hopefully, after a few weeks of searching, the buyers decide on a house. Driving buyers around can be part of the real estate business, but there are many ways for agents to make money. I have not had a buyer in my car for years, and even when I worked with a lot of buyers, they were rarely in my car. Most buyers have a car and are perfectly capable of driving it to see a few houses, so don’t think being a chauffeur and an agent are the same thing. When agents become super successful, they realize how valuable their time is. Many agents start their own team or strictly work with listings as their career develops. One of the great things about being an agent is you can make it a business, and there are many ways to make a living.
The most common way for a real estate agent to make money is as a buyer’s agent. A buyer’s agent works primarily with people looking to buy a house. The agent will look up houses for sale, show houses, write offers on houses for buyers, and help the buyers throughout the transaction. Buyer’s agents will also work with sellers but mostly when a buyer they are working with needs to sell their house to buy a new home.
It is possible to make good money as a buyer’s agent, but you are limited by how many buyers you can work with because it takes a lot of time to work with buyers. For each buyer, you must find the houses, show the houses and write offers on the houses before the escrow process starts. It can take hours and hours to show homes to a buyer before they find one that is suitable.
Another great way to make money as a real estate agent is by listing homes for sellers. A listing agent has a much different job than a buyer’s agent. The listing agent helps sellers price their home, get it ready to sell, list the home in MLS, negotiate offers, and complete the transaction process. Listing agents can make a lot of money because not as many hours are required to list a house as are required to help buyers buy a home. The trick to being a successful listing agent is finding a steady stream of sellers who want to sell their home.
REOs and HUD homes
I specialize in selling REO listings and HUD homes. I also offer an REO starter kit to help agents learn how to sell REO listings and how to get REO listings from banks, asset management companies, and hedge funds. REOs are homes that have been foreclosed on, and the bank took possession of that home. The banks will assign these listings to REO agents to maintain, market, and sell. The REO agent has many responsibilities since the owner of the home is usually in another state and will never see the home. REOs can be a great source of income due to the steady stream of listings that come to a successful REO agent.
Short sales are homes owned by homeowners, but the homeowner cannot sell the home for enough money to pay off what is owed on the home. The seller has to sell the home for less than the bank is owed and convince the bank to take less money. The listing agent has to help the sellers list the home similar to a traditional listing, but the agent also has to help the seller communicate with the bank. The bank will need a ton of paperwork from the seller and may take weeks or even months to make a decision on whether to accept an offer. There are many tax and legal implications with a short sale that an agent needs to be familiar with.
BPOs are reports completed by licensed agents that are similar to an appraisal. However, appraisals can only be completed by licensed appraisers and are much more detailed than a BPO. A BPO is a report used to value homes and consists of three sales and active comparable homes that are similar to the property you are valuing. There is also commentary and other statistics that need to be provided in the BPO. The price paid for BPOs to the real estate agent can range from $30 to over $100. BPOs require an inspection of the home, with some BPOs requiring just exterior pictures and others requiring interior photos.
Property managers manage rental properties for investors or other homeowners. They find renters, manage maintenance and repairs, collect rent, and keep track of accounting. Property managers usually get paid a monthly percentage of the rents collected, with 10% being a common figure. They can also charge leasing fees or other fees associated with the management of properties. It takes a lot of properties under management to make a lot of money as a property manager. The best part about being a property manager is you can create consistent monthly income.
Commercial real estate is a whole different game than residential. Many commercial agents will work at a large firm to learn the trade and may work for a salary, while residential agents typically work for commissions. Commercial properties can sell for much more than residential, but it can take a very long time for them to sell. It takes much more knowledge to sell commercial real estate due to the valuation process, which is much more involved. Instead of using the comparable sales approach, which is used for most residential properties, most commercial properties are valued based on their income and expenses.
Real estate team
Running a real estate team is one of the most profitable ways to make money in real estate. I think the key to long-term wealth is setting up a business that can run without me and offer me a nice income. In real estate, the easiest way to set up your business is to create a team of real estate agents. I run a team with buyer’s agents as well as staff to help the buyer’s agents and myself. As the team leader, I get a cut of each sale my team makes. I also pay many of their expenses and advertising, but their sales more than make up for those expenses.
It takes time to build your business up to a point where you can add agents to your team, but it is well worth it. To run a team, you also need a reason for agents to join your team. I am able to offer many buyers leads through my REO listings, and we also use many other techniques to generate leads. The more listings you have as an agent, the more buyer’s leads you will get off your listings. That is another reason it is nice to be a listing agent and not a buyer’s agent.
Every agent must work under a managing broker if they are not a broker themselves. Being the broker means you are in charge of all the agents in your office and are running the office. You must make sure everyone is acting legally and take care of any disputes or problems. Some brokers run large offices with hundreds of agents and some brokers just have a couple of agents. The broker usually gets a percentage of their agents’ commissions and may get desk fees or advertising money from their agents. Most states require real estate agents to be licensed for a certain amount of time before they can be a broker.
I am a broker mainly for my own investing purposes, but I have other agents as well. There are a lot of expenses that go along with being a broker, and there is a lot of responsibility.
If you want to invest in real estate, being a licensed agent is a huge advantage. A licensed agent saves money on commissions when they buy and sell homes, and it helps me find more deals. I estimate being a real estate agent saved me over $2000,000 on my own deals this year alone!
Agents can also work with investors, but that can be tricky. A lot of investors will never buy a house, but some will buy ten! You have to guard your time when working with investors to make sure you are not wasting hours on deals that will never happen.
What is the best way for real estate agents to get leads?
Getting leads is the main goal of most real estate agents and most companies that market to real estate agents. When you become an agent, you will be inundated with calls from marketers trying to sell you on the next best internet marketing platform. We use online internet lead generation tools like Zillow, but they are usually not the highest quality leads. Many internet lead sites give leads to multiple agents, and many internet buyers or sellers are just testing the waters. We have had the best leads from our own website and from our circle of influence. Your circle of influence are your friends and family, and anyone who is an agent should know that term well. Your circle of influence can also be past clients who become your friends or at least your advocate after they see how good you are at your job. You cannot concentrate on only getting leads, you must also do a great job for the leads you have before, during, and after the buying or selling process.
The old fashioned ways of providing awesome service and talking to people all the time are the best ways to make money in real estate.
Can you make money as a new real estate agent? It all depends on you, your drive, your preparation, and who teaches you. If a new agent concentrates on taking care of their current clients and their circle of influence, they will sell a lot of houses. You also can’t be scared to tell everyone you are an agent. You are providing a service as an agent and should not be scared to tell all your friends and family. Do you want your friends to use another agent when the odds say that agent may not be very good at their job? Or do you want your friends to use you, who cares deeply and will work very hard for them?
Becoming a successful real estate agent is not about the competition; it is about you and whether you are willing to do what it takes to succeed. Most agents are not willing to do what it takes because they are worried about what people will think of them. They are too busy with new marketing techniques to answer their phone. Some people become agents because they are bored and need something to do! If you provide awesome service, remind people you are an agent, and work full-time, you will succeed.
There is a reason 10% of agents make 90% of the money!