Become a Real Estate Agent
(An excerpt from 69
Ways To Make Money In Real Estate)
By Steve Gillman - 2005
As a real estate agent you can make a lot of money with little
risk, just by selling other people's property for them. Well,
this is almost true. You also can get the inside scoop on possibly
profitable investments. The part that isn't entirely true, is
the low-risk part. It can be a tough business to start out in,
especially if you don't know many people. It takes money and
time (and time is money as well, right?).
My own experience? I hated being a real estate agent. I was
young (this was 17 years ago). It wasn't that I didn't sell anything.
In the few months I was actually trying I sold seven or eight
properties. But I also realized that I would never learn to enjoy
the process.
It doesn't fit my personality. I didn't like being in the
middle of transactions. I remember people crying at closings
and yelling on the phone. I remember struggling to advise sellers
on what was best for them, even though if I were in their shoes
I would have found it easy to say what was best for me. I operate
best as buyer or seller - not as the person bringing them together.
However, I met a lot of great people who love the stress and
busyness and action of being a real estate agent. They are mostly
people who love to help people. Some of them just enjoy the business,
while others enjoy it and make a lot of money.
Then there was poor Jack. He was there when I first started,
at the desk in front of mine. He was there months later when
I was quitting, and he was finally making his first and last
sale (he quit shortly afterwards). He was one of the nicest guys
I have ever worked with, but he didn't know how to sell real
estate.
I believe Jack hated the business more than I. Keeping the
money in mind, I could at least make myself get on that phone
and start calling hundreds of people who didn't want to hear
from me, just to find the one or two that did want to. I got
listings this way while Henry sat there waiting for the phone
to ring. But I found it harder and harder to do.
My conclusion? It helps greatly if you actually enjoy this
business - that way you can motivate yourself to do the things
you need to do.
How to Become a Real Estate Agent
It is relatively inexpensive to get licensed in most states.
It will be somewhat different in each, but when I was licensed
in Michigan, it was necessary to be sponsored by a broker. There
are always brokers looking for new agents, so this shouldn't
present a problem. Then you may take a class that teaches you
everything you need to know for the test. This too isn't too
expensive.
After passing the state exam, you'll go to work, but not as
an employee. You are provided a desk by your brokerage, but you
are an independent contractor. Despite not being in business
for yourself, you cannot go off and sell on your own. Usually
the law requires that you work for a time (three years is common)
as an agent for a broker before you can become a broker yourself
and own your own real estate company.
You'll be paying for your own business cards, signs, supplies,
and dues. You might even need some new clothes. The dues to join
and remain a member of the MLS, or "Multiple Listing Service,"
as well as any other memberships required or "suggested"
by your employing broker, is where it starts to get more expensive.
You really have to prepare financially for the transition.
If you have no other job at the time, you may have no income
for at least several months. Unless you have a lot of contacts
or are coming into the business from a related one, it may take
a month or more to get your first listing. If that property sells
in just two months (3 or 4 month is common in many areas), and
closes a month after selling, that means that at the start you
are four months away from your first paycheck.
Apart from the couple thousand dollars needed for direct expenses,
you need to plan for this lag time before you start collecting
commissions. If you are the sole provider for your household,
I recommend that you have at least six months income set aside
before you quit your job and start selling real estate.
How much can you make as a real estate salesperson (a better
title, since "agent" hides the fact that this is about
selling)? This depends on where you work and what you sell. When
I was selling real estate in Northern Michigan, all the real
estate companies were charging 7% commission on residential properties.
My broker split the commission with agents, so if I sold the
house, I got half the commission. If an agent from another broker
sold the house, that broker took 50%, and my broker split the
other 50% with me. In other words, I got 1.75%. This was common
then.
Lower commissions are common now. In some areas, they are
as low as 3% for full service brokers. This is because of increased
competition, and because home prices have gone up faster than
wages or inflation in recent years. 3% of a $500,000 sale (In
California, for example) is still a hefty commission: $15,000,
to be precise.
Brokers will each have their own commission structures, so
check around. There are brokers that let you keep 100% of the
commission, and then charge you for the use of the office, including
perhaps a secretary for the common use of a dozen agents. You
might pay $15,000 per year under this arrangement, so obviously
it would be best to wait until you are selling enough real estate
before considering working under this kind of broker. Others
may operate on a sliding scale, letting you keep more as you
sell more.
How do you effectively sell real estate? That is a book-sized
subject, but here are a few basics:
1. List a lot of property. You can spend weeks showing a young
couple homes just to have them go to another agent or not buy
anything. Get a listing of a home, however, and no matter who
buys it or sells it, you will be paid. Concentrate on working
with sellers more than buyers (although you will always do both).
2. List high-priced fast-selling properties. You can spend
as much time and effort selling a $100,000 property as you will
selling a $400,000 home. But you will make four times as much
money with the latter. Too unusual and expensive can mean a long
time to sell, however, so balance it out. Sell the most expensive
properties that are selling relatively quickly.
3. Specialize in a property type or geographical area. Work
an area or type of property until you are the expert. Then the
sellers will start to come to you.
4. Learn to sell. It doesn't matter if you just want to list
those properties and let others sell them. You still need the
sales skills to get the seller to list with you. Read, take advice
from top sellers, and go to seminars. You can always learn more.
Investing as a Real Estate Agent
In most states you have to identify yourself as an agent when
you advertise your properties for sale. This may make some people
feel that you - as the expert - can take advantage of them. It
is probably the only disadvantage to having a real estate license
as an investor
There are two big advantages, however. First, you get the
inside scoop on properties coming to market. You may have an
offer in on that new rental property even before there is an
ad in the paper or a listing in the MLS.
The other advantage is getting a discount on any MLS listing.
Suppose you see a nice little house for $100,000 for sale. If
it is listed with another office and the commission is 6%, your
broker may get half of that, and give you 60% of that as the
selling agent (you are selling it to yourself). That is $1,800
that you make as a commission when you buy - maybe enough to
cover closing costs.
Copyright Steve Gillman.
69 Ways To Make Money In Real Estate
Want to know the other 68 ways? Get my ebook:
http://99reports.com/make-money-in-real-estate.html
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