So, you want to become a REALTOR^®?

by Blanche Evans

Are you interested in selling real estate and want to know more?

A career as a real estate agent is an ideal occupation for many, but it can be the most frustrating job on earth if you are unprepared financially and emotionally for the day-to-day life of being an agent. To assure both job satisfaction and success, you need to know what a real estate occupation is really like as well as what personal, financial and educational commitments it takes to make a living as an agent.

What is a real estate agent?

According to the original defininition, real estate agents rent, buy and sell property for clients on a commission basis. A newer definition includes the representation of buyers and/or sellers. Real estate agents are regulated by the state they live in and must be licensed to do business by the state licensing authority. When licensed, you can handle a property transaction for a client on behalf of a broker or a builder and are subject to the rules and regulations as outlined by the state. Without a license, you can still operate in the industry, but you are limited in the duties you can perform for a broker, builder or an agent, and therefore, limited in your earning power.

All Realtors^® are real estate agents but not all real estate agents are Realtors^®. To become a REALTOR^®, you must be at least 18 years of age and successfully complete 90 hours of education and pass a state exam. At Edina Realty, you will also become an active member in local, state and national Realtor^® associations that provides you with Multiple Listing Service (MLS) access and other significant benefits.

A real estate agent means that you are the representative of someone buying and/or selling real estate. It also means that you are an agent of the real estate broker or a builder. One of the largest misconceptions about the industry is that as a licensed professional you are an agent of the client. Only the broker can be an agent to the client and then only through contractual agreement. A licensed broker requires additional education and a minimum of 2 years experience. 

How do real estate agents earn money?

Real estate agents work as independent contractors who are supervised by managing brokers. Real estate agents are also the agents of their broker and work on a split commission basis. A typical split for new agents is 50/50 between the broker and the agent when the property closes so no income is earned until you close on a home either for a buyer or seller or both.

It is customary for the seller to pay the listing and selling commission to the listing broker. By contract, the listing agent will typically provide for the disbursement of commissions between the listing broker, listing agent, and cooperating broker (the broker representing the buyer) from the seller's proceeds at closing. This has fostered the belief that the seller pays the commission out of the equity of the home. In fact, it is the buyer who actually pays the commission through the loan proceeds. The first argument for this is that the commission is built into the sales price, therefore it is over and above the seller's equity. The second argument is that the amount of the loan must cover the commission fees and therefore it is the buyer who actually pays the commission because it is s/he who brings sufficient funds to the table to do so.

The commission-only lifestyle

A commission-only lifestyle is challenging because not only do you need to learn as much as possible about your new occupation to gain needed expertise, you must also sell clients on the idea of hiring you even though you are a rookie. Many people get started with a courtesy listing from a relative or friend, but don't expect your friends and family to automatically give you listings or ask your help when they want to buy a new home. Many people know more than one real estate agent and have their own reasons for choosing to work with one.

The role of the broker

What will a broker do for you? Brokers are valuable for their reputations in the marketplace and can bring you a lot of business based on their high profile, reputation and market niche. They are also your liability buffer and will release you from any liability due to a lawsuit that protects themselves and you in the event of a gaff. Edina Realty provides support personnel at each office and sales training that can save you time and money as you get started. Particularly valuable is Edina Realty's proprietary technology and our technology support staff that will help you solve all your technology issues that may arise. Office managers and office administrators also help with many of the time-consuming details.

Brokers will typically provide new agents with a desk, a phone, file cabinets and use of its technology such as shared computers and printers. They should also provide training and other small perks such as sharing software or providing discounts on business or office supplies. The cost of doing business, including self-promotion, will fall on the agent, so the agent must be prepared to cover their own expenses in anticipation of their initial sales. This can take as long as six months to a year, before the agent is earning enough in commissions to cover his/her expenses. However at Edina Realty, we will reimburse you for any personal promotion or property advertising and marketing you may do on behalf of your client through our marketing allowance program. Ask me how this works should you decide to arrange an informational interview.