Anyone in Real Estate?

[Terri_A]

Okay...in my never-ending search for a new career...I've had several friends ask me if I've ever considered real estate. I haven't, but only because I don't know much beyond the fact that they help people buy and sell houses!!!

So, how does it work - you work for a broker? Does the broker get the 3% comm and you get a % of that??? Or do you pay the broker set fees to be a part of that Real Estate group?

I'm trying to figure out a realistic first year income - and I know it takes a while to get off the ground with this business, but I"m trying to estimate a realistic time line to earnings where I'd need them!

Thanks!

[ourthreegirls]

Well, Terri, I can sort-of answer. I can give you my limited experience....
I got licensed in the summer of 03 (my license is now in escrow). It's not an easy business, but if you can sell, and if you know a lot of people that you can get the word out to that you are in real estate, that helps. When I first started, I can't tell you how many times I heard "are you working on your database?" Meaning, are you constantly adding names and addresses you can use to let people know you want to help them with their relocation needs? And, even if you know a TON of people, if you don't know many moving or ready to move, then be prepared to cold call people. I had to call people just to say "I'm so excited to be getting into real estate and I hope if you or someone you know is moving, you'll think of me". That is SO not me.
Anyway, as for commissions, the company I was with charged a standard commission of 7%. This gets charged to sellers when an agent sells their house. At the time of closing, 7% of the sales price gets taken out, 4% goes to the seller side of the transaction, 3% goes to the buyers side. Those percentages get split between the agents involved and the brokers. So, on the selling side, 2% goes to the broker, and 2% to the selling agent. On the buying side, 1.5% to the broker of the buyers agent, 1.5% to the buyers agent. On occasion the seller negotiates a 6% transaction, then it's split 3 and 3 on the buyer and seller sides. Does that make sense? And this is strictly how it was where I worked, but I know some companies are willing to give 5% or lower contracts, depending on the level of service they provide, but that gets complicated when a buyers agent and their broker are expecting a 3% commission. Also, as a disclaimer, that is how it works here in Kentucky. I have no clue how it may vary state to state.

Jennifer

[Grace]

It does work like that here too in Illinois, but the typical percentage is 5%. No one would pay 6% or 7%. 5% is bad enough. The average home here in the Chicago area (I think - I didn't look it up) is probably around $250,000, and as a mortgage broker, most of the purchase prices of the homes I do are anywhere from $300,000 to $1,000,000, and I would say my own average is around $400,000.

As for how to get customers, I work with an agent who does do people she knows, but most of her business comes from referrals from past clients, not necessarily just people she knows. She doesn't do any cold calling, although she may have back when she was brand new (3 years ago), but I don't know that for sure. The reason she gets so many referrals is because she doesn't just list homes or sell homes. She busts her hump working in the best interest of the buyer or seller (whomever she happens to be representing), either negotiating like heck for the buyer and going to bat for them on everything, and anticipating all the pitfalls in advance, and counseling them on good financial decisions, or doing things like staging homes that she is listing. The service she provides is phenomenal, so she has clients like crazy. I think in any service industry, and especially in one where there are LOTS of people providing that service (mortgage brokers fall into that category too), the only way to really succeed is to go way above and beyond all the time. There are no "easy" deals (in fact, we laugh, the ones that "seem" like they'll be easy and straightforward are always the ones that cause us the most grief! :D ).

Anyhow, real estate can be great if you're willing to work a LOT. Nights, weekends, and not have a lot of time off. Oh, and be willing to deal with a lot of stress all the time. That's what I've seen among the really successful agents around here, anyway.

[GingerPow]

Anyhow, real estate can be great if you're willing to work a LOT. Nights, weekends, and not have a lot of time off. Oh, and be willing to deal with a lot of stress all the time. That's what I've seen among the really successful agents around here, anyway.

Yes -- all of the above in prior posts was well explained! NJ and PA commissions are 6%. DH has been a R.E.Broker for 30+ years. A realtor's commission has to go a long way, and boy do they earn it!

Frankly, when your business expenses are out of pocket before the sale of your client's property, the net of what a realtor actually keeps has been chisled away by these ever e$calating marketing expen$e$.

Realtors do not work for a corporation in the classic sense, so they do not have an employer matching 401K, health or dental benefits, company car or a reimbursed expense account.

This has to be provided by the realtor themselves, out-of-pocket, some things are tax deductible, some not. DH put together a medical, also dental insurance group for his office, we all pay our share. We pay ourselves first in the IRA's, and manage our investments - no gold watch, health coverage or pension at retirement. Be smart now, or pay the piper later.

Another aspect of this line of work is how cyclical this business is. You have to be like the ant in the old Aesop's Grasshopper and Ant parable. We have had a few high-flying years here. The resort markets have been red-hot, and now it is in a cool-down. Sellers are in a panic, it is easy to get spoiled when the market is flying, they are not used to the "down" portion of the cycle. DH spends as much time reassuring nervous sellers these days as actually marketing their properties.

Properties are selling, just not at the pace they were, or the top dollar where they were. It is a natural market correction, when people analyze where the interest rates are from a historical perspective, they are still pretty decent. They are just higher than they have been in recent memory, so people get frightened and assume the worst.

Also, the smart people are coming in and buying. The frenzy has dissapated, values have come down a bit (not tremendously), some sellers just want out of the excess properties they own, so now they are making their deals.

And stress? Grace hit that nail on the head. When you consider that you are a very important person in the lives of many people whose homes you have listed, or are on the way to the settlement table, that is quite a bit of updating, assistance and reassuring. It's okay though, most people are very nice, DH works hard to get the job done for them, for him it is as much personal as business. As Grace said, above and beyond is a part of a successful agent's work day.

The cell phone is a part of our lives, it rings at all hours, almost 24/7. The stress level is high, not ALL of the people are nice - but when you take your job seriously, no detail of marketing or any transaction goes unattended. Same can be said for ANY job that one wants to do well. At least with most jobs, there is a weekend, and an evening away from the work.

All that being said --- the opportunities are tremendous, it is a great way to make a living for an independent spirit, some associations go beyond business and you can meet some fantastic people, you can create your own success - there is much to recommend it.

(Just to add: DH was his corporation's #1 Agent in NJ, #5 National, #10 Global for 2005, and '04 as well. He knows his stuff, and it took tremendous time, energy and work!)

[GingerPow]

Would you believe I forgot something?

I realized after posting the previous tome, that I didn't mention another thing that must be paid out of the realtor's commission.

Depending on the structure of the real estate office, a percentage of the commission goes to the office the agent is affiliated with, that can be as much as 50% of earned commission.

In the type of office where agents work as independent contractors, monthly fees are paid, with a very small (if any) portion of the commission going to the house.

Agents do not always get the full commission, only if they are on both ends of the deal, bringing a buyer to a house they have listed. If another agent brings in the buyer, they split the commission - both getting 3%.

[ourthreegirls]

Depending on the structure of the real estate office, a percentage of the commission goes to the office the agent is affiliated with, that can be as much as 50% of earned commission.

In the type of office where agents work as independent contractors, monthly fees are paid, with a very small (if any) portion of the commission going to the house.

Agents do not always get the full commission, only if they are on both ends of the deal, bringing a buyer to a house they have listed. If another agent brings in the buyer, they split the commission - both getting 3%.


Interesting. I didn't even know that about the type of office where they work as independent contractors, but it makes sense. The first part of your post is what I was referring to when I said it gets split with the broker.
I forgot to mention what the fees were that I paid (and I didn't have that much business....so the fees were part of why I put my license in escrow - it really added up!). Our Association of Realtors annual fee was 365.00. There was a QUARTERLY fee of 105.00 just to belong to the Multiple Listing Service. Oh and then there's E and O insurance...I'm thinking my broker paid that for us, but I don't know if every office works like that. My office paid for things like email accounts, voicemail accounts, etc. Any and all advertisements I paid for. Our office did pay for my first initial mailing - after that everything else I was responsible for. Then there are annual CE classes (mine weren't too expensive, but that's only because I searched for cheap ones! Some of them were pricey). Oh and I just remembered Real Estate School - we have tons of local schools here that prep you for the licensing exam. School was around 800 bucks and the exam was 75.00.
Having said all that negative stuff ;) I know lots and lots of successful agents. In my experience it can be a pretty cutthroat business - agents are very competitive for leads, but if you can handle stress and are willing to work your tail off, you can be very very successful! Good luck!

[Terri_A]

Thanks to all of you for the honest answers I was looking for. I know it's a competitive world and a slow starting business...but I'm going to keep getting information on it. I think I would be good at it...we'll see!

[Curiosity Hears]

Terri if you believe you will be good at it and enjoy it then absolutely do it.

I have been practicing real estate for almost two years now and love it. Like anything else it is what you make of it. For me I do it part time and the extra money is great. My primary job is being home with the girls when not in school. I really enjoy working with people and I feel like I am helping them achieve a goal.

If you any questions you would like to pm me with please feel free.

Much good luck and success to you.