How Much Does It Cost To Become A Real Estate Agent?

Real Estate Agent with House Sale Advisors

This is something that we get asked a lot.  Most people don't have a clue how this business works and don't realize that they are in business for themselves.  They are business owners and have to treat it like that.  This is a pretty thorough list of what is in store for a new agent.  Unfortunately not many brokers are totally up front with prospective recruits and this contributes to the high failure rate.

Original content by Maria Morton SP00229578 2007027091

This is a question I hear every now and then from people who have been downsized, laid off or had their hours cut. What does it take to get into real estate? How much does it cost? How much does it pay? To make it easy for people who are wondering about a career in real estate, this article will break it down so each individual can calculate the expenses to get started.

The initial real estate classes needed can be taken online or in a classroom setting. Most states will require 30 hours. If you opt for the classroom, you may find 2 hour classes twice a week for 8 weeks, an intense 3 or 4 day session, or online at your own pace. The classes may cost around $135 - 600.A real estate calculator will run you around $90 - 240.

Once you pass the final test for the classes, you will apply to take the State Licensing Exam. If you will be working in more than one state, take the exam in the state in which you reside first and then apply for the other states. Cost of the exam may be around $75 - 115. There may also be other fees associated with the license exam. An FBI background check: $64 - 95. License Application: $15 - 30. License Fee: $45 - 100. Fingerprinting: $30 - 65.

Do you notice that there are many little fees and charges? real estate This is indicative of your future budget. Many little charges and fees which accumulate monthly, quarterly and annually. Get in the habit of keeping good records for taxes.

Annual Fees for renewing license(s), membership in MLS, national and state association dues, and use of Centralized Showing Services come to around $900/year.

Advanced Designations such as SRES, ABR, GRI, CRS, etc will be an additional $100/designation (or so) + continuing education expenses for those particular designations.

Errors and Ommissions Insurance: will cost another few hundred per year. Your broker may include this in your office fee.

iBox leases and eKey access adds $25/year per iBox + $80/quarter for the eKey. These charges will vary according to how those services are set up in your area.

Yard Signs cost about $50 - 85/sign. Sign Riders run about $7 - 30/rider. Open House Signs run around $25 - 50. Pointers will cost about $7 - 35 each. Flyer Boxes will run from $24 - 50. Sign costs vary according to size and material. Stakes also vary in cost. Your broker will have an agreement with a company to give you the best price they can negotiate and you will be alerted to sales 3 or 4 times per year. You will need at least 2 Yard signs, 1 Open House sign, 2 riders, 2 Open House signs and 5 Pointers to get started. Add to your supply as you go along.

Business Cards can be bought for $40 - 80 / 1,000 cards.

Professional Business Photograph: $150 - 240. You'll get this on a disk or flash drive so that you can upload as needed to all the sites and flyers you will be using.

Name Badge: $15 - 55.

Literature Display Holders for inside the home: $10 - 50.

Business Card Holder for desk or table: $10 -30.

Business Card Carrying Case: $10- 100.

Day Planner/ Scheduler/ Calendar: Free - $99. Get one and use it as a back up in case of technical failure.

Booklet Binding Machine: ~ $300 and up. Your broker will probably have one of these in the office.

Flyers: Print your self for ~ $35/100 including paper and ink or professionaly printed @ .50 - 1./each.

Website: Most brokers will give you a website. You may also wish to have another website not affiliated with anyone else. Plan on $25 - 99/month for this. Or, find a service to host it for you, buy your URL, and hire someone to build a custom website for you. This can be done for under $1,000 if you make a deal with a college student or several thousand dollars to have a professional company do a totally custom designed site.

Blog: Free to several hundred per month, depending on what add-ons they sell you. active rain 

Leads: the classes you take once you find a broker will teach you how to get leads and what to do with them once you get them. Everyone and their brother will try to sell you leads. Most of these 'lead generators' are just going to cost you money and give you nothing in return but a big waste of your time. Learn how to say "Hmm, that sounds interesting. Let me check with my accountant and get back with you." OR "I'm sorry, I can't handle any more leads right now. I have all the business I can handle from my referrals."

Zillow and Trulia are now selling Zip Codes. They will send you leads through your email when someone makes a request for more information. These leads run a range from $30 - several hundred dollars per month. You can buy all or part of a Zip Code. They offer other paid services as well. There are agents who pay THOUSANDS of DOLLARS every month for leads. Be careful out there.

800 numbers will cost around $25 - 50 / month, depending on which company and what they do for you.

Recorded message phone numbers will cost $25 -75 / month. Your broker may offer this as part of their package to you.

Postcards: Cost from .40 - 2.00 / each. This depends on the size and thickness of the card. Some companies will mail for you; some you will order and mail yourself.

CELL PHONE with DATA: plan on spending about $100 - 150 per month. Talk to the other agents in your office to see who they are using. You may wish to add the laptop connect anywhere with your phone. Or you may want to see about family plans available.

Other costs of doing business:  Pens, Paper, Paper Clips, Stapler, Staple remover, Calendars, Football Schedules, Event Schedules, Christmas Cards, Thank You Cards, Newsletters, etc.

You will also find yourself involved in Community Groups, BNI Groups, Networking Groups, and other activities to build your community contacts who may refer business to you. This will require your time and sometimes monetary dues.

Agent Tours: You will be marketing your listings to other agents working in your area who may have buyers for your properties. If you have an Agent Tour Day in your area, you will need to plan for the cost of food and drinks on tour days. Also plan to spend time and money notifying and inviting all the agents. Do this by email, in person, by phone and by flyer. If a person hears the same message 3 times in one week from 3 different mediums, they are more likely to show up.

Gas, car maintenance, and good auto insurance to cover transporting buyers around: Variable.

That's about it for expenses. How much can you make as a real estate agent?

money symbol Income depends on sales and broker charges. Most people starting out go with a big name brokerage in their area for the exposure and training. Those brokers tend to keep a larger percentage of the commission on each sale than the smaller brokerages. The bigger brokers also offer more training than the smaller ones. Some of the training you get in the beginning is not really what you want or need. But I digress. 

Keeping in mind that there is no usual commission because we don't want to violate the federal antitrust laws: here are some examples of possible income for a real estate agent.

A.  If an agent sold $1,000,000 worth of real estate over the course of a year and the commission was 6% on each transaction and the agent represented only one side (buyer or seller) on each transaction, the amount of commission would be $60,000 total. The commission goes to the Broker. The Broker would then pay the agent according to their agreement. Suppose their agreement was 75% for the agent; that would mean the agent would get $22,500. Don't forget that real estate agents are Independent Contractors so are responsible for paying their own INCOME TAXES. Real estate agents are not employees so you will need to plan on paying for your own HEALTH INSURANCE.

$22,500 - 28% for Income Taxes = 16,200. Minus $6,000 for Health Insurance = 12,200 left for living, retirement, marketing and advertising expenses.

B.  If an agent sold $600,000 worth of real estate (4 houses at $150,000/house), that would be an annual income of $13,500 before taxes, insurance and expenses.

C.  Suppose an agent sold $5,000,000 of real estate at a commission rate of 5%. Suppose that agent did not split the commission with another agent representing the buyer. That would be $250,000. Suppose the agent and their broker have an agreement which says the agent gets 95% of the commission. That agent would claim $237,500 of Income that year.

Income Potential is tremendous for a real estate agent; in reality, many agents cannot survive on the income they produce from their real estate business. This is why you see so many people get their real estate license and then leave the business within 5 years. It's also the reason you see real estate agents take jobs outside of their real estate business.

Live Laugh Play Love Learn  ......... Selling A House Is Like Making An Omelet ......
Maria Morton, Realtor
. Leading Edge Society 2010  

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Comments (2)

House Sale Advisors Lancaster and Lebanon Counties PA
House Sale Advisors - Quarryville, PA

This is something that we get asked a lot.  Most people don't have a clue how this business works and don't realize that they are in business for themselves.  They are business owners and have to treat it like that.  This is a pretty thorough list of what is in store for a new agent.  Unfortunately not many brokers are totally up front with prospective recruites and this contributes to the high failure rate.

Sep 20, 2011 11:18 AM
Bob and Debbie Gibbs
J. Rockcliff Realtors - Danville, CA

Very good list of fees and costs. Of course depending on where you live and your broker's policies your fees can be much higher. For example we pay $1800 per year for E&O insurance and an additional $2000 for technology fees. Additionally there is a 6% franchise fee payed to broker on each transaction that is in addition to the commission split. We also pay an escrow coordinator $375 per transaction and our office chages another $165 that I still dont understand. Bottom line is that you can do very well but I would guess that 85% of the agents are barely scraping by.

Sep 20, 2011 11:23 AM