Hi mBot, I was listening to the Honest Real Estate Agent podcasts and got the sense of that. The houses in the immediate area where I live average $182,900. OK, so 3% = $5,487.
I'm a realtor.
You are missing a little bit on this calculation. That may be the overall commission (buyer commission in the Twin Cities is 2.7% not 3%) but the agent doesn't keep it all. You have to split that with the broker. New agents may give up as much as half. More experienced agents keep a higher percentage but they may also pay monthly desk/brokerage fees.
On top of that you have MLS fees, association dues, marketing expenses, car expenses, E&O insurance all while getting no benefits from the brokerage and paying both sides of FICA.
Lets just speculate that you get a little more than half of that average sale (around $3,000) and the first one each year totally goes to fixed expenses. That would mean in order to make $30,000 you would need to sell 11 houses each year. Yes, it is very flexible and no day is the same but does that meet your goals? 11 sales would already be more than the national average of homes sold/agent.
In addition, the one thing you need to understand about being a realtor is that there are really 2 totally different jobs you do. The one everyone thinks of is knowing the process and contracts and then helping people buy or sell their home. The one that many don't think of is that you need to be good at marketing. You don't succeed until you are successful at finding clients and convincing them to work with you. If you have a large network of friends & family that will hire you that's helpful to get started. Otherwise, you need to work hard to find clients whether that be open houses, knocking on doors, direct mail, paying for leads or social media strategies.
Personally, I like the flexibility and variety involved but I think there's a pretty big turnover of part-time agents who don't understand the cost structure or what it takes to succeed.
And to answer another question - yes, you need to have a flexible schedule. I work when clients want to see me which includes days, nights, weekends and often on short notice. That said, I can suggest alternative times that work best and there are lots of times I am home with no commitments (since I only sell 10-15 houses/year).
I am glad you are here and thank you for the insights! I know very little about being a real estate agent. That is probably part of the appeal, part ignorance, and partly the excitement of being able to dig in and learn an entirely new business /industry.
In my early career, I worked in marketing and advertising. I am good at marketing for clients, but not always the best at marketing myself. I can see how the marketing could get expensive, with mailers and "stuff".
I have some dumb questions about real estate:
1. do most agents sign on with the big well known firms?
2. who puts in the big signs in the yards? Do you hire that out?
3. do you have sales quotas if you work with a big firm, is there a ton of pressure on you?
4. How much does it cost to obtain / maintain license? I could go for a broker's license too. I understand it gets spendy.
5. How do you cope with no health insurance, do you buy it for yourself or use your spouses?
6. I am tenacious but don't have the most refined sales skills. Did you get additional sales training?
The things I think I would like about real estate are learning the market and learning to do comparables and figuring out the puzzles of how to market properties. Meeting people is good. I am naturally more introverted but I do well with one on one relationships and focusing on individuals rather than groups.
I am also interested in investment real estate but I'm not sure if I'll go there, I may stick to the stock market. If being an agent would help me find solid deals then I may try out real estate investing. I could tailor to work with investors but that would likely mean doing low cost property in the city, that is not necessarily what I want to do.
