So You Want to Become a Realtor
During my career, I have had many clients, friends, and referrals tell me they want to become a Realtor. “Great,” I say. Then I ask why. There are a million reasons to become a Realtor and another million not to. I love my career. I love my clients (well, most of them). But, just like anything, there are downsides. I am always happy to educate excited “Realtors-to-be” so they get the full picture of what taking the real estate plunge will actually look like. Here are some of the ideas and possible misconceptions I hear about becoming a Realtor.
- “I just love to look at houses!” Me too. The fact is, there is SO much more to being a Realtor than just looking at pretty houses. The scheduling, the driving, the gas consumption, the late clients, the paperwork, the rejection, the people that have no intention of buying because they just like to look at houses too. The list goes on and on.
- “I can make my own schedule.” Yes, you can. However, if you want to make money at it, at least in the beginning, your schedule won’t be yours. It will be your client’s. I understand that you want to be at your children’s after school activities and their sporting events on the weekends and church and family dinners. However, when do you think most people have time to meet with you or go look at houses? After work and on weekends – the same time you want to be with your friends and family. Once you are established and have a solid foundation, your boundaries can be much more rigid. You can hire people to work for you when you are not able. Just know that many nights, weekends, and vacations will be interrupted because of the fact that you “can make your own schedule.”
- “I know so many people that it won’t take me long to be successful.” That may be true. There are certainly people who are so well connected and respected in their community that no matter what new venture they take on, others will support them. It should also be noted that no matter how many people you know, they know you in your current role. It may take a while for them to think of you as a Realtor. It may take a while for them to trust you when you are new. You also should know that just because people know and like you, it doesn’t necessarily mean that they will work with you. Think about how many Realtors you currently know. So does everyone else. If you know three in your current circle, now your circle will have four. How are your friends going to choose which one to work with? Sometimes they choose none of you just so they don’t have hurt feelings in the group.
- “My Realtor made a ton of money and didn’t do much for it.” That could also be true. Here is the common break down of how a Realtor is paid and how much they keep. The Realtor is paid a percentage of the purchase price at closing. A portion of that goes to their brokerage. A portion of that needs to be held out for income tax, self-employment tax, and insurance. There are monthly fees associated with being a Realtor that must be paid in order to do their job. Then, they can pay themselves back for the office supplies, gas, marketing, etc. that they spent on helping you buy or sell your house, before they got paid. Depending on the size of the transaction, the gross commission may be higher but so are expenses. So, when you think about how much a Realtor makes, it can look a lot like this:
$200,000 purchase price x 3% commission = $6,000
30% to the brokerage = $1800
15% for taxes (that is the lowest tax bracket) = $630
15.3% for self-employment FICA taxes = $642.60
Health Insurance (average health, 30-year old, high deductible) = $300
MLS fee = $45
Sentricard fee = $37
Association dues = $45
Misc supplies and marketing expenses = $325
Total Net Commission = $2,175.40
This does not take into account costs for licensing, continuing education, website, client closing gifts/meals, other office fees, outsourcing of any other duties, etc.
- “It is so easy.” The good ones make it look like that. I had a very good, long-term client of mine decide to get his real estate license. Unfortunately, he didn’t consult with anyone before doing so. He was not only unaware of the costs involved just to keep his license active and do the job, but the complexity of forms, contracts, compliance, Fair Housing, and the time it would take to do a great job for his clients. After a few months he came to the realization that it just was not at all what it seemed when I was representing him as his Realtor. He admitted that I had made it look easy and, therefore, it seemed like a great way to save and make some money.
My advice is, if you are thinking about becoming a Realtor, consult with several in different stages of their career. Make sure you take into account all requirements and expenses prior to quitting your day job. Most Realtors should save up about 6 months of living expenses before taking the plunge into full time real estate. You may find that you are a great candidate, are prepared, and will make a great career out of real estate. Or you may find that you just want to go to open houses on weekends and have fun!
If this blog interests you and you are looking for more info on being a part-time Realtor, check out this article by Fit Small Business.
Photo courtesy of jk1991 via freedigitalphotos.net
Michelle Froedge is a residential Realtor and Principal Broker in the Greater Nashville and Williamson County areas of Tennessee. Wife to Robert, “Mom” to Tyler and Livvie, Auntie to Zelamie, she is a vegetarian and sings in her spare time. Michelle has lived in Nashville and Franklin since 1997 and has been selling homes since 2004.