Mentorship

With the booming real estate market, especially locally, we are seeing lots of people interested in the real estate business… friends, family, & clients. Here are the requirements to become a Realtor and what you need to know before you take the first steps towards changing your career.

It all starts with real estate school, but those of us in the business a while know there should be some sort of personality exam first. HA! It’s a very interesting and challenging business, but so much fun most of the time! Here are the requirements to become a Realtor and what you need to know before you take the first steps towards changing your career.

Real Estate School

This is the actual real first step. My schooling was 16 years ago, WHOA! So things have obviously changed, but the goal of real estate school is to provide a framework for the industry and help you learn to pass the test. Then the real education begins. 😉  My top recommendation would be a real school like Kaplan where their sole focus is the real estate industry and surrounding fields (appraisers, etc).

There are other ways to do it, I think our local community college and probably the University of Colorado at Colorado Springs (UCCS) have real estate classes. Classes can be taken on-line through schools all over the country.

Real Estate Test

(Dun dun DUNNN)

• You have to pay each time
• There is one test facility in Colorado Springs (and one in Pueblo)
• There are two portions… State and National
• Plan a couple hours
• Results pretty much immediately
• I think the majority do not pass the first time
• Your license can transfer to different state with different levels of reciprocity (some are full transfer, some partial, some require taking their state test, some don’t transfer and you have to start over)

Hanging Your New License

Once you pass the test!.. you will soon have a Colorado Real Estate license, but now you have to figure out where to “hang” your license. During real estate school, if you went to classes at Kaplan in person, some real estate companies will come visit your class and do some light recruiting. You may also do research on your own. What do you want? … what do you need?

• First, the state requires hanging your license under a brokerage for minimum 2 years to be supervised by a broker.
• small or big?
• boutique or big box?
• company splits or desk fees?
• personality (yes, offices carry different personalities, and like any job, it’s nice to get along with the people you work with)
• monthly meetings
• supporting staff
• mentor program

Once you pass your test, to be issued a license, you have to be fingerprinted by the state of Colorado. They do a full background check.

The Costs of Being a Realtor

It is expensive to get going; there are start-up and recurring costs:

• Real Estate School
• PPAR/CAR/NAR (see next paragraph) – monthly/annually
• Electronic Contract Software – monthly
• License Renewal – every 1-3 years
• Signage – as needed
• Lockboxes – as needed
• Education – multiple times annually
• Gas/vehicle maintenance – weekly/monthly (I drive now about 25,000 miles per year)
• Meals, expenses, client referral gifts
• I’m sure there are others I’m not thinking of!

Join a Real Estate Board

Our local board is the Pikes Peak Association of Realtors. Membership here includes membership to the local board (PPAR), Colorado Association of Realtors (CAR) and National Association of Realtors (NAR). To join the board there are required orientation and ethics classes. You will learn how to use the MLS and how to handle various situations. It would also be advised to take additional classes through PPAR or local title companies for things like contracts, electronic contract software, etc. There is so much you can learn.

Required Continuing Education

As with most licensed profession, continued education is required… a certain amount of hours per 1 and 3 year period… ethics, contracts, elective courses… all to help you become better at what you do.

The industry is constantly changing, the contracts change annually, every transaction is different because of various parties involved and every home is unique.

My best advice

• work on a team or under a mentor for at least a year!
• soak up everything you can from the successful agents around you
• SAVE$$!… it can take months/years to be truly successful, and even then there are rollercoaster times as the market shifts. It may be several months before you close your first sale, and you need to still be able to pay your rent/mortgage during that time… and probably eat.

If you have a friend who is a Realtor in Colorado Springs, take them to lunch or coffee and “pick their brain”. I have done this with several people in the past few years. I love helping people, so I want to talk them through if it’s a good choice. Everyone thinks it’s so easy right now because it’s busy, but in 16+ years, this is the hardest market I think I’ve worked! If you are interested, jump in with both feet and prepare to be challenged, frustrated, encouraged, let-down, built-up, and grow!  If you already have your license check out our mentorship program. It is a good option to get off on a good foot once you have your license.

Ever wonder HOW and HOW MUCH a Realtor gets paid?

Before I bought my first house, I was aware of HOW Realtors got paid. I had the chance to work in the industry earlier in my working career. However, it wasn’t until I started researching how to become a Realtor, and considered becoming a Realtor myself, that I learned more about HOW MUCH a real estate agent gets paid.

I was curious to find out if some of my friends {that had purchased a home} knew how a real estate agent got paid. Or if they knew how much a Realtor makes. So recently I asked some folks if they knew answers to these questions. A small handful knew exactly how and how much. But, most everyone said something like…

“I have no idea!”

“Now that I think about it, I still wonder how much our Realtor got paid.”

“That’s a GREAT question. How does a real estate agent get paid?”

So, that boomeranged! The question came right back at me. Huh… Okay… Well, I’d love to answer that question.

Maybe you’ve wondered about this yourself. Maybe you feel uncomfortable asking. Maybe it never crossed your mind to ask. Either way, it’s okay and understandable. Generally speaking, we don’t ask our co-workers or friends what they make at their jobs. So it makes sense that we don’t think about these things. Or if we do, we’re uncomfortable.

Asking a real estate agent how they get paid let alone how much money, exactly. Well…. that’s awkward!

So, it’s a great question, and absolutely okay to ask!! AND it’s all part of, for most people, the largest transaction you will tackle in your lifetime. And no matter if you’re buying or selling, you are contributing to HOW and HOW MUCH the Realtor makes. I’ll cover this from a VERY high level, bird’s eye view.

Okay, so let’s start with HOW and that will lead us to HOW MUCH…

No Settlement, No Paycheck = 100% Commission

The vast majority of Realtors are only paid if your deal closes. In other words, they get paid via commission from the sale of the house. It’s not about finding a house or putting a sign in your yard, and then agreeing on a final price.

They have to sell a house either for a seller or to a buyer.

They have to get the entire transaction processed and to the “closing table” to complete the sale. And there are many hurdles and hoops to jump over and go through before you get to that closing table, my friend.

A house could not pass inspection… loans fall through… appraisals fall short of the agreed price… or any of the other hiccups that can occur in the process…

Soooooo…no closing table with everyone signed on the dotted line, then no payday for that realtor. Bummer huh!?

Like the English language, there are exceptions to this general rule of thumb though. For example, depending on the negotiated contract, there still might be a commission due to the Realtor. And there are brokerage companies that pay their realtors on salary, with an extra commission, bonus structure. Like I said…this is a “typically speaking” overview that will not include all the exceptions. Otherwise, we’d be here all day.

Okay, moving on…

Who Pays the Real Estate Commission: Sellers And Buyers And Brokers, Oh My!

Typically speaking (you’re gonna get tired of me saying that!), the seller pays the commission for the Realtor fees. Which are always negotiated between the seller and their listing agent. And then if there is another agent involved in that transaction, then they share the commission with that Realtor. There are exceptions to this typical process. You may think that’s a bummer for sellers. Yet, when you think about it, usually the sales prices takes Realtor commission or the real estate fees into consideration. So the buyer is contributing through their agreement to that sales price.

As I mentioned above, I’m giving a broad overview. For more info on the HOW a Realtor gets paid, check out this article on Realtor.com.

Now this brings us to HOW MUCH…

Slice of the Pie: Negotiable Commission Rate of the Sale

If the sale of the house is the whole pie, then a Realtor gets a thin slice. Across the country and here in Colorado, the average commission rate agreed upon by sellers and listing agents is a variable percentage of the sales price of the house. This varies based on many factors – market area, market conditions, type of property, negotiated elements of the real estate contract, and the list goes on. Realtors cannot price fix! So, the commission percentage is always negotiable. If there is another agent involved in the transaction on the buying side, then it’s shared. And even that is up for discussion.

Myth Buster: Not All Realtors Are Rich!

You have to consider that the majority of Realtors are NOT independent brokers. So what does this mean, you ask? Every state is different. In Colorado, real estate agents must work under the umbrella of a licensed broker for at least two years and are called associate brokers. Generally speaking, most remain with a broker rather than go independent or open their own brokerage. This choice affords them support with their marketing, legitimizes their business with clients, and gives them the opportunity to not carry the brokerage liabilities and responsibilities. And that means these real estate agents are splitting their commission with their employing broker.

After these splits of the commission, your average Colorado Realtor makes $51,240*, which is a bit above the national median salary for a Realtor of $44,090*. And that’s all before you take into consideration business expenses, taxes, and other overhead costs.

*Source: U.S. Department of Labor Bureau of Labor Statistics

The Nuts and Bolts: A Basic Example

Due to a job change, a seller is moving out of state and needs a buyer for their house. Realtor A meets with them and signs a contract to be their Listing Agent. Due to the marketing required to sell their home, they agree to a reasonable and appropriate commission rate for the sale of the house. Realtor B brings a buyer to the house. They make an offer. Realtor A and B, on behalf of their seller and buyer, agree on a sales price. They go through all the inspection, appraisal, and loan process. So, let’s take a look at how this will all break down once they get to the closing table…

1. Total Commission (a percentage of the Sales Price of the Home) = $10,000
2. Negotiated agreement of Listing and Buyer Brokerages = 50/50 Split
3. Listing Broker = $5000 commission*, pays $3,000 to Listing Agent
(Broker/Listing Agent are sharing the commission 60/40)
4. Buyer Agent’s Broker = $5000 commission, pays $2500 to the Buyer Agent
(Broker/Buyer Agent are splitting the commission 50/50)

*Remember, no commission is paid to a listing or buyer agent directly. It’s paid to the broker, then distributed to the agent(s) based on the split with the brokerage company.

And don’t forget! This is all before expenses, marketing, taxes, and other costs to run an independent business are taken into consideration.

Sooooo…

I hope this brief overview has helped answers those questions. Bottom line, a Realtor is working for you! Until you get your house purchased or sold, they don’t see a paycheck. If you’d like to understand more or have further questions, contact me. Part of my job is to answer these and any other question you have about real estate. Looking forward to hearing from you.

And remember a Realtor can be a Real Estate Agent, but a Real Estate Agent can’t always be a Realtor. And an Associate Broker can be a…. Well, keep your eye on our real estate blog for that upcoming answer… 🙂