New Real Estate Agent? Run Into The Rain

If you are a newer real estate agent the best advice I can give to you is to run out into the rain. ActiveRain, that is.

Besides being the single best learning tool (if you can use personal discernment) I have ever found it is also the best lead generation source I've come across. And, now this is very important to newer real estate agents, it's FREE!!!

To join, click here!

How Much Will I Make?

MYTH: All real estate agents make $150,000 a year, drive luxury SUVs and vacation three times per year.

Let's get a few things figured out here since you are considering a career in real estate sales. First, there are too many REALTORs as it is. Second it takes hard work, odd hours at times and you have to learn how to work with three year olds in 40 year old bodies. (Calm down, I'm not saying everyone acts like a three year old...but it does come up!)

Still undaunted? Good. You CAN make it. Here is how traditional real estate companies divide up your earnings;

Let's say your first couple of transactions are with buyers and you co-op on your first two transactions with another firm, which is really quite common. The sales incentive offered by the listing agent/seller is 3.0% of the sales price on a $175,000 house. Your commission received at closing is $5,250 to take back to your broker. (It'll probably be mailed/couriered if in KC area.) The traditional broker offers a 50% split to the agent so the agent receives $2,625 for the work he/she has done.

But wait, that is your full compensation for your time, expertise and expenses such as a mobile phone, gas, car washes, sign riders, E&O insurance, eating out and the like. With a traditional broker you will probably not incur the following expenses because they will take care of them for you...data entry, business cards, sign, and office space.

Now let us say you work for a more real estate agent friendly brokerage firm that offers little different compensation package. Same scenario as above, but now your split is 64% after the brokerage split and franchise fees. You walk away with $3,360. That's a difference of $735! Now you need to also take into account that in this scenario YOU will be responsible for your business cards, signs, data entry, web site management and office space in addition to the other expenses you are already responsible for. For the beginning agent these will probably add up to an additional $1,500 in the first year. (Email me if you would like a breakdown.)

So you see that in the second brokerage you would need to do at least two transactions a year to break even with the first brokerage. But how much money do you need to make. (You can probably expect to not make much the first 3-4 months! while you get started.) Well, let's figure it out!

Let's say you want to replace your job income and you make $50,000 a year. Your company currently pays your health insurance (about a $300/mo value at your self-employed cost) and pays you for a two week vacation. Let's value the vacation time at $1,925 for perc pay. Now as a self employed person you will be responsible for the full value of your social security taxes (were you aware your employer was paying half?) but that should be more than offset by all the tax deductions you will now be able to take advantage of! (See your tax professional.)

Add it up. $50,000 (salary) + $3,600 (health insurance) + $1,925 (vacation) = $55,525 will be needed to "replace" your current situation. How many transactions is that? Again, do some math. If your average house sale is $175,000 (not too hard around the metro Kansas City area) and your average commission paid is 3.0% (can be more or less, no set amount) and your split is 64% you will be paid (as in our example above) $3,360. $55,525 / $3,360 = 16.5 transactions. Let's get crazy and say you should average 1.5 transactions per month to replace your income.

By plugging into your brokerage's training programs, being willing to work and unafraid to talk to people you should be able to meet that goal. But there it is. Examine it and let me know what you think!

Don't Mail Those Bills!

Here is something you are going to want to consider before taking the plunge into a real estate career. Do you have enough money to last until after your first close? That could be 30, 60, 90, 120, 150 or even 180 days away! Now it doesn't have to be. I received my first commission check after only 50 days in the business. True, I worked my but off, created a little luck and gave thanks to the man above! I had kids to feed and bills to pay....

Shortly after turning in my first contract my broker, the wise Randy Lindemuth, looked at me seriously and said "Don't mail your bills until I have given you your check."

Don't mail my bills? What did he mean?

If you have never been self-employed you'll quickly find out. Closings slip. They get delayed a day, or two. Heck, I had one that floundered around in an "undead" state for thirty-two days past the contractual closing date before we got that sucker put to rest. Most closings go off without a hitch. But even with proper planning, good communication and due diligence a closing can slip back or fall apart altogether without any fault of your own.

One time I had a closing at 11:00 am that same day. A call came in from the buyer's agent at 9:30 that day saying the closing was off. "Why?" was my only response. It seems the buyer had gone into work that morning and his employer had transferred him to Florida. "But I have a home closing later today" the man responded. And his employer said that they would refund his soon to be lost deposit and he could move to Florida and have a job or he could stay here and be unemployed.

So you see, don't mail those bills until your broker hands you your check!