Becoming a Real Estate Agent

You can become a real estate agent in most any state if you are not a wanted felon and if you can sit through a week or two's worth of classes. But I have a question for you;

Are you capable of putting the interest of your client ahead of your best interests?

Seriously. I've heard agents say things like "I need the commission check" or "I have to make this go through no matter what" or even worse "If I don't' know about it...it's okay." The last is usually a precursor to allowing mortgage fraud to happen.

This is a humbling business. There are times when I'm on top of the world. Earn $23,400 in one month and you'll think you have things going. Earn $0 in the next two months and you'll come crashing right back down to earth.

But here is the deal. It really isn't important how much you make. At least to the client. They have hired you to make sure they get the best deal possible whether buying or selling. They depend on you to advise them. And sometimes the best advice I can give is to not sell. To not buy. To not move forward. To cancel the contract. To walk away.

You can be sure it hurts to do it. The thoughts of my own well-being race through my head, too. But, and here is where personal ethics and will-power come in, the right thing to do is the right thing to do.

I always ask myself "How would I want to handle it if it were me?" The answer always becomes clear that way.

Want to be a real estate agent?

I stumbled across this post today. It's a must read for all prospective real estate agents.

Real Life Story!

I've written here before that you need to be careful how you spend you money as a real estate agent. Want an example?

I had 4 sides scheduled to close by March 30. (A side is a transaction. For instance, if I represent the buyer, that's one side. Both the buyer and seller, that's two sides.) Now I only have 1 side!

Two sides fell out because of extensive, and I mean extensive termite damage. Worst I've ever seen. The buyer went running and frankly he should have. The seller still hasn't adjusted to the situation even though I have been adamant as to what he should do. (Clients don't always listen or hear only what they want to hear.)

Another side fell out because the chimney needs rebuilding! Rebuilding! How often does that happen? (It may still be saved. But with each passing hour I'm sure the seller is thinking of just renting the property.)

So, now you see why you must be liquid and flexible in your funds as a real estate agent. We have the potential to make a lot of money. But we work very hard, work with many different personalities and are on the phone even when we don't want to be. It's all part of the profession.

And you can never forget when working with your clients that you are working for their benefit...not yours.

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!

How Flexible is Your Schedule?

If you are coming from the 9-5 world you may find real estate sales to be a shock to your system. Personally, I love the ever changing dynamics of this business. But the very things I do not mind drive many people away within the first couple of deals. Last night was a classic example.

The Setup: Kansas vs. Kansas State is a big deal here in the heartland when it comes to basketball. Tip off is at 8:00 pm and I'm set to meet a bunch of buddies on both sides of the issue up at Johnny's in Olathe. At 5:00 pm an offer comes in on one of my listings.

The Issue: Many agents I know are adamant about keeping certain business hours. They protect their family and recreational time fervently. And I too, set aside time that is not to be disturbed...like the birth of a child or Sunday morning services or that long awaited date with my bride. But in a soft seller's market I do not believe it is in the best interest of my client to be so rigid. So I put in a call to my client and we begin the process.

The Outcome: Throughout the KU v KSU game, while sitting in a noisy restaurant/bar with a bunch of friends I constantly had to keep sending text messages and answering phone calls as the night wore on with counter offer after counter offer. We finally wrapped it all up around 10:00 pm...just as the game was ending! So with one eye on the game, another on my buddies and a third eye on the deal we got it all put together.

Now I can hear it already! You were negotiating a deal in a bar? How could you do the best job for your clients? What if you forget something? Blah, blah, blah. Here's the deal. My clients know me. They read my blogs. We talk a lot. They know basketball and friends and family are important to me. They are just as likely to call me at lunch and hear me sitting with my 9 year old up at school as they are to catch me at the office. The beauty of being a real estate agent in the 21st century is the ability to be mobile. Mobile phones and laptops and PDAs make life and business easier to conduct.

But with all this mobility and communication comes the trade off. Real estate, for me, is usually conducted within the hours of 9-6. Actually, most deals are done within those time constraints. But flexibility is a must and if I occasionally have to be on the phones at 10:00 pm, so be it. For me, it beats knowing that I HAVE to be at the office at 8:30 am tomorrow morning. It beats the boss telling me I can be hungry at 12:00 but have to be back by 1:00. And that whether or not the work is finished earlier or later I can leave at 5:00. Sometimes I stay up late and work till 1:00 am on different real estate projects. Sometimes I don't make it to the office until 10:30 the next day.

I'm self-employed. I can do that. So long as I exceed the expectations of my clients and work hard enough to provide the lifestyle for my family that they deserve. There it is. The ying and yang of a REALTOR's business hours.

A Word from Keller Williams Realty Olathe Team Leader Rob Hill

In a moment here I will introduce you to my Team Leader. Keller Williams uses team leaders to organize and run the day to day affairs of the agents in the office. Of course, we also have a supervising broker. But the Team Leader is who most agents will interact with when setting goals, overcoming obstacles and answering questions regarding negotiations. So without further ado I give you Rob Hill.

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What a great day it is in real estate! Actually, that can be said of every single day since I took the huge step of faith in entering the real estate business many years ago. I couldn’t have made a better decision but it took some time before I realized my potential and began on my pathway to success.

It took a while for me to conclude that simply having my real estate license wasn’t going to automatically bring commission checks and happiness! I soon figured out that the more skilled I was at generating leads from within my sphere of influence the higher my sales volume became.

There are virtually hundreds of real estate agents that are clamoring for every listing and buyer in my market area and I needed to be confident that there is no agent more skilled and committed than I. The problem, however, is where do those skills come from that can give an agent the edge in a battle for a listing or buyer? I found that many have gone before me that have failed and also those that have succeeded in having the know-how and savvy to be a cut above the rest.

I am my own business manager and independent contractor. I am the only one who can make or break my business and having the finest tools of the trade at my disposal is critical. I floundered at a level far below my potential for many years before a colleague suggested I take some time and look closely at the advantages of a company that is at the forefront in training, on the cutting edge of the technology that is so important in our industry and our success and provides a company intent on seeing every associate not only succeed but win in their real estate business.

I could have placed my real estate license with any company in the entire Kansas City area and I searched and researched until I found the best place to help me succeed. That company, Keller Williams Realty, gives every associate the optimum opportunity to build and learn the skills necessary to compete and win.

My business is worth the best. Is yours?

Rob Hill
Team Leader
Keller Williams Realty
Diamond Partners, Inc. - Olathe

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!