Are you interested in selling real estate and want to know more?

A career as a real estate agent is an ideal occupation for many, but it can be the most frustrating job on earth if you are unprepared financially and emotionally for the day-to-day life of being an agent. To assure both job satisfaction and success, you need to know what real estate as an occupation is really like as well as what personal, financial and educational commitments it takes to make a living as an agent.

What is a real estate agent?

According to the Michigan Occupational Information System description, real estate agents rent, buy and sell property for clients on a commission basis. A newer definition should include the representation of buyers, and working on a fee-for-service basis, offering limited services for set fees.

Real estate agents are regulated by the state they live in, and must be licensed to do business by the state licensing authority. When you are licensed, you can handle a property transaction for a client on behalf of a broker or a builder and are subject to the rules and regulations as outlined by the state. Without a license, you can still operate in the industry, but you are limited in the duties you can perform for a broker, builder or an agent, and therefore, limited in your earning power. To become a REALTOR®, you must meet the age, educational and other requirements in your state, plus you must join and retain active membership in the National Association of REALTORS® (N.A.R.) Only N.A.R. members can call themselves REALTORS.

All Realtors are real estate agents, but not all real estate agents are Realtors. An agent means that you are the representative of someone else. Usually this means that you are the agent of the real estate broker or a builder. One of the largest misconceptions about the industry is that as a licensed professional you are an agent of the client. Only the broker can be an agent to the client, and then only through contractual agreement. To become a licensed broker requires more education in most states than becoming an agent. Only brokers can be fiduciaries of the client, yet most clients believe that the agent with whom they are working is "their agent," a situation the real estate industry is attempting to address through the device of designated agency, in which the broker can appoint an agent to be the client's representative. See the laws in your state for clarification by visiting your state association of realtors found on the front page of Realtor.com.

How do real estate agents earn money?

In most states, real estate agents work as contract laborers who are supervised by broker/managers. They are the agents of the broker, and work on a split commission basis. Most of the time the broker takes half of the commission earned. If a typical split is 50/50 between the broker who lists the property and his/her agent, the listing agent will earn 1 1/2 percent commission and the listing broker will take 1 1/2 percent. The selling broker (representing the buyer) will split the remaining three percent with his/her agent. In other words, you won't earn any money until you close a home either for a buyer or seller or both, unless you work for a firm that pays a salary to its agents, or you work as an assistant to an agent or a broker.

There is still discussion about who pays the commission, the seller or the buyer. By contract, the listing agent will typically provide for the disbursement of commissions between the listing broker, listing agent, and cooperating broker (the broker representing the buyer) from the seller's proceeds at closing. This has fostered the belief that the seller pays the commission out of the equity of the home. In fact, it is the buyer who actually pays the commission through the loan proceeds. The first argument for this is that the commission is built in to the sales price, therefore it is over and above the seller's equity. The second argument is that the amount of the loan must cover the commission fees, therefore it is the buyer who actually pays the commission because it is s/he who brings sufficient funds to the table to do so. Due to the advancement of buyers' agency, new contracts may call for unique distribution of the agents' fees according to whether or not the buyer is represented by an exclusive buyer's agent and whether the buyer and agent contract separately from the sales contract for the payment of the fees. Eventually, listing contracts may only cover fees to the seller, and the buyers' representation agreements will include the payment of fees to the buyer's agent. Fees may be paid upon closing on both sides, or may be paid as a draw for services rendered along the way, by contractual arrangement.

There are some brokerages that operate on the 100% commission rule, which means that the agent does not share commissions with the broker, but instead pays franchise fees and amortized office costs to the managing broker/owner. These arrangements can put more money in the agent's pocket but these brokers will typically offer openings only to more experienced agents or those new agents with the greatest potential for earnings.

A commission-only lifestyle is challenging because not only do you need to learn as much as possible about your new occupation to gain needed expertise, you must also sell clients on the idea of hiring you even though you are a rookie. Many people get started with a courtesy listing from a relative or friend, but don't expect your friends and family to automatically give you listings or ask your help when they want to buy a new home. Many people know more than one real estate agent and have their own reasons for choosing to work with one.

Growing in popularity are fee-for-service business models in which agents charge a set fee for certain services such as the preparation of a market analysis or the holding of an open house. The ability to charge fees for services, instead of offering full fees for full service are subject to the permission of the broker. Since you are working under the auspices of his/her name, it should be the broker's decision how to charge for services. Most brokers would accept a fee for service fee in exchange for a waiver of liability from the consumer.

The role of the broker

What will a broker do for you? Brokers are valuable for their reputations in the marketplace and can bring you a lot of business based on their high profile or niche. They are also your liability buffer and will maintain errors and omissions insurance to protect themselves or you in the event of a gaff. Depending on their size, they may have support personnel that can save you time and money as you get started. Particularly valuable are those brokers who maintain tech support staff and office managers and assistants to help with many time-consuming details.

Brokers will typically give new agents desk space and access to phones and some technology such as shared computers. They also provide some training and other small perks such as pay for speakers or trainers to visit, sharing software, or providing discounts on coop purchases of office supplies. Brokers will pay some advertising costs upfront for listing agents' listings. Otherwise, the cost of doing business, including self-promotion, will fall on the agent, so the agent must be prepared to cover their own expenses in anticipation of their initial sales. This can take as long as six months to a year, before the agent is earning enough in commissions to cover his/her expenses.

Part II - What Does a Real Estate Agent Do All Day?

Published: April 11, 2000

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.