Question Details

Sara, Both Buyer and Seller in

I am thinking of becoming a real estate agent. After becoming an agent would I be able to save on commissions

Asked by Sara, Thu Oct 4, 2007

With all the discouraging news about interest rates going up, and the prices falling, I am
researching in the above question. How much would I be able to save as an agent?
I' would be selling my home and buying another one.

Help the community by answering this question:


Yikes! In addition to all of the answers regarding the value of using a Realtor (which are ALL true), real estate is an expensive hobby if you are going to do just one or two transactions. Let me break it down a bit...Depending on your state, you will most likely have to take classes and pass a test to get your license. You will have to pay the state for your licensing fees and FBI background fingerprinting. You will have to pay fees to your local association and to your state and national assocations. You will have to pay local MLS usage fees. You will have to buy a lockbox. You will have to pay for errors and omissions insurance....all before you list or sell your first house. You will have to affiliate with a brokerage and split your commission with the company. You will have to pay transaction fees, pay for signs, etc. You will have to pay taxes on the earnings...

So hypothetically:
Classes - $300
State Lic / FBI - $200
Assoc Fees - $500 annually
MLS Fees - $400 annually
E&O Ins - $1000 anually
Lockbox - $100 ea
Total - First year $2,500 start up fees

Many firms will not allow you to list your own home yourself - so you may have to pay a co-listing agent a fee...Also, often firms require rookie agents to work with a mentor and give them a precentage of your commission on all of your first several transactions. You will still have to pay the buyer's agent commission when you sell your home.

You will end up spending countless hours on all these endeavors. Most firms will not want to bring you on, as they want professional Realtors on board as opposed to those just looking to make a quick buck and get out. Much luck to you as you evaluate your path...
2 votes Thank Flag Link Thu Oct 4, 2007
Erin Stumpf…, Real Estate Pro in Sacramento, CA
Always pay yourself! Repeat, always pay yourself. You'll need to show income and have the expense later in life. My accountant even makes me charge myself for property management. If you have kids, put them on the payroll too.

I'm not an accountant, just someone who pays for one.
0 votes Thank Flag Link Thu Oct 4, 2007
I am licensed in two states (CA and PA). I haven't had this issue come up with my broker in CA yet, however, in PA, my broker only permits a discount on my commission IF I have met a certain quota for the year. In addition, as an agent AND a seller, you MUST disclose in writing to all prospective buyers that you are a licensed agent.

All of the answers given here contain valuable information. I recommend researching the expenses involved to obtain and maintain your license.
0 votes Thank Flag Link Thu Oct 4, 2007
It doesn't seem as though you really want to become a real estate agent. It seems as though you want to skirt the system and try to save/make a few bucks. Ha, ha! A well oiled office would shun this type of inquiry. It's simply not professional. I own a real estate company in Massachusetts and have had "potential" real estate agents ask me questions in the same vain. Good luck with your research.
Web Reference:
0 votes Thank Flag Link Thu Oct 4, 2007
Hi Sara,

Many people have similar notions when the time comes to buy or sell a property. The crucial piece that often gets left out in analyzing cost/savings is expertise. You can save on fees by obtaining your Real Estate license and doing the job yourself, but you run a very high risk of not being adequately prepared to determine/negotiate the best value and to shepherd a transaction from contract to closing. Would you hire a rookie agent fresh out of Real Estate school to represent your best interests? I know that I sure wasn't prepared to command top market value fresh out of school. The job might not be brain surgery, but there is a very steep learning curve. I would offer that it takes a good 10-20 transactions before an agent really starts to have a clue about what they are doing. I would opt for a professional with years of knowledge, networking enroads, and success. After you pay the requisite licensing fees, and the opportunity cost of the classwork (wouldn't you be better served using this time to earn money?), the fee savings will be marginalized as well. Don't lose track of the big picture. Think of the house flipper who starts going cheap on cost by putting in sheet vinyl and laminate countertops in the house, without thought to spending a bit more money for far greater returns. At the end of the day, who cares what you save in cost if you produce a lower net? Don't want to make the mistake of winning the battle but losing the war. If you want to launch a career in Real Estate, by all means get your license. If you are simply looking to cut cost, you'll very likely end up doing yourself more harm than good. Just this agent's opinion. Best of luck in whatever you choose to do.
0 votes Thank Flag Link Thu Oct 4, 2007
In many regions it is typical for sellers to not pay commissions to agents acting as a principal in the transaction. Also, many brokerages policies will not permit an agent to be the listing agent for their own property, as this could create a conflict of interest.

Now, there is another thing I have to address here, and forgive me if I sound a bit harsh: The way you worded your question indicates to me that there are a few things that you may not quite understand about the value of a REALTOR.

If you were to become a REALTOR, the "savings" that you are looking for would be garnered not through your commissions on buying and selling your own home. The true savings would come from making use of the training you receive -- training on how to properly price a home, training on how to negotiate, and training on how to protect your client (or yourself) from buying into a "bad deal." This is why on average, a home listed with a REALTOR will net about 17% more on the market than a similar home sold by an unrepresented seller. A REALTOR serves as a personal advocate, marketing expert, and trained negotiator, (among other things). If you were to simply get your license to do your own transactions, you would be wasting your time and money. In addition to the pre-licensing education requirement, testing fees, and licensing fees, there are also the fees to join the local, state, and national association of REALTORS, the fees to use the Multiple Listing Service, and whatever personal marketing expenses you may have. I don't recommend anyone get into this business unless they actually plan to make a business of it. You need to consider you will likely incur $5,000 or more in marketing expenses, in your first year alone. Close to 80% of new agents fail in this business, and do not stay in business more than a year as a result of being unprepared for the reality of it. You need to actually work, and serve your clients needs in order to succeed. There is no "get-rich-quick" that you can count on. I invite you to read the article I referenced, below to get a better idea of the true value of a REALTOR's services.

Also, I am not sure what "discouraging" news you are referring to. Mortgage rates have dropped recently. Rates for non-conforming loans (sub-prime and Jumbo loans) have been adversely affected by the recent troubles in the mortgage industry, but conforming loans for credit-worthy borrowers are doing quite well.

I hope my answer doesn't offend you, but I think you deserve an honest, straight-forward answer, before you potentially lay out your money and spend your time getting your license only to get little if any return on your investment. Good luck to you, in whatever you decide to do.
0 votes Thank Flag Link Thu Oct 4, 2007
The answer to a question like this potentially lies with the Broker that you would place your license under. In most states, the Broker sets the rules on fees and commissions. In some cases, as an agent selling your own property, you might be able to forgo your own commission. Your Broker may require a smaller amount than usual. Let's not forget that as an agent and a Broker, there is some risk involved with transferring Real Estate. This is why we carry insurances. Another fact to consider is that the Broker will be paying to advertise the property and should expect some rate of return on that investment. In the case of buying a property, some agents pay themselves a commision and then may be able to roll that money back into the deal to offset the mortgage. All this being said, with proper training, the knowledge gained and the tools available to you as an agent you may be better able to spot a really good deal on a property and realise saving there. You must take into account the costs that you would incur in the education required to obtain your license and the fees that you may have to pay in association dues. Becoming a Real Estate Agent is usually not cheap. Good luck!
0 votes Thank Flag Link Thu Oct 4, 2007
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