The Basics Every New Real Estate Agent Needs to Know
Remember: You're Starting a Business, Not a Career
Let's get one thing out of the way right off the bat: this article is about the reality of the real estate business for new agents. I'm not sugar-coating anything, and I don't have an agenda. There is only one entity responsible for your future success or failure as a real estate agent ... and it's you.
Why Is This a Business, Not a Career?
You are an independent contractor. You are in business for yourself. Even the IRS has created a special category that recognizes these facts. Unfortunately, all of those doubts, fears, and insecurities that go along with starting out in a new business with your only income dependent on your abilities will come into play and create dependencies that may not be good for you.
Why is this a business and not a career; at least in my opinion? A career is usually working for someone else, though you may be in a professional capacity. You're generally not involved in all aspects of the business. As an independent contractor real estate agent, you can cede some of the responsibilities of running your business to a broker, but there are trade-offs. As a business owner, you would normally...
- market and advertise your business.
- be responsible for following all applicable laws and regulations.
- decide on the type of deals you will take and how you operate within the law.
- be responsible for all licensing and insurance to operate.
- be responsible for all costs of marketing and operations.
- be responsible for taxation and government reporting.
The Role of a Managing Broker
Now, in most states, an agent, or even many brokers, are not licensed to operate independently. They must operate under the supervision of a managing broker. If it isn't a choice, then so be it. In this situation, you follow the rules as set out by the broker, and the broker receives all income and then splits with you as agreed. It is usually mandated by state law.
If the broker says that the brokerage only represents buyers, then you won't take listings. If the brokerage says that dual agency will not be practiced, then you will not do it. None of this is a problem if you don't consider the rules to be bad for your business.
You have the ability to interview brokers and even negotiate everything from brokerage rules to splits within legal limits. It is in the selection of a sponsoring or supervising broker that some agents get off to the wrong start for their future business growth. Sure, it's a new thing for you, and you have insecurities and you really do need some help in learning the ropes. The license exam doesn't teach you how to do the job.
Money, Money, Money
Where many new agents make a mistake is in selecting a brokerage based only on money issues. It involves more than just the commission splits. Often their offer of marketing, ad space, space on the brokerage website and other business cost items will be the deciding factor. Remember though that once you become dependent on these subsidies, it will become more difficult for you to make a decision to benefit your business by moving to another broker or going out on your own.
Sure, money may be a problem at the beginning; often it is. So, you probably will need to consider the subsidies. But, from the first commission, set aside a portion in a business account that should grow and become a possible future resource if you want to make a change. I'm not knocking brokerages but consider their motivations. They put on new agents with little expectation of them starting out of the box as superstars.
They offer incentives that can and will increase if you do become a top producer. You usually get bigger splits and more marketing help, as the better you do the better the brokerage does. But, always remember that not getting your own website, your own brand, and your own marketing email and practices going will make it more difficult to go another way later.