Real estate is a rewarding career path with tremendous potential for growth. The Association of Real Estate License Law Officials estimates that there are more than two million active real estate agents in the United States. Additionally, according to the United States Bureau of Labor Statistics, the job outlook for real estate agents is expected to grow by 6% between 2016 and 2026.
A real estate career is also enticing because you don’t need a college degree to pursue it, and it offers flexible hours. No matter what your prior experience, if you’re looking for a new career, you’ll want to check out the real estate industry. This complete guide details everything you need to know about how to become a real estate agent.
Minimum requirements to become a real estate agent
If you’re looking to sell real estate for the first time, there are a few minimum requirements you’ll need to meet. As a real estate professional, you must:
- Meet your state’s age requirement, which is usually either 18 or 19 years old
- Be a legal resident of the United States
- Meet basic education requirements, like having a high school diploma
- Be able to pass a background check
- Complete your state-specific pre-license education
- Pass your state-specific real estate licensing exam
Before you go down the route of becoming a real estate salesperson, you should also understand what the job entails. Even if you meet the minimum job requirements, you may find that you’re not cut out for the real estate industry.
What does real estate entail?
The first step of becoming a real estate agent is determining whether you’re fit for this type of job. Start by considering some of the day-to-day requirements and necessary skills associated with working in the real estate market.
If you wish to become a successful real estate agent, you’ll need people skills. Much of your day will be spent working with clients, facilitating the purchase and sale of a property. You’ll need to do things like:
- Preparing listing presentations
- Staging homes for viewings
- Taking and uploading digital photographs
- Finding potential listings for your clients
- Emailing listings to clients
- Organizing tours
You’ll spend a lot of time communicating through email and over the phone. If you’re not comfortable dealing with people and talking frequently, you may want to look into another line of work.
Real estate agents must also be incredibly organized. They need to meet strict deadlines and manage a schedule that changes often. Examples of administrative work that a real estate agent might do include:
- Signing and filing various leases and other legal documents
- Creating budgets
- Performing data entry, such as entering clients’ information into a database
- Developing marketing plans
- Updating website listings
You’ll also want excellent research skills. If you wish to become a real estate agent, you’ll need to research and generate new leads. You’ll also need to find potential listings in your area.
Ability to improvise
If you’re looking for a job where you sit at a desk for 8 hours a day, real estate is not for you. Although the job affords some flexible hours, they likely won’t be within a standard nine-to-five timeframe. You must be willing to work with the schedules of buyers and sellers to coordinate times for viewings and other events.
How to become a real estate agent: step-by-step
If you feel that you have the skills needed to become a real estate agent, it’s time to start exploring the six steps required to do so.
Step 1: Research the real estate licensing requirements in your state
The first thing you’ll need to do to become a real estate agent is to research the licensing requirements for the state you wish to work in. You can find this information on your respective state’s real estate commission site. Specific requirements vary from state to state, so you’ll want to make sure that you pay careful attention here.
Additionally, if you live near a state border or often travel to another state, you may want to consider becoming licensed in multiple states. States have a reciprocity agreement similar to driver’s licenses. If you become a real estate agent in one state, your license will likely be valid in another state after you pass a written exam. These written exams are shorter than the extensive exams that we’ll detail below.
Step 2: Enroll in your state’s real estate pre-licensing course
Once you know your state’s requirements, enroll in a pre-licensing course at a real estate school. Many states offer both in-person and online courses for those looking to practice real estate. These courses can be challenging but will prepare you for life as a new real estate agent. When choosing a school, consider things like the:
- School’s reputation
- Quality of the content the school offers
- Professors teaching the course
You can expect to pay anywhere from $100-$400 for a pre-licensing course. Completing a pre-licensing course is mandatory to sit for a real estate exam. You won’t be able to sit for a real estate exam by merely studying hard, or burying your nose in the books and trying to teach yourself real estate.
Step 3: Take and pass the licensing exam
Once you complete your pre-licensing coursework, you’ll be ready to sit for the real estate exam. It’s best that you take the test soon after completing your real estate course. However, you should begin preparing beforehand.
Many states require you to provide your fingerprints, background check information, and a fee to sit for the license exam. States often take a couple of weeks to process this information, so you’ll want to submit it well before your scheduled testing date.
These exams cost around $400 to take and have two sections. One section covers broad, national real estate practices, while the other involves more state-specific real estate laws. You cannot take one section at a time. The state scores each section separately, and you must pass both sections to pass the exam. Once you pass the exam, you’re ready to begin your full-time real estate career.
Step 4: Find an agency and broker
Even though you’ve passed the real estate exam, you’re not authorized to operate as an independent agent. You’ll need to link up with a real estate brokerage to start buying or selling property. States will not award real estate licenses until you can demonstrate that you’ve received sponsorship from a broker.
You should start looking for a broker early in the process. Interview several managing brokers to find out about their working style, agency structure, and agent fees. Most agents will need to pay a fee to the brokerage they work under. Sometimes this is a flat fee. Other times, the contract specifies that the broker receives a percentage of every sale. Make sure brokers clearly outline the prices you’re expected to pay.
Additionally, ask brokers about mentoring or additional classwork the agency offers. Some agencies pair new agents with experienced ones on the first few deals to help make sure the new agent learns the ins and outs of the trade while also adhering to real estate law.
Step 5: Continuing education
Even after your first year, you’ll need to invest in real estate education continually. Taking continuing education courses helps you maintain your license.
Many agents also choose to get specialty designations that allow them to market and target their services to different segments of people. For instance, some agents join the National Association of Realtors (NAR), which allows them to use the term “Realtor®.”
Although many people use “real estate agent” and “realtor” as synonyms, the two terms are different. “Real estate agent” is a broad term. “Realtor” is a title afforded only to those who become members of the NAR. The agency or broker who you work for can advise you about which certifications are best.
Step 6: Plan for and track expenses
Even though you’re under the sponsorship of a broker, the IRS classifies you as an independent contractor. Working as an independent contractor means that you’ll need to be diligent when tracking your expenses so you can deduct them from your income as a business expense. Below are some of the everyday costs you may have when working as a real estate agent:
- Signage: You’ll need custom signs with your name on them to hang at your first listing. These usually cost $40-$60 each. You will also need open house A-frame boards. These run about $100 each.
- Association fees: You can expect to pay annual dues of $300-$700 at your local association.
- Lockbox services: Keys for listings are placed in access-controlled boxes. Typically you buy both the boxes and the service for accessing them. Expect fees to run $300-$500 per year and each box to cost around $100.
- Advertising: Trying to get your name out there is pricey. Third-party vendors like Zillow and Trulia offer advertising options for agents, but ads on their listings can run from $50 to $1,000 per month.
- Miscellaneous office expenses: Don’t forget professional headshots for your business cards, the business cards themselves, and other office supplies like a computer, a printer, and some transaction folders.
Vehicle maintenance and travel also serve as one of the most significant expenses for real estate agents. If you use your car strictly for business purposes, you can deduct all costs related to the vehicle. Otherwise, you may find it more useful to deduct your total mileage traveled. You’ll want to keep track of things like mileage and tolls to reduce your tax burden at the end of the year.
You’ll also want to consider making estimated quarterly tax payments on any real estate commission you earn. Since there is no employer to take taxes out of your paychecks, you’re required to pay the entire federal tax burden of 15.3% — typically, your employer would pay half of this, and you would pay the other half. Because the United States has a pay-as-you-go tax system, you need to calculate how much you owe each quarter. Failure to do so could leave you with a significant tax penalty at the end of the year.
Tracking real estate business expenses can be easy
From the minute you start paying for pre-licensing courses, you’re accumulating business expenses that you can deduct from your self-employment income. Why wait until the end of the year to try and figure out what expenses you had? Consider using reliable accounting software like QuickBooks Self-Employed. QuickBooks makes it easy for independent contractors and small business owners to track their expenses and pay their taxes at the end of the year.