There are some misconceptions about being a real estate agent, most are centered around commissions and how much it costs to be an agent. Each agent is an independent contractor, which means they each run their own business and must maintain their own business expenses. Brokers (who are in charge of agents) do not pay for their agents licensing classes or other expenses (though some are included in your broker fees). So let’s take a look at the most common expenses. The rates discussed are for the Virginia area, but they give you a sense of costs.
Remember that as a business owner, each of these is tax deductible! Writing off business expenses is a great benefit of becoming an agent.
Licensing Classes: $150-400
Every state has a specific real estate licensing course that must be taken in order to sit for your licensing exam. Online classes tend to be less expensive, and we are seeing higher pass rates, so take advantage of the cost difference!
License Exam: $60
Once you have passed your class you can sit for the national and state licensing exams. This fee covers the testing and finger printing/background check you will need to undergo.
Once you have passed the license exam you can order your actual license. The license will be delivered to your broker, as they must oversee you.
Broker Fees: $60-80/mo
Broker fees vary WIDELY between brokers. This is typical for Keller Williams. The monthly fee pays for the office space, training, E&O insurance, websites, technology, training, etc.
You are now officially a real estate agent! But there are a few things you need to pay for in order to do most of your work.
The MLS is where you input and find information on all of the homes for sale in your region. Showing instructions, plats, tax info and more is available with the listings. You will need this to find homes for your buyers or to enter your listings.
Realtor © Associations: $600-800/year
Each region has it’s own rules on which associations you will need to join. There is typically a local agent association as well as the National Association of Realtor’s (NAR), which you may need to join. Some associations also include other things in their memberships, such as electronic key systems. Most are prorated depending on when you join the association.
Electronic Keys: $200/year
Today’s lock boxes are technologically advanced, mostly working by Bluetooth app on your phone or a keycard. You will need access to these boxes in order to show most homes. If you have listings you will also need to buy a lock box to put on the home.
Business Cards: $50
Of course the first marketing expense for an agent is to invest in business cards. Obviously you will need them to give to potential clients, but when you show homes it is also customary to leave one there so the owner knows it was shown.
If you decide you want to work with sellers you will need to invest in signs and sign posts. They can get pretty pricey, but you can of course reuse them. I always suggest new agents order one because you never know when you will need it!
To get clients you will need to invest in marketing, but investing doesn’t necessarily mean money, it can mean time! Depending on your marketing plan you can bootstrap your real estate startup until you are selling homes and then branch out with your marketing efforts.
This one might seem silly, but you will be driving a lot as an agent! Unfortunately most clients are not going to buy the first home they see, so this should be part of your budget as an agent. The great news is that it is a write off, so make sure you track those miles!
There are of course plenty of other write offs and expenses as you go such as paper, pens, printing costs, travel for conferences you want to attend, name tags, the list can go on. These are the costs that will get you licensed and started in real estate.