Have you ever thought about becoming a real estate agent? In reality, in most states the requirements are pretty straightforward and uncomplicated. For example, in my state of Massachusetts, to become an agent one needs to take a 40-hour pre-licensing class and then pass the salesperson exam. In other states, like California, the requirements are a bit harder, but still doable.
I strongly believe that most people can pass the exam and become a real estate agent. Even if you do not want to become the next million-dollar real estate agent, you can find success in the industry as well. But, before you choose to go down this path, you should think carefully about whether entering the real estate brokerage field is right for you.
Why You Should (and Shouldn’t) Become a Real Estate Agent
You should be mindful about why you want to get licensed before even signing up for a real estate class.
If you want to become a real estate agent to practice real estate, either full time or part time, welcome to the club! Please explore the rest of pyvt to learn more about finding success in the trade. As always, if you have any questions, please feel free to drop me a line.
If you are thinking about buying or selling a home and want to save on the commission, you may want to reconsider. At the end of the day, it is your decision whether you want to sell or buy without a real estate agent.
When someone expresses an interest in becoming a real estate agent just to buy or sell their primary residence, I always ask them these two simple questions: The National Association of Realtors is the United States’ largest trade group, and of real estate agents, not all of them belong to this group. Do you really think the entire industry is “nonsense” and that you can “beat” it by quickly getting a license?
Do you think that you, a newly minted real estate professional, will be able to successfully out-negotiate someone who has been in the practice for 10, 20, or even 30+ years? I find again and again, those who chose not to work with an agent or try to beat the system, generally do not understand what a real estate agent really does. Once they learn about the trade, they tend to respect an agent’s opinion, and work with, instead of compete against, them to reach their goals.
How Much Does a Real Estate Agent Make?
While we are on the subject, understand that most agents do not make the type of money you see on television shows like Million Dollar Listing. In fact, the median agent makes about $50,000 a year.
However, I know of many agents who make significantly more than that. In fact, some deals are worth more than $50,000, and a single agent may do 30+ deals a year. Remember, most agents work for themselves and are therefore independent contractors. That means there is no salary cap, and significant tax benefits like the option of opening a Roth Solo 401(k). The highest-paid agents are pulling in millions every year.
Free Real Estate Agent Salary Calculator
I created a free real estate agent salary calculator on pyvt. You can use it to estimate how much you can earn as a real estate agent. I have also included many tips to help you more accurately gauge your potential gross income.
Many newer agents are surprised to find that they will be faced with many mandatory fees. Did you know that annual dues to your local MLS, NAR board and liability insurance can cost thousands of dollars?
The Pre-Licensing Class
Between my second and third years of college, I took the Massachusetts real estate salesperson course at my local Coldwell Banker, after which I passed the real estate licensing exam and became a real estate agent. Some brokerages have their own real estate schools while others do not. I was told having your own real estate school is a great form of advertising towards new agents, which makes sense. Large firms need to advertise towards newer agents. We will get to why this is the case later. Regardless, I took the pre-licensing class with a friend from school, and while I was able to pass the test, he did not.
I took the class in the beginning of August, and after three months of summer break it was disappointing to go back to the classroom. I distinctly remember that on the way to class I saw a man fishing from a Jon Boat on our local river and I wished I were in his position.
Anyways, before I talk about the class and exam, I will make two points. First, I took the exam in Massachusetts. As noted, in many states the requirements to become a real estate agent are different. If you want to get licensed in multiple states, it may be better to take the exam in a state other than the one that you live in, as many states have reciprocity agreements. The second and more important point is that everyone learns better using different methods (visual, audio etc.) so what helped for me may not necessarily work for someone else.
One last thing, I successfully passed five College Level Examination Program (CLEP) tests, administered by the College Board, in the year leading up to taking the real estate salesperson exam. I was also a college student. Consequently, I was used to the procedure and what to expect.
Online or in-Person Pre-Licensing Class
I interviewed two schools, one online and one in person. For me, in-person was the obvious way to go, partly because they were offering a great discount and partly for the reasons explained below.
The in-person school ran the class over two weekends (four 10-hour days), whereas most of the online schools were split up into 4-hour sections. I’m in my 20s, so while the technological aspect of an online class was appealing, as well as being able to do the class in my pajamas, in-person has always provided me with a better learning environment.
Pros of in-person class
- Faster pace – 4 ten-hour days versus 10 four-hour days.
- More engaging – Our instructor, Ken, had great stories and knew how to keep the class entertained. Regardless of your instructor, in-person is usually more interesting than online.
- More one-on-one time – Our class had three students. Our instructor was always willing to answer any questions we had.
Pros of online class
- Work from your living room – Obviously, this is the biggest advantage. For many people, learning from home is less distracting too.
- Repeat Challenging Subjects – Online real estate classes frequently run more often than in-person. They also will likely have more supplemental information available online, making it easier to study.
Both of the schools I interviewed with (online or in-person) let students retake the class, or any portion of it, if they failed the test free of charge. Since some classes are only offered once every few months, waiting for another class to run in-person may be a hinderance.
The Actual Class
When I took the real estate pre-licensing class, Coldwell Banker offered it every two months year-round. The July/August was their slowest (Can’t blame anyone for not signing up then, as we only get four months of decent weather around here), so we ended up with only three students in the class, one of whom was my friend from college. A small learning environment was already a great plus. Our instructor, Ken, was a character, and of course was very knowledgeable in the subjects at hand. On arrival, we were all given with two books, one that went over the basics of real estate on the national level, and one on the state level. There were also practice tests in each book.
Daily Structure of the Class
Each day was divided into two parts. The first half of the day (8am-12pm) we went through the books, and after lunch (1pm-6pm) we bounced between the books and various practice tests. Also note that Massachusetts required 50 minutes of instruction to the hour, so sometimes we would skip the afternoon breaks to go home a bit earlier. You would not get that perk in an online class. Another big advantage of doing the 10-hour days was that less than 36 hours after we walked into the classroom for our first class (Saturday 8am), we were already half-way done with the course (Sunday 5pm). That was nice to think about.
Ken was wicked (Boston slang for very) funny and knew how to keep the class awake. His pop culture refences also kept the class going. Besides the basics of real estate, topics included, Snoop Dogg, Dr. Dre, Suge Knight, boxing, college life (All three of us students in the class were in college) and epic commercial real estate flips.
Between our first and second weekend of classes, a big multi-residential project burned down nearby (Everyone was fine), so that made for some great conversation. The only real negative was that Ken liked to keep the room really cold (65 degrees), but when we ate lunch we turned it up to 70 and he didn’t seem to notice in the afternoon. Lastly, since it was a commercial office building that was empty on the weekends, there was a workout room and separate lunch room with an Xbox and lounge chairs. My friend and I did manage to get in a few games or FIFA, but we could never get ourselves up early enough to use the workout room before class. Ohh well.
The Real Estate Salesperson Exam
The salesperson exam was 120 questions, broken down into 80 general real estate questions, and 40 state-specific questions. I had 150 minutes for the general portion and 90 minutes for the state section. The broker test is similar, but with five less general real estate questions. I won’t go into this further because your teacher should give you the exact breakdown (it changes overtime) and to be completely frank, it’s 120 questions and you need to get 70% right on each section, no matter which way you cut it. There were also a few experimental questions they threw at me before I took the exam.
The general exam was broken down into various topics including, Property ownership, Land use controls and regulations, Valuation and market analysis, Property disclosures, Contracts, Real estate calculations, Financing, General principles of agency, Leasing and property management, Transfer of title and Practice of real estate. The state exam sections included, Requirements governing licensees, Contracts, Consumer protection, Environment issues, Massachusetts fair housing law, Landlord tenant law, and additional topics. Each topic has various subsections. You will find out more about these subsections during your class.
Studying for the Real Estate Salesperson Exam
Right off the bat a lot of ideas on how my friend and I could approach studying for the exam came to mind. The first was that there were far too many topics for the exam to really question us deeply in each subject. So, I knew it was either going to be a bunch of random but really hard questions from each section or it would just be general broad overview questions from each topic. Fortunately, it was the latter.
Ken helped us study during part of our class time, but it was pretty clear from the practice tests that neither of us were getting the minimum 70% right. Once we finished the class, we both studied for a number of weeks on our own. Ken did make himself available if we had any questions outside of the class, but neither of us did.
Earlier in the article I mentioned taking CLEP tests to get credit for college courses. So, because of these prior tests, I already had some test taking strategies to apply here. The first strategy was simple; define the timeline. Since I was entering my senior year of college and I knew I wanted to try real estate after I graduated, I knew I had 9 months to pass the test. But, college would be time-consuming and I probably wouldn’t have much time to study once classes started back up in early September. The same time constraints were true with my friend too, so we both knew that once the class ended in the beginning of August we had roughly one month to pass the test.
Therefore, with one month to get licensed we had two options; take the test at the end of August (or the beginning of September) or take it in two weeks and if we fail at least one section, take it again at the end of August (or the beginning of September). Either of these options would get us to where we would need to be before college started back up.
Advantages of taking the test twice:
- If we failed, we would have received a scoring breakdown. This would give us an idea of which topics we would need to focus studying on for the retake.
- We could choose to just study for one portion of the test, likely the general section. However, we would likely fail the state portion, which we would retake later.
- If we passed one section and not the other, then we would only need to re-take the section we failed. Therefor, as noted above, on the second go-around we would only need to study for one section.
- We would have a general understanding of the actual test-taking procedure. Minor, but important if you struggle with test anxiety.
Disadvantages of taking the test twice:
- The exam fee was $84. The re-take fee was $54.
- If we failed the exam, that would leave us with one less studying day.
- The hassle, car/gas costs with taking the test twice.
So, you might assume we opted to take the exam twice? In reality, we both realized after a week and a half of studying (when we would have needed to book the first exam) that we did not have a good chance of passing it so quickly. Although I was scoring around 70% of both sections on the practice exams and may have squeaked by with a pass, my friend was not doing as well. Consequently, we decided to wait until the end of the month to take our test.
My Secret: Skipping the Math Section of the Exam
The biggest fear that my friend and I had was the math on the real estate salesperson test. Some people tried to scare me by saying that they were shocked they passed because they were “bad” at math. One of the first things you should know about real estate brokerage is that it is not really math heavy. As expected, the exam is not math heavy either.
Therefore, here is my big secret: I simply skipped studying for the math portion of the exam. Before taking the test, I realized that I would probably be able to score about 50% on the math portion using knowledge I already had. Some of the questions were really basic, using multiplication; but others were mostly foreign, like discount points and refinancing. I realized that I could study and probably get my score in that section over a 70%. However, only 10% of the test questions fell under the real estate calculations section. So, ironically, I used basic math to figure out why so many people who struggled with math were able to pass the test. Follow me through the next two paragraphs as I explain further.
We knew that the general portion of the exam was 80 questions and 10% of those questions were part of the real estate calculations section. So, only 8 questions would be “math” questions. But, I only needed to get 70% of the 80 question right to pass the test. Therefore, I could get up to 24 questions wrong on the entire test and still walk out of the testing center as a licensed real estate salesperson (Assuming I passed the state section). Side note, if you want to know why there are so many real estate agents, this might be part of the problem.
Regardless, even if I studied really hard and learned some challenging equations, I would probably only have gotten two or three more “math” questions right. Those few correct answers would have been at the expense of countless hours of studying. Instead, I simply chose to use those study hours playing more FIFA, studying other sections that were much easier to master.
Test Taking Accommodations
One more important thing to note. If you need accommodations for the exam, they are available. I would have qualified for extra time, but four hours was way more than enough time for me, so I didn’t bother applying for it. If I ever take the broker’s exam, I would probably ask for a separate room because the actual test taking room was a bit crowded.
What the Real Estate Exam Actually Teaches You
Some people say that the real estate class and exam lays “the foundation for a successful real estate career”. Wrong. The real estate test is like shoveling out the first shovel of dirt on a new 100,000 sq/ft warehouse. Not even the first step in the 100m sprint. Like the first minute on the first day on kindergarten. Ok, that may be a bit extreme. But in reality, the test is just the first step of many that you will need to take in order to become a successful agent. And the suckish part is that you can do the class, study hard, pass the test, and then never sell a house, which is far more common than you would think.
The above analogies also apply to the general world of real estate. You can do everything right until the last moment, and then one tiny little thing can go wrong and the entire deal falls apart (See my article: How one Wrong Phone call lost me a $25,000 Real Estate Commission).
While we are on the subject of the meaninglessness of the test, let me add another point. There are many agents who have failed the test who are now very successful; just as there are NASCAR drivers who fail their road test, billionaires who drop out of college, A-list actors who struggled for years, the list goes on. Never let a test define you.
One important lesson I took from my whole experience is that there is still so much opportunity in this field. I have often heard that the only way to inherently change is to learn more information. When I first went into the class, I thought that the idea of putting together a commercial real estate transaction would be impossible. By the time I walked out of the class, I realized that making big real estate deals was not so far-fetched. Just a few years later, I would be in the running on multi-million-dollar sales.
How to Skip the Exam Completely and Still Become a Real Estate Agent
So, you are looking to avoid the exam and still learn how to become a real estate agent. You are a natural salesperson! Just kidding. If you are looking to sneak past this entire process (I don’t blame you), there is one method that will work in Massachusetts, as well as many other states. In short, if you are an attorney, you can skip the test. Here is the official wording:
“the Board is permitted to issue a real estate broker license to any Massachusetts-licensed attorneys holding a current law license in good standing with the Supreme Judicial Court. All applicants for an Attorney-Broker license are exempt from the Board’s examination requirements.”
Saving on a Real Estate Commission
If you are just looking for a real estate license for one, or a handful of, personal transactions, there are a few other ways to save on commission without going through the hassle of becoming an agent.
Besides having a family member or trusted friend who is an attorney, you may have a one who is also a licensed real estate salesperson in your state. Or, you may have a family member who is licensed in a state that has a reciprocity agreement with the one you are trying to make a deal in. For example, my dad is a licensed real estate agent. He got his license back in the 90s, but let it expire shortly thereafter. Even without doing any work, he could refer a buyer to another agent and collect a referral fee. He could also take the required continuing education classes, reinstate his license and affiliate himself with a broker, thereby collecting a higher fee.
Approaching a Real Estate Agent Directly
Lastly, if you are interested in buying a home, you could approach the listing agent directly and ask for a discount on commission or rebate. Because a listing agent generally shares a commission with a buyer’s agent, they may have some wiggle room if you do not use a buyer’s agent. You can also simply ask your buyer’s agent to reduce their commission too. Be careful with all of these methods though; without (or with inexperienced) representation you may pay far more than you would if you were to simply hire an agent. This added cost may exceed any commission savings.
How to Join a Real Estate Brokerage
In reality, many brokerages would be happy to have you. In fact, after I passed the test I received many letters from different franchises, such as Engel & Volkers, Coldwell Banker, and RE/MAX. Why was a 21-year-old getting nods from such big firms?
In reality, most brokerages need agents to survive and bringing on another salesperson costs them almost nothing. In my case, the only requirement to become a salesperson at CBRE was that I went in for an interview with the managing broker. All agencies are going to have some required fees, such as Errors and Omission Insurance (E&O). Larger agencies usually require you become a member of the National Association of Realtors (and thereby REALTOR®). The latter involves annual dues and the attendance of a day long in-person class.
Think of a broker like an Ebay or Amazon trying to convince you, a prospective seller, to sell in their store. As we all have probably learned after receiving a subpar item in the mail, many of these marketplaces seem to let in just about any seller that exists. Real estate firms are not too different. Real Estate brokers only make money when their agents (or the broker themselves) sell a home, so it is imperative that they have agents working under them.
Negotiating a Split With a Brokerage (50/50, Flat Fee, Etc.)
Here is the thing, brokers need agents; and there are a lot of brokerages. If you go into a brokerage and simply ask to join, they will likely offer you a 50/50 split on all sale and rental commissions. Some brokerages reduce their cut as you make more and then reset the rate every year, while others only take a flat fee. Others have entirely different business models. For the sake of simplicity, let’s break down how a 50/50 split works.
How a Real Estate Agent Split Works
Say you sell a $1,000,000 house at a 2.5% commission (Remember, commission is always negotiable). $25,000 will go to your firm. Your firm will then take $12,500 and you will get $12,500. In my opinion, no matter how prestigious the name of your firm, a 50/50 split is highway robbery. Especially if you sell five, ten or even twenty homes a year. Of course, if you firm offers to give you many leads, you may determine it is a good financial deal.
For example, if you are new to an area and know few people, you are unlikely to get many leads from your farm. One brokerage may offer you a 50/50 split, while another may give 75/25. But, the 50/50 firm may promise you many leads while the 75/25 lets you go on your own. If the leads are legitimate, the 50/50 firm may be the better choice.
Where Successful Real Estate Agents Work
One thing to note: Heaving hitting agents, those who sell a lot of homes, often are on far better splits than new agents, and are getting the best leads too. This makes sense, and as you sell more homes you should always be negotiating with your broker. But, I know of cases where very large agents actually make more money from their broker than they bring in, in the form of stipends and other perks. Why would brokers do this? Well, they know a big time real estate agent attracts new talent. It is literally worth it to them to pay a heavy hitter to stick around!
Why You Should Be Wary of Smaller Brokerages
One word of caution: In some smaller (boutique) outfits, the managing broker works as an agent themselves. This means that you are both a competitor and a salesperson working under said broker. Guess where all of the good buyer and seller leads go first?
To resolve any issues, you should make sure to ask the managing broker how leads, and other resources, are divided among the office. The managing broker may not offer many resources to you, but if the split is good, then that might be a fair tradeoff.
For example, one agent I know consistently sells a lot of homes in an older subdivision. They have been there for years and have a successful sales strategy in place. They have no interest in company leads, advertising, and other bells and whistles. Consequently, they simply join whichever brokerage is offering the best split.
How to Become a Real Estate Agent and Find Success
This is the pivotal question. Most people are able to take the real estate class, pass the test and join a brokerage. Few are able to find success as a real estate agent. Of course, everyone’s vision is different. Some people get licensed to sell a few homes, assist a more experienced agent with official duties (such as holding open houses), or sell their own home.
But, if you are hoping to become a successful agent bringing in six-figures, or more, understand that while the task is doable, it is extremely challenging. Therefore, I always recommend new agents consider joining an experienced real estate agent and forming a team, or joining an established one.
Some agents may simply ask you to join as their assistant, while others will give you leads to get you on your feet. The most important thing you need to consider is if the agent you work with wants you to meet your personal financial goals in the long term. I have heard of few no agents magically becoming successful in real estate. If you want to find success and are offered a spot on a team, make sure the team’s goals align with your own.
Also, regardless of how you start out as an agent, you want to make sure you are actually gaining experience. If you simply do the same backend computer work day in and day out, it will take a long time to learn how to handle the in-person aspects of the profession. As you gain more experience, make sure to assist in all parts of a real estate transaction.
Another option is to find an experienced agent to mentor you. This can be a great option for those looking to go out on their own right away.
Remember, agents are almost always 1099 employees. If an agent, or brokerage, is offering you a salary, then you will likely make a fair income, but nothing out of this world. In other words, the less risk you are willing to take on yourself, the less money you will make. Generally, you can’t have the best of both worlds.
Additional FREE Resources
I have many free resources and an education center on pyvt. Both tools should help you find success as a real estate agent. Before you start, you should create a business plan and interview other agents. Most salespersons are more than willing to meet for a cup of coffee (you pay!). If you have any further questions, feel free to leave them in a comment below and I will be happy to respond.