ESSENTIAL GUIDE TO RESIDENTIAL REAL ESTATE B E G I N N I N G YO U R R E A L E S T ATE CAR EER IN EAST TN
Rev 3/11/2019
DIALOGUE So, if you’re considering a career in the Real Estate Industry. You are embarking on starting a small business. It is a SALES business and you have to be able to sell to make a living. However, it is not pressure selling, but rather a situation where you have to simply ask people for business. It is that simple. It’s basic nature does not mean that it is easy, nor does it mean that there isn’t a lot to learn. Once you begin, you will essentially be on two paths: The first is to learn the business; the second is to generate your business. The latter is the most difficult. The people who fail in this industry are those who do not understand how to generate business. To get started in the real estate industry, you first need to get licensed. Becoming licensed is a simple process that entails completing 90 formal hours of training. These 90 hours are broken up into a 60 hour Pre-Licensing Course and a 30 hour Licensing Course. These courses are available online or in the classroom (Please see page 2 for Knoxville Area Licensing Schools). The schools themselves generally cost $600-$700. Once your course is completed, you schedule your test, immediately receive your results, and if yours was a passing grade, you then get your license and move forward with paying your board dues, your MLS dues, etc... Once everything has been factored in, the cost from ground-zero of acquiring your license and becoming a fully-operational, key-carrying agent totals about $2,800. That said, this business is very inexpensive to launch. The REAL investment to begin in our industry is in “opportunity lost”. That is simply what you would be making in another endeavor while you’re ramping up in this industry. Typically in our market, a single agent will spend about $2,800 to get started and then you’ll spend another $3,000, depending upon your company or commission plan, within your first year, before any marketing or self-promotion. The person that does well in our industry typically has not only the finances to begin, but the finances prepared to support themselves for their first year. This amount depends on the person and is the amount required for the agent to live comfortably while generating their business. Educating yourself realistically for the initial costs and subsequent hard work required of a truly successful real estate agent is the key to not only surviving, but thriving in the real estate business. Take the time to assess the demands of this booming industry and discover if this is the career for you.
TABLE OF CONTENTS Education & Licensing Process
PAGE 1
Education & Licensing Resources
PAGE 2
Real Estate Career Expenses
PAGE 3
Selecting Your Brokerage
PAGE 4
FAQ
PAGE 5
Commission Breakdown
PAGE 8
EDUCATION & LICENSING PROCESS
STEP 1
DECIDE if it’s the right
STEP 2
ENROLL in Pre-Licensing & Licensing Course
STEP 3
COMPLETE your exam
STEP 4
CHOOSE your brokerage
STEP 5
STEP 6
PAGE 1
business for you
Broker SUBMITS YOUR APPLICATION to TREC (TN Real Estate Commission) - 60 hr course completed - 30 hr course completed - Copy of high school diploma OR college Transcript - Fingerprint & background check - E & O policy - Passing certificate from exam
RECEIVE your license 10-14 days after submission
EDUCATION & LICENSING RESOURCES
YOUR EDUCATION & LICENSING REQUIREMENTS
COURSES
60 Hour Pre Licensing 30 Hour Course for New Affiliates
EXAM
PSI Testing Center 308 N Peters Rd, #205 Knoxville, TN 37922 P: (800) 733-9267
FINGERPRINTS
Submit application to TREC with fingerprints on application. Includes mandatory background check. https://www.tn.gov/content/dam/tn/commerce/documents/ regboards/trec/forms/Fingerprint-Instructions2018.pdf
APPLICATION SUBMISSION
Application for state license must be submitted to: https://www.tn.gov/content/dam/tn/commerce/documents/ regboards/trec/forms/TREC_Certification_Form.pdf
TN LICENSING SCHOOLS
TREES Knoxville TREES Training Center Serving Chattanooga, Knoxville, Sevierville, Nashville-Elm Hill, and Murfreesboro 5401 Kingston Pike | Twelve Oaks Building 1, Suite 220 | Knoxville, TN 37919 phone: 1-800-572-8733 | fax: 423-894-1399 www.tntrees.com
TRECS Tennessee Real Estate and Comprehensive Sales School 9041 Executive Park Drive, Suite 100 | Knoxville, TN 37923 phone: 865-693-4992 | email: info@trecs.org
PAGE 2
REAL ESTATE CAREER EXPENSES WHAT DOES IT COST TO GET STARTED?
Pre-Licensing (60 hrs)
$350 (est.)
Course for New Affiliates (30 hrs)
$165 (est.)
Licensing Test
$43
Agent License
$110
Fingerprinting
$45
E&O Insurance
$249
MLS Fees (1 year: Jun - Jul)
$336
KAAR Membership (Includes state, local, and national dues - 1 year: Jan - Dec)
$485
KAAR Up-Front Costs
$300
Lock-Box Fees
$301+
Not including: +$16/mo. mobile key fee, +$115/per additional lock box
TOTAL Essential Marketing Materials Professional portrait, business cards, name badge, yard signs (at least 5), prospecting postcards, website, etc...
GRAND TOTAL
PAGE 3
$2,384 $934+ $3,500
SELECTING YOUR BROKERAGE STEP 1
RESEARCH
STEP 2
INTERVIEW
with several of your area’s real estate firms STEP 3
CONSIDER
- Heritage, reputation, and company image - Benefits - Training opportunities - Technologies - Employment longevity - Position within local market STEP 4
COMPARE FEES
STEP 5
COMPARE COMMISSION PLANS
PAGE 4
FAQS Q
Q
How do you get in?
Where do you take the course?
Q
How do you test?
Q
Who does well in the Real Estate Business?
Q
How long does it take to start making money?
-Q
Q
PAGE 5
Why is the failure rate so high?
Why do I have to work for a broker?
Once you make the decision to join the Real Estate Industry, you enroll in the licensing school of your choice, complete the required hours, and take your test. Once you receive your passing grade it is time to apply and send off for your license, which will arrive in about 10 business days. While you are waiting, spend your time getting to know the business. Several Real Estate school options are available locally to complete your course. Schools offer both online and in-classroom courses. Classroom courses are strongly encouraged. See page 2 for the Knoxville area school selection.
Once you receive your certificate, proceed to the testing service. You will know whether your grade was a pass or fail instantaneously. Most importantly, people who do well in the Real Estate business understand that they are starting a business. Beyond that, essential traits include salesmanship, organizational skills, flexibility, being goal-driven, and being a self-starter. Examples of professions that tend to do well in this industry are nurses, teachers, ex-retail jobholder, coaches. Additionally, agents who were raised in the community where they are conducting business will always have an advantage. Dedicated, hardworking, full-time agents can typically expect to see 25-35k of income in their first year. Most of this income will come towards the last quarter of your first year. After the first year, this amount can grow exponentially depending on the work that is applied. Many potential agents don’t understand that the Real Estate business is a sales business. A lot of new agents struggle with the very basic first step of asking people for something. After that, the sense of urgency in this business and the long timeframes between beginning a relationship and getting paid makes it very difficult for someone who is dependent on consistent cashflow. Tennessee state law requires all licensees to be the responsibility of a broker.
FAQS (CONT) Q
Is it hard to find a brokerage firm to work for?
Q
What key factors do you look for in a brokerage?
Q
How do commissions work?
Q
How much do you make on an average sale?
Q
Q
From the time you start working with a buyer/seller, how long does it typically take to get paid?
How do you find business?
It is not. With very few exceptions, all brokerages are actively looking for new agents.
Many brokerages are set up to present a face that is meant to attract new agents, not necessarily keep or nurture them. Always be sure to seek a brokerage that provides quality, ongoing education and that presents an environment that encourages consistent growth and learning in a professional, ethical way. Look at the quality and logevity of the agents in the firm. One paradox of this industry is that many brokerages boast about their training and are the ones who produce the weakest agents. Weaker firms barely teach you to survive in the woods, and certainly don’t teach you to thrive. Two basic commission concepts that are necessary to understand are the commission that the consumer pays and commission programs.
See page 8 for a typical commission program breakdown.
If you list a house that is sellable, in an average market, at 6%, then market the house, show it several times, then get it sold in 60 days, it then closes 30 days after that, then your commission would be awarded typically 90-100 days from the time it is first listed.
Being that your your main goal is to get out there and find potential buyers and sellers, agents have several key responsibilities when it comes to seeking out potential buyers & sellers. From simply learning to ask people that you meet for business, to different direct-mail techniques, to holding open houses, to getting attached to a team, to utilizing lead systems, much of your initial business will become from your direct sphere of influence. This includes your family, your friends, networking partners, and the members of your community. PAGE 6
FAQS (CONT) Q
How do you get trained in the business?
Most of the larger Real Estate firms have specific training programs. Additionally, there is a wealth of resources, information, and instructional videos available online. If an agent is lucky enough to find a firm that offers a mentorship or field guide program, a new agent will be able to learn at the hip of a seasoned veteran of the industry, which expedites the learning process immeasurably.
Q
Am I an employee or an independent contractor?
It is very rare in this industry for an agent to be anything other than an independant contractor, which means you will work on straight commission, allowing you an unlimited opportunity to make money. In not having the encumbrance of an employer, however, an agent also forfeits the benefits that accompany that, such as salary, draw, and insurance.
Q
1099
Q
Can Real Estate be a part time business?
Q
What is Hurdle Rate?
Because most agents are independant contractors, they file their own taxes with a 1099 form (self-employed status). Create a budget that covers your required income taxes. Absolutely, yes. If an agent has an additional source of income and wants to join the Real Estate industry part time, there is always a potential to become at least moderately successful.
Definition: A hurdle rate, which is also known as minimum acceptable rate of return (MARR), is the minimum required rate of return or target rate that is expected to receive on an investment. Hurdle Rate is figured by taking the total amount that you would require to live comfortably for one year. You then take the average commission example ($3600) and divide it into your required one-year salary, and that number is the number of transactions you would need to achieve your hurdle rate. In short, Hurdle Rate is the amount one needs to make to “get over the hurdle”.
PAGE 7
A TYPICAL
COMMISSION BREAKDOWN
COMMISSION
$200,000 x 6%
PAID TO LISTING FIRM
= $12,000
SALES PRICE
who then pays $6k to selling ďŹ rm
Every transaction has two sides; a listing side and a selling side. It is possible for an agent to be involved in both sides. paid to LISTING
FIRM
50%
= $6,000
paid to SELLING
FIRM
50%
= $6,000
* Example provided for explanatory purposes only. Actual calculations may vary.
PAGE 8