As a newly licensed California Bureau of Real Estate (CalBRE) sales agent, the first step in using your license in sales, property management or mortgage originations is to find a suitable employing broker.
To find the right broker, keep in mind seven key factors.
1. Pros and cons of being a part-time/full-time real estate agent
As a part-time agent, your income will not come exclusively from real estate. Part-time work usually means you have another source of income and want to work in real estate sales to supplement that income. Or, you may be using a part-time real estate position to initiate yourself into the industry before transitioning to full-time work as an agent.
But brokers are hesitant to hire new part-time agents, since they perceive part-timers as:
- having less time to seek out, open and close real estate transactions; and
- not being as committed as full-time agents to meet the needs of clients they solicit while employed by the broker.
Brokers provide services such as office space and lead sharing procedures for their agents. They will not likely employ a part-time agent and provide these amenities (and supervision) when they can hire a full-time agent who will produce more sales than a part-time agent for the same or less effort by the broker.
Further, a new agent requires training. A broker does not want to invest the time needed to properly train a new agent in exchange for a part-time commitment.
So ask employing brokers if they are hiring part-timers and what they expect of part-timers. By their response, you will understand what is at stake when you are employed as a part-time agent.
On the other hand, being a full-time agent means you need to build up clientele as quickly as possible to support your need for income. This means creating a brand for yourself by actively searching for and pursuing real estate opportunities daily. Without a business development plan, you will not survive in real estate sales, property management or mortgage lending. Worse, you will generate little income, insufficient to support a minimum standard of living.
Finding a broker who will employ you is easier when you commit yourself as a full-time agent than when you attempt to enter the industry as a part-time agent. Brokers perceive those agents who commit to full-time work as:
- willing to put in the time necessary to solicit sales opportunities and close deals;
- personally committed to long-term employment in real estate services; and
- responsive to client needs without being distracted by the demands of a second job.
This fully submerged perspective makes brokers more willing to invest in giving you the support and training you need to succeed as an agent.
2. Know the expectations of being an independent contractor
As an active agent, you will be employed by a broker, most likely under an independent contractor (IC) employment agreement.
As an employee of the broker under an IC agreement, the broker will carry workers’ compensation and errors and omission (E&O) coverage — but you’re on your own for things like:
- payment of self-employment taxes to the tune of 15.3% of your net business income;
- payment of your installments for estimated tax on taxable income;
- car insurance;
- health insurance; and
- unemployment insurance.
To help a new agent determine what the employment relationship with a broker entails, first tuesday’s Form 506 lays out the duties and responsibilities of the agent and the broker. Section 2 of the form provides for what you agree to do as an agent while employed by a broker. Section 3 covers what the broker agrees to do during the employment. The form also contains a schedule of fees and charges you, as a new agent, will expect.
Familiarize yourself with the contents of this form to prepare for your discussions with prospective brokers over your understanding and expectations of the employment. Question whether you will be required by the broker to join a trade union (and why), and whether you will have access to the local multiple listing service (MLS) – as well of the costs incurred for these services.
3. Set realistic goals for the income you want
Before you look for an employing broker, you need to set your own goal for the annual income you want to earn. Setting realistic goals is the result of forethought and analysis. Goals are personal objectives and are not to be left to evolve after you start working as an agent. Once set, you will know what to expect of yourself and your broker. Further, you will have balanced the use of your time, energy and talent more wisely.
In your first year as an active agent, you will likely not earn as much as you planned to make. Most full-time real estate agents, regardless of how long they have been an agent, earn between $34,000 and $45,000 annually. Income varies depending on how much time, effort and planning you put into the employment. Personal confidence and talent are prerequisites to an early uptick in client solicitation and closings, and thus first-year earnings.
To figure out how much you will most likely earn in a particular aspect of real estate transactions – sales, type of property (SFRs, commercial, apartments), leasing or mortgage originations – speak with the brokers you interview about the market they are in and how they believe you will fit in. Ask them questions such as:
- What is the price range of the properties you will work with?
- How many sales will you likely close in your first year?
- What cash reserves will you need before your first sale closes?
- What business equipment and supplies will you need to provide?
- Is the model of your car sufficient for showing properties?
- What special knowledge is needed to handle the class of sales the office handles?
- What level of mentoring programs or training do they offer?
You need to know what your annual gross earning, costs and expenses will be during your first year as an agent. Without an up-front analysis, you will not determine the net earnings you will end up with annually.
first tuesday’s Form 504 helps you keep track of the costs and expenses you can expect to incur in your first year of employment as a real estate agent, such as:
- gross fees due to you as an agent;
- transaction deductions taken by the broker;
- office expense contributions (equipment rentals, membership fees, library/subscription charges, etc.);
- agent’s business expenses (auto, licensing fees and education, travel, insurance, etc.) and;
- marketing and sales expenses not covered by the broker.
Completing this worksheet will help you set a sales goal to be met for the first year of employment. With this analysis, you will have a better idea about the net income and after-tax income you can expect from each broker you interview.
4. Find a broker with a mentoring program
In a recent online poll conducted by first tuesday, the majority of voters pointed to training/mentoring as the most important factor when it comes to selecting a broker for employment.
Real estate has cultures. Each type of real estate has its own customary and unwritten rules to follow – industrial, retail, office, apartments, SFRs, land, business opportunities, mobile homes, etc. Also, each region of the state has its different customs. Thus, to understand how to properly practice as an agent, you need on-the-job training from a mentor or senior agent or you will not fit in locally with the activities of other agents.
A mentoring program offered by a broker provides you with advice and guidance on how to handle real-world situations you will encounter. You need to be trained to deal with difficult clients, to market and qualify properties and to manage your time spent with others and on property analysis. It also gives you instant networking capacity with other real estate agents.
A broker who does not offer a mentoring program means you have to figure out by trial and error just how to conduct yourself. If they do not give you the training or support you sense you need, it is best you locate a broker who does.
5. Get to know the broker and the office environment
New agents do not have the bargaining power to negotiate the best fee split or leads generated by the office environment. However, you can still control your selection of an environment best suited for you to learn the business. You may also conduct a search of the broker’s name and business online. Always check CalBRE’s website for information and a profile on the broker.
Look for a broker who:
- provides a stable and supportive working environment for agents who are learning the ropes; and
- is up-front about the income, expenses and initial investments you will need to make.
Also consider these questions in your search:
- Does the broker have realistic goals for you?
- Does the broker appear well organized in their practice?
- Is the office alive and run efficiently?
- What is the reputation of the broker among experienced licensees?
To get a feel for the office environment, you will want to talk to other agents in that office. Figure out how these agents work together and whether they are the type of individuals you want to work alongside and emulate. A broker who knows how to motivate and keep the office mood upbeat and dynamic provides you the greatest opportunity for success.
When a broker gives you realistic expectations about what it is going to be like working for them, both you and the broker will be satisfied with the employment relationship. When a broker is candid with you, you have greater assurance that being employed by them will not result in you wasting your time, energy or resources in striving to meet unrealistic goals.
6. Ask about the broker’s success
To determine the success of the broker, you want to ask questions about sales, prospecting and lead generation fostered by the office. Look into the agent turnover rate the broker is experiencing. Does the rate seem high? If so, why aren’t agents staying for at least two years?
You will want to look for an office where you can imagine yourself working for at least two years. It takes that long to get a well-rounded understanding of how to make money providing services in the real estate business.
Other questions you will want to ask prospective brokers include:
- Why are agents successful with this broker?
- What makes this brokerage office successful?
- How many full-time agents does this broker have?
- Do they have weekly sales meetings?
- What are their sales goals?
7. Interview with multiple brokers to find the right one for you
As a new agent, take it upon yourself to visit the offices of different brokers. Your observations will tell you how different brokers operate as they do not all act the same. Some questions you may want to keep in mind when interviewing with brokers include:
- What does one broker offer that another does not?
- Is one broker more successful than the other and in what way?
- Where do you see yourself best fitting in and earning an income?
- With which broker will you most likely attain your personal goals?
Consider the interviews of different brokers a trial run; if a broker is not feeling like the right fit, find another one who does. Their attitude and yours are important considerations.
Do you have any other tips for choosing the right broker? Let everyone know by your comments!