Getting started in Real Estate
Hope all is having a great end of summer. I’ve had a lot of request from brothers who want more information about getting their real estate license in the state of California. I’m not a big shot real estate investor/developer yet but I do want to share some real estate basics with you all.
In order to receive a commission for the sale of real estate in California, you will need an active real estate license. There are two types of licenses:
- a salesperson license
- a broker license
The salesperson license allows you to sell real estate and process transactions but only under another broker’s license. Brokers are responsible for everyone that is working under their license. When the contracts are signed, they are not signed under the sales agent’s name but rather the broker’s name thus the broker is liable for everything. The commission is paid to the broker and the broker then pays the sales agent.
In a typical transaction there are 6 different people involved, the buyer, the seller, the buying agent, the selling agent, the buying broker, the selling broker.
The listing agent a.k.a. selling agent helps someone who wanted to sell their house by marketing it in the Multiple Listing Service (MLS) and other venues. The seller usually pays 5% commission to the listing agent (but remember that it is paid out to the selling broker).
What happens usually is that the broker and the selling agent have a 60/40 contract where the selling agent gets 40% of the 5% and the broker gets 60% of the 5% paid by the seller. Depending on which office you work for and how much experience the ratio may vary.
So selling agents usually end up getting 1.0-2.5% of the sales price if they find the buyer on their own. If they work with a buying agent they usually only get half of that in the end getting .50-1.25%.
What is a buying agent? Say I wanted to buy a home, I would get a buying agent to help me find a house. The buying agent would find some houses that fit my requirements (most likely through the MLS) and would call the selling agent to set up an appointment to see the home. The buying agents and selling agents work out a commission agreement
That’s the ideal way that the business is run but things are a little different in the real world. The commissions are negotiable and they fluctuate depending on the circumstances surrounding the deal.
Here’s more information about buying a home either to live in or invest in:
http://www.hud.gov/buying/index.cfm
http://money.cnn.com/magazines/moneymag/money101/lesson8/
http://www.homebuyinginstitute.com/
http://www.remax.com/residential/real_estate_101/buying_a_home/index.aspx
To become a broker you will need at least 2 years of working experience in real estate. You can track how long someone has had their license for, which brokers they’ve work for, how many times they’ve been disciplined by the Department of Real Estate.
You need 3 basic courses to qualify to sit on the sales person exam and 8 course for the brokers’. All the education requirements and requirements to take the exam are listed here:
http://dre.ca.gov/exm_home.html
One of the first things you need to do is find out the purpose of getting your license? Do you want it so that you can save money when you buy a new home? Do you want it so that you can start a career in real estate? Or do you just want it to be cool?
These are all legitimate reason to pursue a CA real estate license. Personally, I started off with the last reason but ended up working in real estate for all the reasons. I didn’t do it to be cool but to distinguish myself from the competition. Having a real estate license doesn’t put you a mile ahead of the game or anything but it does give you somewhat of an advantage. It’s actually a great networking tool that I use when I speak with older executives.
After you’ve decided that you want a real estate license, the next step is to get your education requirements and take the exam. After you’ve passed you exam you will get you salesperson license a few weeks later. When you do so, find a broker or brokerage firm you would like to work for. Firms are always hungry to look for more sales agents because it helps the company grow in size and revenue. Make sure you don’t settle for the first firm that hires you and negotiate the commissions.
In addition to the commission be sure to discuss who will be paying for the insurance. You need errors and omission insurance incase you get sued as a real estate agent. Prices are generally $500-$800 dollars a year depending on which insurance company you work with. There is also general liability insurance but usually the firm pays for that unless you are a broker running your own firm.
That’s the basic for a residential. Commercial is a whole different field.
I work at a commercial firm in Newport/Costa Mesa and we specialize in buying/selling dental/medical offices.
There are other firms that specialize in selling entire buildings or leasing them such as CBRE (where Ms. Jacqueline Pak works) and Cushman and Wakefield. They make even more bank.
I typed this during my lunch break so I have to get back to work. Again this is just a brief summary of how things are suppose to work. If you guys have anymore question please don’t hesitate to send me an email at scott@nguyenscott.com and I will address them in as much details as possible.
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