We would like to thank Kaplan Real Estate Education, a provider online real estate courses, for sponsoring this article. Kaplan offers a great e-book on “Launching Your Real Estate Career” which can be downloaded for free here. All views expressed in this article belong exclusively to Fit Small Business.
In this guide we’ll show you all the steps it takes to become a real estate agent – from education to licensing, finding a broker and more.
In order to become a real estate agent, the basic requirements are:
- Be at least 18 years old (or 19 in Alaska and Alabama)
- Have a GED or high school diploma
- Be legally authorized to work in the US
From there, you need to take a certain number of classes and pass a real estate licensing exam, which varies from state to state. In the rest of this guide, we’ll outline each of these steps & more:
Step 1. Pass the Real Estate Personality Test
Working in real estate can seem like a dream – you choose your own hours, work at your own pace and earn massive commission checks.
As many real estate agents will attest, however, the reality is much different. Agents often spend more time working than they would at a traditional 9-to-5. Entering the industry requires some hefty upfront costs, and it can take several months before you earn this money back.
The first step to becoming a real estate agent is to ask yourself these practical questions and make sure the job is right for you:
Are you well rounded in your business knowledge?
Are you able or willing to learn prospecting, sales, marketing, finance and law? Real estate agents have to apply knowledge in many different business subjects in order to find leads, close sales, draft contracts, work with lenders, etc.
Are you willing to work on off-hours and weekends?
A lot of people become interested in real estate because they want a more flexible schedule. While this may be a valid perk, what they don’t all realize is that agents are “on call” up to 18 hours a day. Whether it’s jumping on a new lead before someone else does, or taking a call from a needy client, agents must be prepared to enter “business mode” at any time of day.
Can you afford to spend at least $3,000?
Between class registration and exam fees, getting a real estate license can cost up to $800. Add broker fees, E&O Insurance, MLS Access and NAR Membership (optional) and you’re looking at around $3,000 for your first year, according to Mindy Jensen from BiggerPockets.
Can you go 3 to 6 months without income?
Completing pre-licensing coursework can take a month if you take classes full-time – or 8 months if you work on nights and weekends. After receiving their license, it can take realtors 1 to 3 months to close their first sale, and an additional 2 to 3 months to receive their first commission check.
Are you interested in architecture & the local housing market?
This one may sound like a no-brainer, but not all agents have a genuine interest in the homes they sell. Being able to discuss home designs and local neighborhood features with passion is something that clients will notice.
If you can confidently say “yes” to all these questions, then you’re ready to move on.
Step 2: Register for Real Estate Licensing Classes
The next step to becoming a real estate agent is to sign up for classes. All states require you to pass a certain number of real estate classes before you can take the exam. Registration costs anywhere from $99 to $649 or higher depending on your state and the school you enroll at.
The exact requirements vary by state. They range from 24 credit hours in Massachusetts to 210 credit hours in Texas. Most states fall in between, however, requiring 50 to 100 credit hours. To find the requirements in your state, see this guide from InvestFourMore.
Pre-licensing classes teach you the basics of real estate, such as the listing/selling process, drawing contracts, valuing properties, etc. You’ll also have to take some basic math classes to learn how to calculate commission, property taxes, price per square foot, etc.
You can take these classes at a local college, or from an online school like Kaplan Real Estate Education. The benefit of taking classes online is that you get to work at your own pace and set your own hours, which is especially helpful for those who need to continue working their day jobs.
We took a close look at the top online real estate schools and found Kaplan to be the best. They have the highest ratings from students, an excellent graduation rate (76%) and a more personalized class structure. Their courses are more interactive, offering study groups and webinars that mimic a classroom experience – yet at the same time, you get the flexibility of an online course. You can check out our comparison of Kaplan, RealEstateExpress and CareerWebSchool here.
Step 3: Take the Real Estate Licensing Exam
As soon as you finish your real estate courses you’ll want to sign up to take the test. We recommend doing this right away so 1. the knowledge is fresh in your head and 2. because the paperwork can take a while to process. The sooner you sign up, the shorter the gap between finishing classes and earning your license.
To sign up for the exam, you need to fill out an application. In New York, this comes with a $15 fee. In California, it’s a $60 fee. You also need to provide a transcript from your real estate school that proves you passed the required courses.
The test format varies from state to state, but it’s typically a multiple-choice test that takes 1.5 to 3.5 hours to complete. In order to pass, you have to answer 70 to 75% of the questions correct. To read more about the real estate licensing exam, you can check out our full guide here.
Step 4: Find a Broker
So you took the exam and passed with flying colors. It’s time to apply for your license, right?
Not so fast. Before you can get that special document that grants you the right to buy and sell homes, you need to find a real estate broker to sponsor you.
What is a real estate broker? A real estate broker is somebody who has a lot of experience in the real estate industry and took extra courses to receive their brokerage license. This license grants them the right to manage or run a real estate business. All agents are required to “work for” a broker, since the broker will oversee their transactions and take some liability off their shoulders. If you want to learn more about the role of real estate brokers, check out our article Real Estate Agent vs. Broker: What’s the Difference?.
I say “work for” in quotations because there’s a huge variety in how brokers run their business. Some act as traditional managers, giving you training and advice, while others take a hands-off approach.
Broker Fees & Resources
Now, all brokers charge agents a certain fee to sponsor them. This typically means a percentage of your commission checks (anywhere from 5% to 60%), or a flat monthly fee known as a “desk fee”. As a general rule of thumb, the more training and resources you get from a broker, the higher the fees. In other words, a broker that gives you one-on-one training, office space, advertising, an administrative assistant, etc. is going to charge you much more than a broker who just signs off on your transactions.
For most new agents, it’s a good idea to join a broker who offers more resources. On top of real-world training, a “hands on” broker will provide you with leads – something that’s hard to find as a new agent. Thus, most new agents will split about 50% commission with their broker, according to Point2.
A key exception is real estate investors. If you’re just looking to get your license so you can flip properties, training and lead generation isn’t as important. Instead, you can find a “hands off” broker that takes a much smaller split. Mindy Jensen from BiggerPockets describes a brokerage she joined that charges a flat $499 per property bought or sold, plus a small $52/month desk fee.
How to Find a Broker
To start your search for a real estate broker, browse for property listings in your area. Write down the names of real estate companies and start making some calls. A lot of brokers are actively looking for new agents, so they should be pretty excited to hear from you.
Step 5: Submit Your Real Estate License Application
Once you’ve found a broker who will you sponsor you, you can finally submit your application for a real estate license. On the application you’ll include your course transcripts and proof of passing the exam. You’ll also need to provide your broker’s ID number, as well as your own state ID and Social Security Number.
The application requires an additional fee – In New York, it’s $50. In California, it’s $245, plus a $49 fee for fingerprinting. Other states will require you to submit to a background check, along with fingerprinting, so there may be additional fees.
Step 6: (optional) Purchase Errors and Omissions Insurance (E&O) and Join the National Association of Realtors (NAR)
Depending on the state you live in and/or the brokerage you join, you may have to do two more things before you can start selling homes.
Errors and Omissions Insurance (E&O)
is a type of liability insurance that can protect real estate agents if they make a mistake during a transaction. A classic example involves two Pennsylvania-based who failed to disclose a home they sold was the scene of a gruesome murder-suicide. As told by the Wall Street Journal, this resulted in a 7-year legal battle after they were sued by their client.
E&O Insurance can cover you financially during cases like this. Of course, cases are usually much more mundane, like mis-filed paperwork, termite damage to a home, etc.
Currently, 12 states require agents to be covered with bare-minimum E&O Insurance – mostly in the South & Midwest. The rest of the states do not have a requirement, although individual brokers might. The cost is about $600 a year for an individual policy. Alternatively, your broker might have already provide coverage for their office. In this case, you’ll pay them back through your commission split or desk fee.
The National Association of Realtors (NAR)
is an optional trade association for real estate agents. Although the word “Realtor” is sometimes used interchangeably with “real estate agent,” it actually refers exclusively to NAR members. By joining the NAR, you get the privilege of becoming a “Realtor.”
NAR members follow a special code of ethics and pay a $120 annual fee. The idea is that by following a client-centered approach to real estate, NAR members will be more sought-after by consumers. The small fee you pay is offset by the extra business that comes in as a result.
Whether or not this is true can be debated. But at the end of the day, many brokers require agents to become NAR members, so you may not have a choice. Even if NAR membership is not required, you may want to join for some of the member discounts, or just for the status of being a “Realtor.”
The Bottom Line
With the final requirements completed, you should be well on your way to selling and buying homes. You can find more real estate resources on our dedicated Real Estate Homepage. If you’re looking for more info on becoming a realtor, check out this free ebook from kaplan on Launching Your Real Estate Career.