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Real Estate Agents and Brokers
Nature of the Work | Working Conditions | Employment | Training, Other Qualifications, and Advancement | Job Outlook | Earnings | Related Occupations | Sources of Additional Information
The purchase or sale of a home or investment property is not only one of the most important financial events in peoples lives, but also one of the most complex transactions. As a result, people usually seek the help of real estate agents and brokers when buying or selling real estate.
Real estate agents and brokers have a thorough knowledge of the real estate market in their community. They know which neighborhoods will best fit clients needs and budgets. They are familiar with local zoning and tax laws, and know where to obtain financing. Agents and brokers also act as an intermediary in price negotiations between buyers and sellers. Real estate agents are usually independent sales workers who provide their services to a licensed broker on a contract basis. In return, the broker pays the agent a portion of the commission earned from the agents sale of the property.
Brokers are independent business people who, for a fee, sell real estate owned by others; they also may rent and manage properties for a fee. When selling real estate, brokers arrange for title searches and for meetings between buyers and sellers where details of the transactions are agreed upon and the new owners take possession. A brokers knowledge, resourcefulness, and creativity in arranging favorable financing for the prospective buyer often mean the difference between success and failure in closing a sale. In some cases, brokers and agents assume primary responsibility for closing sales; in others, lawyers or lenders do this. Brokers supervise agents who may have many of the same job duties. Brokers also manage their own offices, advertise properties, and handle other business matters. Some combine other types of work, such as selling insurance or practicing law, with their real estate business.
There is more to an agent or brokers job than just making sales. They must have properties to sell. Consequently, they spend a significant amount of time obtaining listingsowner agreements to place properties for sale with the firm. When listing a property for sale, agents and brokers compare the listed property with similar properties that have recently sold to determine its competitive market price. Once the property is sold, the agent who sold the property and the agent who obtained the listing both receive a portion of the commission. Thus, agents who sell a property they also listed can increase their commission.
Most real estate agents and brokers sell residential property. A small number, usually employed in large or specialized firms, sell commercial, industrial, agricultural, or other types of real estate. Every specialty requires knowledge of that particular type of property and clientele. Selling or leasing business property requires an understanding of leasing practices, business trends, and location needs. Agents who sell or lease industrial properties must know about the regions transportation, utilities, and labor supply. Whatever the type of property, the agent or broker must know how to meet the clients particular requirements.
Before showing residential properties to potential buyers, agents meet with buyers to get a feeling for the type of home the buyers would like. In this prequalifying phase, the agent determines how much buyers can afford to spend. In addition, they usually sign a loyalty contract which states the agent will be the only one to show them houses. An agent or broker uses a computer to generate lists of properties for sale, their location and description, and available sources of financing. In some cases, agents and brokers use computers to give buyers a virtual tour of properties in which they are interested. Buyers can view interior and exterior images or floor plans without leaving the real estate office.
Agents may meet several times with prospective buyers to discuss and visit available properties. Agents identify and emphasize the most pertinent selling points. To a young family looking for a house, they may emphasize the convenient floor plan, the areas low crime rate, and the proximity to schools and shopping centers. To a potential investor, they may point out the tax advantages of owning a rental property and the ease of finding a renter. If bargaining over price becomes necessary, agents must carefully follow their clients instructions and may have to present counteroffers in order to get the best possible price.
Once both parties have signed the contract, the real estate broker or agent must see to it that all special terms of the contract are met before the closing date. For example, if the seller agrees to a home inspection or a termite and radon inspection, the agent must make sure this is done. Also, if the seller agrees to any repairs, the broker or agent must see they are made. Increasingly, brokers and agents handle environmental problems by making sure the properties they sell meet environmental regulations. For example, they may be responsible for dealing with problems such as lead paint on the walls. While loan officers, attorneys, or other persons handle many details, the agent must check to make sure that they are completed.
Increasingly, real estate agents and brokers work out of their homes instead of real estate offices because of advances in telecommunications and the ability to retrieve data on properties over the Internet. Even with this convenience, much of their time is spent away from their deskshowing properties to customers, analyzing properties for sale, meeting with prospective clients, or researching the state of the market.
Agents and brokers often work more than a standard 40-hour week; nearly 1 out of every 4 worked 50 hours or more a week in 1998. They often work evenings and weekends, and are always on call to suit the needs of clients. Business is usually slower during the winter season. Although the hours are long and often irregular, most agents and brokers also have the freedom to determine their own schedule. Consequently, they can arrange their work so they can have time off when they want it.
Real estate agents and brokers held about 347,000 jobs in 1998. Many worked part time, combining their real estate activities with other careers. More than two-thirds of real estate agents and brokers were self-employed. Real estate is sold in all areas, but employment is concentrated in large urban areas and in smaller, but rapidly growing communities.
Most real estate firms are relatively small; indeed, some are a one-person business. Some large real estate firms have several hundred agents operating out of many branch offices. Many brokers have franchise agreements with national or regional real estate organizations. Under this type of arrangement, the broker pays a fee in exchange for the privilege of using the more widely known name of the parent organization. Although franchised brokers often receive help training salespeople and running their offices, they bear the ultimate responsibility for the success or failure of their firm.
Real estate agents and brokers are older, on average, than most other workers. Historically, many homemakers and retired persons were attracted to real estate sales by the flexible and part time work schedules characteristic of this field. They could enter, leave, and later reenter the occupation, depending on the strength of the real estate market, family responsibilities, or other personal circumstances. Recently, however, the attractiveness of part time work has declined, as increasingly complex legal and technological requirements raise startup costs associated with becoming an agent.
In every State and in the District of Columbia, real estate agents and brokers must be licensed. Prospective agents must be a high school graduate, at least 18 years old, and pass a written test. The examinationmore comprehensive for brokers than for agentsincludes questions on basic real estate transactions and laws affecting the sale of property. Most States require candidates for the general sales license to complete between 30 and 90 hours of classroom instruction. Those seeking a brokers license need between 60 and 90 hours of formal training and a specific amount of experience selling real estate, usually one to three years. Some States waive the experience requirements for the brokers license for applicants who have a bachelors degree in real estate.
State licenses typically must be renewed every one or two years, usually without reexamination. However, many States require continuing education for license renewal. Prospective agents and brokers should contact the real estate licensing commission of the State in which they wish to work to verify exact licensing requirements.
As real estate transactions have become more legally complex, many firms have turned to college graduates to fill positions. A large number of agents and brokers have some college training. College courses in real estate, finance, business administration, statistics, economics, law, and English are helpful. For those who intend to start their own company, business courses such as marketing and accounting are as important as those in real estate or finance.
Personality traits are equally as important as academic background. Brokers look for applicants who possess a pleasant personality, honesty, and a neat appearance. Maturity, tact, trust-worthiness, and enthusiasm for the job are required in order to motivate prospective customers in this highly competitive field. Agents should also be well organized, detail oriented, and have a good memory for names, faces, and business details.
Those interested in jobs as real estate agents often begin in their own communities. Their knowledge of local neighborhoods is a clear advantage. Under the direction of an experienced agent, beginners learn the practical aspects of the job, including the use of computers to locate or list available properties and identify sources of financing.
Many firms offer formal training programs for both beginners and experienced agents. Larger firms usually offer more extensive programs for both beginners and experienced agents. Larger firms usually offer more extensive programs than smaller firms do. Over 1,000 universities, colleges, and junior colleges offer courses in real estate. At some, a student can earn an associate or bachelors degree with a major in real estate; several offer advanced degrees. Many local real estate associations that are members of the National Association of Realtors sponsor courses covering the fundamentals and legal aspects of the field. Advanced courses in mortgage financing, property development and management, and other subjects are also available through various affiliates of the National Association of Realtors.
Advancement opportunities for agents may take the form of higher commission rates. As agents gain knowledge and expertise, they become more efficient in closing a greater number of transactions and increase their earnings. Experienced agents can advance in many large firms to sales or general manager. Persons who have received their brokers license may open their own offices. Others with experience and training in estimating property value may become real estate appraisers, and people familiar with operating and maintaining rental properties may become property managers. (See the statement on property, real estate, and community association managers elsewhere in the Handbook). Experienced agents and brokers with a thorough knowledge of business conditions and property values in their localities may enter mortgage financing or real estate investment counseling.
Employment of real estate agents and brokers is expected to grow about as fast as the average for all occupations through the year 2008. However, a large number of job openings will arise due to replacement needs. Each year, thousands of jobs will become available as workers transfer to other occupations or leave the labor force. Not everyone is successful in this highly competitive field; many beginners become discouraged by their inability to get listings and to close a sufficient number of sales. Well-trained, ambitious people who enjoy selling should have the best chance for success.
Increasing use of electronic information technology will increase the productivity of agents and brokers as computers, faxes, modems, and databases become commonplace. Some real estate companies use computer-generated images to show houses to customers without leaving the office. Internet sites contain information on vast numbers of homes for sale, available to anyone. These devices enable an agent to serve a greater number of customers. Use of this technology may eliminate some marginal agents such as those practicing real estate part time or between jobs. These workers will not be able to compete as easily with full time agents who have invested in this technology. Changing legal requirements, like disclosure laws, may also dissuade some that are not serious about practicing full time from continuing to work part time.
Another factor expected to impact the need for agents and brokers is the ability of prospective customers to conduct their own searches for properties that meet their criteria by accessing real estate information on the Internet. While they wont be able to conduct the entire real estate transaction on-line, it does allow the prospective buyer the convenience of making a more informed choice of properties to visit, as well as the ability to find out about financing, inspections, and appraisals.
Employment growth in this field will stem primarily from increased demand for home purchases and rental units. Shifts in the age distribution of the population over the next decade will result in a growing number of persons in the prime working ages with careers and family responsibilities. This is the most geographically mobile group in our society, and the one that traditionally makes most of the home purchases. As their incomes rise, they also may be expected to invest in additional real estate.
Employment of real estate agents and brokers is very sensitive to swings in the economy. During periods of declining economic activity and tight credit, the volume of sales and the resulting demand for sales workers falls. During these periods, the earnings of agents and brokers decline, and many work fewer hours or leave the occupation altogether.
The median annual earnings of salaried real estate agents, including commission, in 1998 were $28,020. The middle 50 percent earned between $19,060 and $46,360 a year. The lowest 10 percent earned less than $13,800 and the highest 10 percent earned more than $83,330 a year. Median annual earnings in the industries employing the largest number of salaried real estate agents in 1997 were as follows:
Median annual earnings of salaried real estate brokers, including commission, in 1998 were $45,640. The middle 50 percent earned between $28,680 and $80,070 a year.
Commissions on sales are the main source of earnings of real estate agents and brokers. The rate of commission varies according to agent and broker agreement, the type of property, and its value. The percentage paid on the sale of farm and commercial properties or unimproved land is usually higher than the percentage paid for selling a home.
Commissions may be divided among several agents and brokers. The broker and the agent in the firm who obtained the listing usually share their commission when the property is sold; the broker and the agent in the firm who made the sale also usually share their part of the commission. Although an agents share varies greatly from one firm to another, often it is about half of the total amount received by the firm. Agents who both list and sell a property maximize their commission.
Income usually increases as an agent gains experience, but individual ability, economic conditions, and the type and location of the property also affect earnings. Sales workers who are active in community organizations and local real estate associations can broaden their contacts and increase their earnings. A beginners earnings are often irregular because a few weeks or even months may go by without a sale. Although some brokers allow an agent a drawing account against future earnings, this practice is not usual with new employees. The beginner, therefore, should have enough money to live on for about six months or until commissions increase.
Selling expensive items such as homes requires maturity, tact, and a sense of responsibility. Other sales workers who find these character traits important in their work include motor vehicle sales workers; securities, commodities, and financial services sales representatives; insurance sales agents; and manufacturers and wholesale sales representatives.
Information on license requirements for real estate agents and brokers is available from most local real estate organizations or from the State real estate commission or board.
For more information about opportunities in real estate, contact:
Last Updated: March 30, 2000
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