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California Real Estate Exam: Everything You Need to Know
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As a mother, Veronica wanted that freedom to be able to work from home. She also gravitated towards the great financial aspect tied into being a Real Estate Agent.
Veronica’s career began at CA Realty Training. She went to in-class training sessions at the Westwood location. She goes on to say that this decision was the best decision she has made for herself. She explains that the support, the courses, and the schedule that CA Realty Training provided all worked out very well for her.
Veronica explains how she felt an abundance of emotions- from excitement to doubtfulness. Now that she got her license, she quickly wondered what her next step was and knew she had to get to business!
The reason for doubtfulness was due to the fact that she did not truly believe that she could do it. However, the support from CA Realty Training has helped her get perspective and gave her the confidence to get out there and begin her career. Her new-made connections and co-workers provided her support and influenced her to get started.
The first people that Veronica approached before getting any clients were her sphere of influence. She goes on to say that her last client was actually from her part-time job at the retail store she worked at prior to getting her Real Estate Agent Salesperson License. Alvarez tells Robert that she told people in her sphere of influence that she had her license, and two months later she got clients!
Veronica advises people that want to get started in this career that they should strive to get past insecurities and doubts (because fear is what ultimately limits people from becoming successful). Alvarez also advises people to pick the right brokerage for them- which will encourage them to stay focused and determined.
Veronica has zero regrets about her decision and career change. She is happy with all of her decisions and with the path she chose for herself. Next time this year, she hopes to have more listings and sales, and will work hard to ensure her goals are achieved.
One of the most critical choices you will make at the start of your career as a newly licensed or potential real estate agent is whether to work solo or alongside a team.
This decision is crucial because it shapes the entire future of your practice and determines how much financial and professional success you can gain.
Let us take a quick look at the advantages and disadvantages of joining a real estate team:
Pros of Joining a Real Estate Team
Cons of Joining a Real Estate Team
As a new agent, you are bound to be faced with a lot of challenges, including:
Let’s face it, handling all of this could get overwhelming. You just might need to join a team to ease the burden. Let's explore whether this is a good idea:
A real estate team consists of a group of real estate agents working together under a brokerage. These agents do everything together, including managing listings and collecting commissions.
While it might seem like a wrong idea to team up with your competition, you should know that joining a real estate team might be a good idea – especially if you are a new agent.
Working in a team allows you to be closer to other agents, some of which will be more experienced than you are.
You get to see how they handle their leads and clients and learn things from them, thus helping you to become a better realtor.
Additionally, the leads given out by the team leader are pooled together. With a combination of effort from every team member, it is easier to find and land a client.
As a new agent, it could get overwhelming trying to keep afloat. But, if you work with a team, you get professional support from other agents and your team leader. You can also enjoy proper training and education that benefits your career.
Like any business, being a real estate agent comes with its expenses. These include licensing fees, brokerage fees, operation costs, continuing education, marketing materials, office supplies, self-employment income taxes, MLS fees, and lots more.
However, in a real estate team, all these expenses are shared amongst everyone, thus helping each teammate to save some extra money.
Some expenses you get to share with your teammates include MLS fees, office supplies, marketing material, operation costs, and others.
In the real estate industry, the competition is usually agent against agent, and in the case of a team against team.
This simply means that rather than working against your teammates, you are working with them, thus giving you fewer people to compete against.
This way, you get to pool together resources and marketing power to land clients. And suppose one teammate is unwilling to work with a particular client. In that case, the client can quickly be passed on to you rather than have them go to the competition.
While working alone allows you more control of your time, it also gives you the chance to become lazy by dilly-dallying and procrastinating.
However, suppose you are working in a team. In that case, you are automatically accountable to your team leader and teammates. You will thus be pushed to work harder and be more productive.
When working as a team, your sphere of influence is no longer limited to the people you know.
Instead, it spreads to include everyone your teammates know, which increases your chances of landing a client.
While joining a real estate team might be the best for new agents, the same cannot be said for experienced agents.
This is because they might be looking for more independence and freedom that a team cannot give them since they have more experience.
While sharing expenses with your teammates will help you cut costs, it will also mean you get a smaller commission cut. Unfortunately, this will limit your earning potential.
Real estate teams always have team leaders who are in charge of running the entire team.
When working in a team, you don’t get to be your own boss and call the shots; you have to answer to the team leader and other teammates.
This loss of independence and decision-making makes you less of the entrepreneur you would be if you were working solo.
When you work in a real estate team, you put all your efforts into building another person’s brand rather than yours.
Unfortunately, this means you might not get the chance to pursue your interest because you are pursuing that of the brand and team leader.
It also means that if you ever decide to go independent, it might seem like starting from scratch.
Personality is so important in a team that some teams won’t accept agents based on their personality. Different people have different personalities, and when working as a team, you have to deal with all these personalities, good or bad.
While some teammates might have personality types that agree with yours, others might be more difficult to work with. This affects how well you can get along with your team and produce results.
Joining a real estate team is not a prerequisite to success in the real estate industry. But, it has many benefits that could help you kickstart your career as a real estate agent.
If you are a newly licensed agent, joining a team is advisable. But, in the end, whatever decision you make, just make sure you consider both your short-term needs and long-term goals and ensure you are getting the most out of it.
Is a commercial real estate license different from a residential license?
Absolutely not! There’s a big misconception that you have to obtain a different license for commercial real estate. When you get your real estate license, it allows you to practice in both sectors of the field.
This is one of the advantages of having your license. You are not limited to one or the other. You can practice residential or commercial real estate and some people decide to do both.
While you are still helping people buy and sell real estate, other business-related factors will be different. Let’s compare the actual differences between residential and commercial real estate and what agents deal with.
With residential real estate, agents focus on selling properties for residential use. Single-family homes, condominiums, and any multi-unit building up to 4 units are common property types. This will also include duplexes or triplexes.
Commercial real estate is focused on properties that will have a return on investment for their clients. A typical commercial agent will focus on negotiating properties such as office buildings, entire apartment complexes, strip malls, and retail locations.
The average price of a home in residential real estate can vary depending on the area and market. For instance, the current median price of a home in California is about $800,000. The average commission percentage is 3% per side.
While the commission percentage is the same, the size of the commission check in commercial real estate is substantially more. That’s because the price point of a commercial building exceeds the price of the average single-family home in comparison.
When working in residential, a majority of your business will come from your sphere of influence, or the people you know. Referrals from your past clients will also make up a portion of your client list. Because all people need a place to live, there is no limit to who you can target as a lead.
Commercial agents deal with companies and investors as their clients. Commercial clients expect agents to be informed about data such as cap rates and gross rent multipliers. They tend to be less emotional and more data-driven.
Is residential better?
That’s relative depending on what you consider a priority when practicing real estate. Let’s compare some of the advantages in the field of residential.
It has often been said that real estate is a “people business.” Buying a home can be very emotional for buyers. If you love working with people and making meaningful connections with your clients, then residential is the right field for you.
Again, commercial agents are dealing with investors. These people tend to be more interested in data, react less to emotion, and are more analytical.
A commercial investor is not as concerned with moving in by the end of summer or falling in love with a dream kitchen. They think in terms of numbers, rent schedules, and insurance rates more than anything else.
The average time it takes to sell a home can be anywhere from 30-70 days. That’s an advantage in residential real estate. You have more opportunities to close deals and make more in commissions.
While commercial real estate can get you more in commissions, the transactions can take longer to close. This is simply because there is more research and data that has to be done on a commercial deal. Some commercial deals can take a year or longer depending on the property and the market.
Can you do both commercial and residential real estate?
Absolutely. As we mentioned before, your real estate license allows you to practice in both sectors. Although, most agents will specialize in one or the other.
Each area of real estate will have different methods of lead generation, marketing, and training. Becoming familiar with commercial practices will help you close more deals.
In terms of marketing, while residential agents might reach out to potential leads through social media and mailers, commercial agents are much more likely to formally present data and numbers to their clients.
Because commercial real estate is focused on investment return, it relies more on hard numbers. If you are a residential agent interested in getting into commercial, here is some of the terminology you should understand and get familiar with:
You must be more adept at calculations and realize that your clients are looking for a good investment. Learning how to evaluate and interpret the data based on these calculations, will help identify the appropriate properties.
When you work in commercial, there’s a much greater risk but often a greater possibility of a larger financial reward.
Residential real estate allows you to work with people and make connections. Your initial leads are the people you know. You can potentially close your first deal within 3 to 6 months if you work your database.
Residential transactions have fairly quick closings allowing for more earning potential.
As a commercial agent, your commissions may be 10x as large, but they definitely don’t come as frequently. There is typically less of a turnover rate on a commercial sale since investors tend to hold on to their buildings for many times longer than people usually stay in their homes.
That's why it’s important to save money for living expenses–even more so than a residential agent–and be able to weather the storm if nothing sells within a year or more.
Commercial agents need to know the data and how to interpret it. They also need to be patient, confident, and persistent to succeed in the competitive field of commercial real estate.
If you are a newly licensed agent, you may be asking yourself whether you should practice residential or commercial. With each sector, there will be advantages and disadvantages. The most important question to ask yourself?
“Which is better for me?”
Getting your clients under contract on a property is a feeling like no other for real estate agents. But next comes the escrow process, bringing with it its own set of potential challenges.
Escrow is the process of transferring the funds from the buyer to the seller through a third party. While the escrow process should go smoothly, some common escrow problems include:
Throughout your real estate career, you will likely experience one or more of these problems.
As you and your clients navigate escrow, here are some of the most common issues you could encounter and what you can do to save the transaction.
Suppose the buyer has included an inspection contingency in their offer. In that case, they have the right to bring a third-party inspector to the property, and potentially back out of the deal depending on the findings.
In a property inspection, the home is examined thoroughly for various issues like structural damage, electrical, plumbing, and HVAC systems.
Depending on how the purchase contract is written, a buyer can back out of a home purchase if the severity and cost of the issues are more than they want to deal with.
Usually, with an inspection contingency, a buyer can indicate how much they’re willing to pay towards inspection repairs before they have the option to walk away.
However, if a buyer decides they still want the house despite the inspection report, there are still options! Using your negotiating skills, you can work with the seller’s agent to try and agree on the repairs.
If the buyers are still interested in the house, you can go back to the seller to determine if they’ll lower the cost of the house or potentially contribute to the cost of repairs.
The appraisal is an evaluation of the property's value from a third party to gauge whether a buyer is paying a fair price for a home.
There are a few reasons why a house could potentially appraise for less than your purchase price. In competitive markets with low inventory, it’s not uncommon for homes to sell for more than they’re listed.
Sometimes when this happens, the appraisal value hasn’t yet caught up with the market’s value. Other times, a real estate agent has priced the home too high, and the listing price will have to be lowered to meet the appraised value.
If your client's home appraises for less than the purchase price, you have a few options. You can negotiate with the seller to either lower the listing price or the buyer can make up the difference in the amount of down payment they offer.
If neither option is available and your buyer has an appraisal contingency in place, your client can walk away from the deal without losing any deposits.
In some cases, you might be able to appeal or dispute an appraisal in which the buyer’s lender submits a request to re-evaluate the home.
The chance an appraiser changes their decision is slim, but in some instances, it can work to correct the low appraisal value.
Buying a home is a stressful and intense process that some buyers don’t anticipate when starting their home-buying journey.
A lot can change in a buyer’s life - both financially and personally - from the time they start the search to when they’re under contract on a property. Sometimes they can get cold feet, resulting in buyer’s remorse after the contract is already in place.
Ultimately, homebuyers could decide for reasons outside of the real estate agent or seller’s control that they no longer want to purchase that home.
It could be because they weren’t able to sell their current home in time, or perhaps they found a house they like better. Whatever the case, staying positive and empathetic with your client is important.
Getting a loan today is much different than in past decades. There is intense scrutiny into every aspect of the loan applicants' finances and strict guidelines on debt, income, job verification, and more that can result in funding being revoked.
During the escrow process, it’s important to counsel your client to make no major changes to their current financial situation. They shouldn’t make large purchases or suddenly change jobs, as it could change their loan eligibility.
Sometimes these things are out of your clients' control, like if they lose their job or have an unexpected medical bill.
One way to avoid this is to have your clients get pre-approved by a lender before they write a contract. This can prevent any surprises and give your clients a good idea of what they can afford.
You can certainly take steps to avoid these escrow problems and save the deal from falling through — and it starts with your negotiating abilities.
When these issues arise, it’s crucial to utilize the power of negotiating to help find a middle ground between the buyers and sellers.
Communicate with your clients to understand what their needs are and what is the best way to support them during this time.
You’ll likely have to work with the seller’s agent to find a middle ground, or the deal might not succeed.
Clear communication and transparency can go a long way in working to settle the problems.
No matter how good of an agent you are, these problems can pop up in any transaction. How you handle them will indicate how confident of an agent you are.
As you navigate your clients through the escrow process, remember to stay positive, communicative, and solutions-driven to provide the best service possible.
The H.O.A. (Homeowner’s Association) can affect home ownership in numerous ways- mainly for its high cost, but also its many benefits. First we will discuss what the difference between an apartment and a condominium (condo) and then we will explain how the H.O.A. is involved.
An apartment and a condo are very similar, but primarily vary in terms of ownership and use-restrictions. While both are usually units within a larger building, the primary difference is that a condo will have an individual owner per unit, whereas the whole apartment building will all be owned by one entity such as a person or a corporation. For a renter, there is not much of a difference, but for those looking to purchase a property, a condominium may be an affordable stepping-stone to a larger, detached home. And while an apartment building has rules written into the lease that are set by the owner/manager, a condominium complex has an H.O.A. with rules set by agreement between the homeowners of each condominium.
An H.O.A., or Homeowners Association, is a small housing “government” that sets the rules and restrictions allowed in the community in which you live. As mentioned, it’s made up of the owners of the individual units so each person has a say at the HOA meetings, and an opportunity to become part of the Board that oversees the H.O.A. (Being on the Board is not always fun and games - many times you will have to settle complaints between other homeowners and act as a referee between two angry neighbors.)
H.O.A.s are not only in condominiums - some single-family communities have them as well - but they are present in every condo building to ensure some common items like maintenance and upgrades of common spaces and the exterior of the building(s). Unlike a detached home, a condo owner cannot just paint the outside of his or her home - all units must be painted and upgraded together to ensure a common, cohesive look. Also, upgrades to amenities - like a pool or a gym - have to be agreed upon by all homeowners of the complex, both for aesthetics and for cost.
Another aspect of H.O.A.s that can’t be overlooked is the monthly cost, which must be factored into total ownership costs of the house. For example, if a monthly mortgage payment is a stretch, the extra $100-500 (on average) in Homeowners’ fees can really make or break a sale. Though there are benefits to H.O.A.s, the fees are usually the least pleasant part of the experience. Some Associations even have fees over $1000 per month! These are probably the ones that provide the most benefits, but that can definitely make or break a sale if the buyer is stretching to afford the monthly mortgage payments.
However, an expensive and important aspect of H.O.A.s is their insurance for the building, common spaces, and any incidents that may arise in the common spaces. For example, if a guest of one of your neighbors falls in the back courtyard, the H.O.A. should carry liability insurance to cover the guest’s medical bills. If a fire starts in one condo and burns down the entire building, the H.O.A. should carry insurance to help defray the costs of rebuilding the entire complex.
As you can see, these differences are important to keep in mind when renting an apartment or condo, and it’s very important to review all the rules of an H.O.A. before buying a condo. Some H.O.A.'s dues may seem too high for the benefits they offer, but keep in mind that they do oversee many services and insurance for common areas. As always, do your research thoroughly and keep everything in mind when buying your own home.
Choosing a real estate brokerage can affect your success, the training you get, and your satisfaction in the industry.
Different brokerages provide different support, commission rates, and resources. Evaluating your options carefully is important.
If you are choosing a real estate broker, your choice matters. Picking the right broker will make or break your future career. This guide will help you determine the best brokerage for you.
When deciding how to choose a real estate brokerage, it’s important to understand the different types available.
Franchise brokerages, like Keller Williams and Century21, are national and global companies. They offer many resources and strong branding, but they may also have higher fees.
Independent brokerages offer agents more freedom and personalized support. However, they may not have the same recognition as larger franchises.
Virtual brokerages are becoming more popular. Agents can work from home and save money. However, they may provide less face-to-face interaction and community support.
When choosing a real estate broker, think about the benefits and drawbacks of each type. This will help you match your career goals, work style, and the support you want.
To choose the right brokerage, research the brokerages in your area. You want to evaluate the brokerage based on the following factors:
Let’s dive into each one of these factors and see how to identify a good brokerage – especially for new agents.
When choosing a real estate broker, it’s important to know how the commission works.
Most real estate agents earn a percentage of each sale, known as the commission split, which can range from 60/40 to 70/30 or more.
In addition to splits, some brokerages charge desk fees or other administrative costs, which can reduce your overall earnings.
As a new agent, these factors can greatly affect your income. Understanding the commission structure will impact your earnings and future growth. This is key when you are looking for a broker as a real estate agent.
For new agents, choosing a brokerage that offers robust training and mentorship programs can be a game-changer.
To learn about real estate, you need more than just a license. You also need real-world experience, guidance, and ongoing education.
When choosing a broker as a new agent, look for a brokerage that offers training programs. Make sure they provide access to mentors and resources to help you succeed.
A solid mentorship program will accelerate your growth and help you avoid common pitfalls as you pick a real estate broker to work for.
The culture of a brokerage plays a crucial role in your long-term success and satisfaction as an agent.
When choosing a real estate agency, think about more than just commission splits. Consider the support system the brokerage provides.
A supportive environment, where team members help each other, can really help new agents.
Brokerages with a strong office culture and good agent tools can help you succeed. They provide the support you need as you learn to choose a real estate brokerage that matches your values.
Some brokerages offer lead generation and marketing support to help agents grow their client base.
When choosing a real estate brokerage, inquire about how the brokerage helps agents secure leads and market their services.
Some offer many tools, like CRM systems, paid ads, and client referrals. Others may let agents find their own leads.
This support can greatly affect your success as a new agent. So, think carefully when choosing a real estate broker that meets your needs.
A brokerage's knowledge of the local market can be a critical factor in your career success.
When you search for a broker as a real estate agent, consider their knowledge of the area. Your brokerage should understand the local market where you want to operate.
A brokerage with local knowledge can guide you better. They will help you build a network and connect with clients.
The location of your brokerage affects the properties you will work with. It also impacts the clients you will serve and your career growth. This makes location an important factor when choosing a broker as a new agent.
In today’s competitive real estate market, modern technology and tools can greatly impact your success as an agent.
A brokerage with advanced CRM systems, digital marketing tools, and transaction management software can help you work better. It can also help you manage clients more effectively.
When considering how to choose a real estate brokerage, look for one that provides access to the latest tech resources.
This saves time and boosts your efficiency. You can focus more on building relationships and closing deals.
You can choose between a traditional office or a real estate agency that operates online. Having the latest technology is critical in both cases.
A brokerage’s reputation is one of the most important factors to consider when deciding where to work.
A company with many happy clients and successful deals can give you credibility. This helps you build a strong career.
To make the right choice, research the brokerage's reputation. Check online reviews and industry awards.
Choosing a real estate broker to work for means looking at more than just commission splits. Finding a brokerage with a good reputation is critical. This can help you attract clients and grow your professional network.
When you have found a few brokerages that you like, it’s time to schedule an interview.
To do so, simply call the brokerage front desk or send them an email. In your outreach, mention where you are in your career, your goals, and that you would like to interview.
Most brokerages are excited to recruit agents. You can interview and secure a job. Make sure to prepare interview questions based on the criteria we listed above.
Asking those interview questions will help you learn more about the brokerage and its resources.
Choosing the right real estate brokerage is a crucial step in building a successful career.
From evaluating commission structures and technology to considering training programs and company culture, there are many factors to weigh.
When deciding how to choose a real estate brokerage, take the time to assess your goals, needs, and long-term vision. Whether you’re just starting or looking to make a switch, understanding your options will help you make an informed choice.
Purchasing a house is perhaps one of the biggest purchases many make in their lifetime. Research puts the United States homeownership rate in the second quarter of 2022 at 65.8%, a slight increase from 65.4% in 2021.
Of this 65.4% in 2021, 34% were first-time home buyers. While being a first-time buyer can be both an exciting and frightening experience, the statistics above prove that you are not alone.
This article provides a step-by-step guide on buying your first house, avoiding costly mistakes, and making the best out of your home-buying experience.
Having decided to purchase your first property, these are a few tips you must know and consider when buying your property:
The choice of mortgage lenders or financing institutions is a major step in purchasing your first property. This step must be handled thoroughly as its impact lasts for several years after the purchase has been completed.
When choosing a lender, it is important to consider their interest rates, down payments, additional fees, and repayment periods to ensure that these terms are favorable and suit your needs.
The next step is to obtain a mortgage preapproval from your lender stating that the lender has offered to finance your purchase with a particular amount under certain terms. Obtaining a pre-approval letter gives you an advantage over other buyers by demonstrating to sellers that you are a serious buyer.
It is important to note that your lender will review your credit history, debt-to-income ratio, and other financial documents to verify your income, assets, and debt. Depending on the mortgage lender, you could get a preapproval in as little as one business day. However, it usually takes a few business days to be finalized.
No rule in the real estate industry makes it compulsory for buyers to engage the services of real estate agents. However, it is advisable to hire professional and experienced realtors to ensure ease and protection from start to finish of the buying process.
A good realtor will get you the best properties that meet your needs at the best prices, guide you through the negotiation, handle all necessary documentation and investigations, and, most importantly, oversee the closing. When scouting for realtors, you can begin your search on the internet or seek referrals from recent buyers around you.
After selecting your potential realtors, during the interview, inquire about their experience with assisting first-time buyers and how they plan to help you find a home, especially those not on the market yet.
One of the perks of working with a realtor is it increases the likelihood of finding your ideal property -whether it be a single-family unit or a condominium- within your budget in record time. Due to the vast network of contacts and knowledge of the market available at their disposal, realtors are invaluable to buyers looking to find the best property in the market.
When searching for property, consider your budget, the location of the property, the safety of the environment, other surrounding neighborhoods, and its proximity to necessary amenities important to you, such as schools and hospitals.
After finding an appropriate property, proceed to make an offer on the property. This is a crucial aspect of the procedure that must be handled with expertise to prevent your offer from being rejected. Your realtor would guide you on how to draw up a strong offer that would be accepted.
They will also assist you in deciding how much money you want to offer for the house, ensure that the necessary documents are contained in the offer, and inform you of important conditions you want to ask for.
Some experts advise going the extra mile, especially in a highly competitive market. This entails adding little gestures such as flowers or the seller’s favorite cookies -if you are privy to this information. Bear in mind that you may also be offered a counteroffer for different reasons, such as a change in the property’s value after appraisal.
Once your offer has been drawn up, it is sent to the seller, typically through your realtor. Most of the time, this is done via email, but it can also be sent to the seller’s residence via mail or eBay. Your agent must also inform the seller’s agent so they can look out for your offer.
Once your offer has been selected, and an agreement has been reached with the seller, an escrow account is opened – typically by your realtor. This enables a neutral third party to protect the money and documents of the two transacting parties and only release each to the respective recipients when all of the terms of the contract are met.
An escrow typically takes about 30 days to close so as to enable the lender to verify your financial security and the value of the property in question.
One of the important requirements to meet in order to obtain financing from a lender is to carry out an appraisal of the property in question.
This is typically carried out by an approved appraisal company, usually, one that the lender suggests. Lenders do this to confirm the actual market value of the prospective property and ensure that they are not issuing loans higher than the property value.
The most common method of appraisal is the comparison approach which compares the prospective property to at least 3 recent sales in the area. This method typically uses properties sold within the past 12 months to provide an up-to-date picture of the current market.
Before purchasing a property, employing a professional inspection agency to carry out a thorough house inspection is paramount, regardless of the state of the property. This gives you a general idea of what you are getting into in terms of the quality, safety, and overall condition of your potential home.
It also helps you draw up a comprehensive budget to foot additional expenses, such as repairs that may arise while acquiring the property. On the other hand, you can negotiate to have the seller make the repairs or give you a discount on such expenses.
This phase involves signing all documents related to the purchase of your property, including loan documents, to finalize the deal. It is important to hire a professional solicitor to handle all legal affairs related to your property in order to ensure you are well protected before signing any of the documents.
Your realtor would also inform you of the documents you are required to bring along to the closing, such as a means of identification, i.e., a government-issued ID card and all other necessary documents.
The process of acquiring a property does not end with the payment and signing of documents; it is necessary to have the purchase documented with the appropriate authorities. After closing the deal, your title or escrow agent typically files for the original deed of the property in the appropriate government office in your county.
This document legally proves that you are now the owner of the property. When there are no discrepancies in the title of the property, this process typically takes a couple of hours from the closing to a few weeks.
Purchasing a first property can be a life-changing experience for anyone. However, like any other transaction, it is important to conduct thorough research and employ the required professionals. This is to help you avoid incurring losses and possibly legal issues during the purchase process.
As a real estate agent, the ability to connect with the people who need your services and satisfy their needs is your most important duty.
And achieving it all boils down to one thing - your sphere of influence.
Let’s take a look at what this means, and how you can cultivate a sphere of influence that rocks.
A sphere of influence (SOI) consists of people whom you are personally connected with.
These are people that you have a relationship with and who are very likely to influence your business by recommending your services and/or providing valuable feedback.
Examples of people in your sphere of influence include your friends, family, past clients, old schoolmates, business colleagues, and every other person that you are connected to in one way or the other.
Many new real estate agents knowingly or unknowingly become secret agents – people who do not tell other people that they are real estate agents. This secrecy could either be because of shame or embarrassment at sharing they are agents, or because they do not want to look like they are begging for business.
However, you need to understand that there are certain dangers to being a secret agent.
Every day, we are presented with several opportunities to tell our SOI about what we do, and failure to take these opportunities could result in a loss of potential clients.
Being a secret agent simply means that you are limiting the amount of business that you can get, and giving another agent the chance to get your potential clients.
It is therefore very important for you to make a conscious decision to quit being tight-lipped about your business and publicize it any chance you get. Remember, if you are not gaining new clients, you most likely are losing new clients.
While you can make use of other forms of advertisements such as social media, newspapers, posters, and the likes, your sphere of influence is really your best bet to finding leads in the real estate world. Here’s how:
Firstly, your sphere of influence consists of people who know you, love you, and want to support your business.
These people are familiar with your work ethic and have a sense of trust in you. All of these give you an edge over the random real estate agent whom they are not acquainted with, thus making them more likely to work with you.
Advertisements only advertise your business; they do nothing in the way of building a relationship between you and potential clients.
Your sphere of influence, however, gives you a chance to provide people with solid proof of your reputation and outstanding service.
As a result, there is a higher guarantee that you’d sooner get a lead from your SOI than you would from the posters you put up.
There are three main lead temperatures -cold leads, warm leads, and hot leads. Cold leads consist of people who fit your target audience but haven’t yet interacted with your business. These people are the least likely to purchase your services.
Warm leads are people who have interacted with your business, either by visiting your website, clicking on an email link, or engaging in a social media post.
People in this category are more likely to become clients than cold leads. Finally, hot leads are people who have shown interest in your services and are willing to purchase.
Your SOI provides you with more warm leads than cold leads because these people have had interactions with you and can easily contact you to find out more details about your services.
This makes your SOI one of your best bets in finding leads.
Have you ever felt like you do not know anyone, or that you have an extremely small or non-existent sphere of influence?
Well, you might want to think again, because everyone has a sphere of influence, and you are not an exception. The people you grew up with, went to school with, work(ed) with, play sports with, live next to, and relate with daily are all part of your sphere of influence.
You no doubt have one or more categories of these individuals in your life.
Having identified the people in your sphere of influence, the next thing to do is familiarize them with your business. To achieve this, you should:
The first step to building your SOI is reaching out to the people in your inner circle; people who know you well, love you, and want to see you succeed.
Informing them that you are a real estate agent automatically makes you a candidate for their patronage or referrals. You can reach out to them via calls, texts, or a one-on-one meeting.
The next step is to reach out to people who you are quite acquainted with, although not on a personal level.
These people include your neighbors, co-workers, gym pals, mailman, apartment building doorman, grocery store attendant, or bartender at your favorite bar.
The best way to inform these people about your job is through a personal meeting since you are not very likely to have their contact details.
This category consists of people who do not know you, and who have had little to no interaction with you.
Examples of this include the uber driver that picks you up, the guy you jog past every morning, and some random friends on Facebook.
It is not enough to reach out once and inform your sphere that you are an agent.
You have to remind them often so that when they think about a real estate agent, you are the first person that comes to mind. Here are some ways to achieve this:
The best time to start building your sphere of influence is the moment you realize you want to be an agent.
Even before getting your license and practicing, you should begin telling your friends and family about your goals. By doing so, you are laying a foundation that you can begin building upon as soon as you get your license.
Everyone has a sphere of influence, no matter how little it may be. The ability to fully utilize your sphere of influence is a key determinant of how well you can beat the competition and become a successful real estate agent.
Remember to begin building your SOI even before you get your license, no matter how difficult it might be, and in no time, you’ll see that it is totally worth it.
Technology has put down roots in almost every aspect of our lives… whether it’s work, socializing, dating - or, yes, home shopping! It’s no secret that home shoppers are heavily using sites like Zillow and Redfin to research homes for sale, but there are also many other tools that can help today’s savvy agent stay ahead of the curve and on top of leads and clients.
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One key way to stay in touch with your clients is by putting a chat feature on your website, or having a robust Facebook messenger presence. Since everyone is so used to discussing things over text or messenger, an instant message-based way to get in touch with you is essential. This also enables more people to reach out to you, and any potential person reaching out to you could become a client!
Another key way to stay in touch with your clients is with a good CRM: a Contact Relationship Manager. This software will help you manage your SOI (sphere of influence) and save you all the details of remembering when you last spoke with someone. The best CRM will integrate with your email and phone calls to automatically track contacts and will even suggest creating a new contact for any unknown number.
Thirdly, a good web and social media presence is truly crucial to stay current and to get leads converted into deals. Among Facebook, Instagram, Twitter, and Snapchat, social media is a huge tool for real estate agents to build their brand - and in Snapchat-talk, the disappearing nature of “stories” encourage visitors to check back every day, so they don’t miss anything! Another one of Snapchat’s benefits is its low “permission level,” meaning that users get to choose when they view your stories, rather than receive a notification that has to be attended to or ignored immediately. Because the current generation of internet users is now so overwhelmed by advertising and promoted content, it’s VERY important to share organically - what you’re really doing and what you’re actually passionate about.
Once your technological outreach has gotten you clients and a listing, you should be very conscious of the technology now available and expected from a seller’s standpoint. 360-degree cameras and tours are nearly a must nowadays, and they greatly enhance a property’s marketability via online channels such as Zillow and Redfin. Most agents are now creating websites with the house’s address, for example: www.123mainstreet.com, which should show an even more in-depth tour of the home with all details such as square footage, pictures of the view, and more. Another photo method gaining popularity is fly-over “drone” photography of the house and neighborhood, since buyers are now ranking the neighborhood as a greater decision-making factor than in the past, and aerial photos of a home and yard can be much more informative than the average and traditional on-the-ground photos.
Another possible factor that can help sell houses more quickly, especially to younger buyers, is a smart/connected home, which is sometimes referred to with the new term “Internet of Things.” The I.O.T. is a reference to connected light bulbs, thermostats, outlets, and more, which allow users to control their home through an app on their smartphone, and monitor energy usage to reduce their carbon footprint. This is especially prominent for the millennial generation, but also becoming more and more popular among older buyers as well - since everyone is so used to controlling everything from their phone, controlling their home is the next logical step.
Overall, technology is pretty cool, and it is constantly growing at a rapid speed. It is important for Real Estate Agents to stay up-to-date with all that is new in real estate tech- for the sake of their clients, for the sake of making more money, and for the sake of staying with-it.
It can feel overwhelming to build a website from the ground up, but an elegant and informative real estate website goes a long way in making a name for yourself and putting yourself out there. A well-designed website will attract more clients, help you sell more homes, and build your online presence. Take it one step at a time, and your new website will be central to your online marketing efforts in the real estate industry. The following is a quick overview of what you can do to build a powerful website.
To get started, your real estate website should include an aesthetically appealing logo — either for your company or for yourself as an independent agent — next to your company name or personal name in large font. Next to this, you will need navigation tabs along the top of your website. You can deviate from these standards, but make sure your website is still easy to navigate for new visitors.
You’ll design and publish a variety of landing pages to promote your real estate services to potential clients. For example, you may publish multiple landing pages that are each optimized for different segments of your target market. Some real estate agents choose to optimize landing pages for different neighborhoods and cities, or they create landing pages specifically for an email newsletter sign up form.
Navigation tabs on a real estate website typically include contact information, social media buttons, about page, services, blog, and FAQ. You may also want to include a navigation tab for your local listings; easy access to your listings is a fantastic way to generate leads. On the about page, feel free to include information about yourself and/or your team, which is especially helpful for agents who are just starting out and would like to introduce themselves to potential clients.
Best practices for real estate websites dictate that you should also do the following for your new website:
- From the start, optimize your website for mobile. People are always on the go nowadays and multitasking, so they need to be able to easily and conveniently browse your website from their mobile devices.
- Visual content, especially videos, are proven to be more effective and engaging than textual content. The best option is a website on which you can upload videos for your potential clients to watch and learn about your services and listings.
- Start off on the right foot and save yourself a headache by setting up your website analytics and prioritizing Search Engine Optimization when you build your real estate website. When set up properly, analytics will help you understand what is working and what isn’t working for lead generation, including which pages are effective and which are not. Proper SEO practices will make your website easier to find for potential clients when they run a web search to find a real estate agent. Be sure to optimize for location, so clients seeking you in the area will be sure to find you and contact you.
- In business, looking professional is important if you want to be taken seriously. The same concept applies to your website. Your website design should be engaging and visually impressive, because it is your online representation of yourself and your work. A top-notch website design will be worth its weight in gold when your engagement and credibility with website visitors and readers begins to grow.
- Post a blog on your website to showcase your expertise in the real estate industry. Always update your blog posts on a regular basis. A successful blog has the potential to double your website readership! You can hire a content writer to produce your blogs, or you can write them. Writing your own blog shows potential clients that you know what you’re talking about and that you’re passionate about the business. Additionally, offering evergreen content on your blog is an excellent way to generate leads; post your own e-book, publish tips for buying and selling homes, provide white papers, and submit other evergreen content for your target audience to download.
- Your website footer should include a copyright statement and your contact information. Include your address, phone number, email, logo or company image, and site map. There should also be easy-to-find links to your website pages, like the homepage, about page, services, blog, and contact page. Don’t forget the social media buttons as well, so your audience can navigate to your Facebook, Instagram, Pinterest, Twitter, LinkedIn, etc.
While hiring a professional website designer may cost more than creating a website yourself with a free template, you will see a return on your investment if you have it professionally done. Let someone else manage and design it while you focus on your career and your clients. Look at samples/portfolios, pricing, and details on services offered by website designers and programmers. An expertly crafted website will also stand out as unique and compelling and will have a foot up on websites that are built from plain, over-used templates. If you do use a template, just be sure to focus your attention on making it look professional and one-of-a-kind if possible.
That being said, there’s nothing wrong with using a template to build a website, especially if you don’t have the budget when starting out to hire a professional website designer. There are inexpensive options on the market that allow you to customize templates and add features that are relevant for real estate agents to use. Choose a domain name that is short and easy to remember. If you can, use your company name as the domain name. You can still craft and run a successful and effective website for your real estate business.
Before launching your real estate website, be sure to check the entire website for any bugs or inconsistencies. You want to work on fixing these before launching the website. Otherwise, potential clients may become frustrated; you wouldn’t want to accidentally seem unprofessional.
We wish you the best with creating your new real estate website. Exercise your creativity, and have fun while creating an online presence for yourself. Now get out and market your new website!
This is a guest post contribution from Valerie Kriss, Executive Assistant at Square 1 Group.
Feel free to contact Square 1 Group for your real estate website.
Client testimonials are one of the most powerful tools for real estate agents looking to build trust and credibility.
Just like reviews on platforms such as Google, Yelp, TripAdvisor, a collection of positive testimonials on your site or social media can greatly influence potential clients by showcasing your expertise and reliability.
Testimonials serve as real, relatable endorsements that can make prospective clients feel confident about choosing your services.
This article explores effective strategies for requesting, encouraging, and leveraging testimonials to grow your real estate business.
Timing is key when asking for a testimonial.
The ideal time to request one is when your client is most satisfied, often shortly after a successful closing.
This is when clients feel the value of your service and are most likely to share their experience positively.
Consider sending a follow-up email or making a quick call, letting them know how valuable their feedback is for your business.
When asking for a testimonial, a personalized approach works best. Consider using a short, friendly message such as:
“Thank you for trusting me with your home journey! If you’re happy with my services, would you mind sharing a review? Your feedback helps future clients know what to expect.”Tailoring your request to reflect specific aspects of their experience can prompt a more genuine response and higher-quality testimonial.
Make it as easy as possible for clients to leave a review. Provide direct links to popular review platforms like Google, Zillow, or Facebook in your emails or messages.
Include step-by-step instructions if necessary, and even consider creating a dedicated page on your website with instructions and links to simplify the process further.
A specific and detailed testimonial holds more weight than a generic comment.
Encourage clients to share particular aspects of their experience.
For example, rather than simply saying, “John was a great realtor,” they might say, “John helped us find a home in the perfect school district and sold our old house quickly to make the transition seamless.”
This depth of detail allows potential clients to visualize themselves in similar situations, making the testimonial more impactful.
Let clients know that specific details make a big difference in testimonials. Explain that a review like, “Sarah helped us find the perfect home in our ideal neighborhood within our budget” is more powerful than just “Great realtor!”
Providing examples can help clients understand what details are helpful to include, such as what made the experience stand out, how their needs were met, or any unique challenges addressed.
To prompt clients to be thorough, consider asking open-ended questions like:
Open-ended questions invite clients to share specifics, which makes their testimonials more relatable and engaging for future clients.
Place testimonials on high-traffic areas like your homepage, landing pages, and specific service pages. Positioning them strategically reinforces credibility as visitors browse.
Use testimonials that relate to each page’s focus. For example, a review highlighting neighborhood expertise would fit well on a location-based page.
Regularly post client testimonials on social media platforms like Facebook, Instagram, and LinkedIn to reach a broader audience.
Pair testimonials with visuals, such as client photos (with permission) or images of properties sold, to add authenticity and catch attention.
Add testimonials to email newsletters, brochures, and direct mail to strengthen marketing efforts.
Highlight recent or highly relevant testimonials in digital ad campaigns or on listings, allowing new prospects to see positive client experiences immediately.
Encourage clients to mention specific services or locations in their reviews, like “helped us find a home in Downtown Austin.” This adds valuable keywords that improve your site’s SEO.
Detailed testimonials with location and service specifics can help your site rank better for local searches, making it easier for potential clients to find you when searching for agents in their area.
Positive testimonials are a powerful trust-building tool. They allow potential clients to read about real experiences and gain confidence in your expertise.
Since clients rely on reviews to assess credibility, having a robust collection of positive testimonials increases the likelihood that new clients will reach out to you.
Prospective clients often consider the volume and quality of reviews before making a decision, so consistency is key.
Client testimonials are an invaluable asset in establishing trust and credibility in the real estate industry.
They provide prospective clients with genuine insights into your expertise, reliability, and the satisfaction of past clients.
By strategically gathering, encouraging, and showcasing detailed and positive reviews, you create a powerful tool that not only strengthens your online presence but also helps convert leads into loyal clients.
When a house is listed, the price is determined by the realtor and the seller after research and conversations.
However, once the property is under contract, an appraiser will have to come in and confirm that the home is, in fact, worth the amount it’s being sold for.
The appraisal process is a standard step in any real estate deal involving bank financing.
But, problems can arise, and it’s essential to fully understand the appraisal's role in the real estate transaction.
A home appraisal is a third-party opinion of how much the home is worth based on the fair market value.
During the appraisal process, a real estate appraiser will go to the home and take note of the home’s condition, what repairs might be needed, and how it compares with other homes nearby that have recently sold.
Once complete, the appraiser will send a report to the mortgage lender and include a final determination of the property's value.
Appraisals are required whenever a property purchase or sale involves a bank or mortgage, as the bank wants to ensure the home is sold for what it’s worth.
An appraisal is also used to determine the property taxes the county will charge every year.
Both the appraisal and inspection will look at a home’s condition and file a final report. However, they serve different purposes in the homebuying process.
While the appraisal will judge the home’s value, an inspection is a more in-depth look at the home’s condition.
The home inspection report will look at all home details like outlets, plumbing, electrical, and other major home systems to see what areas of the house may need repair.
The most significant difference is that an appraisal won’t uncover deeper issues in the home, and will simply outline the home’s valuation based on the required guidelines.
That’s why it can still be recommended to get a home inspection to understand the home’s condition fully.
An appraiser will consider several things when determining the property's fair market value. Most appraisers use the Uniform Residential Appraisal Report that Fannie Mae publishes.
This outlines the interior and exterior condition of the home, and requires a list of homes that are similar in location and size which have recently sold.
This will ensure the property’s value is in line with current market trends and pricing.
They will also conduct an in-person visual inspection of the property to judge the home’s condition and if any things would adversely affect the property’s value.
The property’s appraised value is influenced by a lot of factors but can include things like the number of bedrooms, bathrooms, the floor plan layout, and square footage.
Each appraisal report has a few standard sections that describe the home and how the appraiser reached the conclusion.
Assuming the appraiser used the uniform report, it will outline several sections including:
At the end of the report, the appraiser will outline based on all the above, what they estimate is the home’s fair market value.
Since the appraisal mainly protects the lender, the individual buying the house or borrowing the money pays for the appraisal. Ranging in cost, you can expect the appraisal to cost several hundred dollars depending on how big the house is and the condition of the property.
While most of the time an appraisal is required for a traditionally financed purchase, obtaining an appraisal can be valuable in a variety of transactions.
For buyers, the appraisal confirms that they’re paying a fair price for the home. For the sellers, the appraisal confirms that the home is priced in line with others in the market.
If your appraisal comes in higher than the original price you’re planning to purchase the property for, you’re in good shape!
This means that you will buy the house for less than the market value. The purchase price of the property won’t change, but you’ll be getting the home for a good deal.
However, on the other hand, problems will arise if an appraisal comes in lower than the property's purchase price. While this doesn’t happen frequently, it can happen, and it’s important to understand how to negotiate the process.
Since the home's value is lower than the purchase price, a lender will only agree to loan the appraised value. This means the buyer will have to cover the gap between the appraised amount and the purchase price in cash.
Or, if the buyer is unwilling to pay the difference, the seller might have to decrease the property's price to the appraised amount.
This is why it’s important to have an appraisal contingency in place. If the appraisal comes in lower and the seller won’t negotiate on the difference, an appraisal clause will allow you to walk away from the deal and keep your earnest money deposit.
The appraisal protects not only the bank but also provides a system of checks and balances for the buyer to ensure they’re paying a realistic price for their home.
Protect yourself with an appraisal contingency and speak to your realtor to address any outstanding questions.
With proper knowledge and understanding of the process, you’ll be prepared to handle the appraisal of your home with ease.
A lot of people assume that selling their homes themselves, that is, without the services of a real estate agent, can be a good idea.
The common notion among these homeowners is that not having to pay sale commissions to their listing agents can save them some money.
However, selling a home without professional guidance or assistance comes with many hidden pitfalls.
In this article, we will discuss in detail the meaning of “For Sale By Owner,” the problems associated with it, and how to land an FSBO client as a real estate agent.
“For Sale By Owner” (FSBO) is a method through which homeowners sell their property without the representation of a real estate agent or broker.
FSBOs can be very complicated and time-consuming, and although some homeowners still prefer this sales method, only a few percent succeed.
Due to the workload involved in selling their homes themselves, many homeowners would only opt-in for this sales method when they already have a lineup of potential buyers.
According to the National Association of Realtors, only 7% of home sales in 2021 were FSBO sales this year. This shows that FSBOs do not happen very often, and for good reason too.
The typical real estate agent's commission on any transaction is 5% - 6%, so selling your property yourself may seem like an incredible way to save money.
This may not be entirely true as, in most cases, the risks that come with “For Sale By Owner” listings outweigh the benefits. Here are six problems that affect FSBO deals.
It isn't uncommon for homeowners who sell their homes themselves to significantly undervalue their property because they do not have enough real estate knowledge to estimate the value of their homes correctly. Guessing the value of a home is a two-edged sword; on one end, the homeowner could realize substantial financial losses from underselling, and on the other end, a price that is too high can scare off potential buyers and keep the house unsold for a long time.
This is where the expertise of a real estate agent comes into play. A real estate agent’s understanding of the local market and their experience selling similar houses can help sellers allocate realistic listing prices to their property.
When selling a property as an FSBO, homeowners either market their property or utilize the services of online listing companies rather than the conventional Multi Listing Service (MLS).
Since these sellers have complete control over the home listing and are not made to follow the MLS rules and guidelines, it is not unusual to find the information provided on “For Sale By Owner” homes wrong and misleading. This is one of the biggest issues buyers come across regarding FSBOs.
Although there are quite a number of legitimate sellers out there, many people still regard all FSBO listings as scams. This is a problem that hinders the success of most FSBO sales.
Without an agent, there are huge chances that someone may try to sell a property they don't own. Buyers don't want to go through the stress of having to fix issues like this, so they’d rather just avoid them.
When listing a “For Sale By Owner” property, it is vital to understand that the homeowner is liable for everything and anything listed. This means that if a seller gives wrong information on the house, that seller will be held accountable by law.
And while some homeowners provide inaccurate information on purpose, others do it out of sheer ignorance.
If you are uncertain about specific details of your home, it is advisable to work with a real estate agent. This way, you can be sure that all details about your property will be professionally researched and accurately listed.
This would eliminate the possibility of your clients being disappointed during inspections and any legal problems arising further down the line.
“For Sale By Owner” properties often have awful marketing. This is because only a few online marketing companies allow FSBO property to be listed, and the homeowners themselves have little to no experience in real estate marketing. If a property listing isn't placed in front of the people, it may never be sold.
A real estate agent has the knowledge and experience to get property listing right and market to the right people better than the homeowner would. This makes real estate agents who typically have access to Multi Listing Service (MLS) indispensable tools to sell a home successfully.
There is no doubt that trying to sell an FSBO property can be strenuous and time-consuming. When selling your home yourself, you have to take up all the responsibilities of a real estate agent and even put in more hours than a professional normally would. This can make balancing time with work and family challenging for the homeowner.
If a “For Sale By Owner” seller is lucky enough to find a buyer, chances are the property would be sold below the home’s actual value.
According to the National Association of Realtors, FSBO homes sold at a median of $260,000 last year, which is significantly lower than the median of $318,000 that agent-assisted homes sold for.
This is because the search for an FSBO buyer is stressful enough for any homeowner to forget about negotiations. However, with a real estate agent looking out for your best interest, you can be sure that the value of your property will be correctly estimated and a worthy price negotiated with potential buyers.
As a real estate agent, the most efficient way to get an FSBO client is by pointing out the flaws of FSBO sales to the homeowner and showing how much value you can offer them.
“For Sale, By Owner” sellers advertise their homes on platforms such as Facebook, real estate sites, or with just yard signs because they lack access to the Multiple Listing Service(MLS). You can point out that this doesn't do much good as their property remains unsold for long periods.
You could also point out to them that they run the risk of not achieving the maximum price by selling FSBO.
Let them see that even though they might be saving some cash by avoiding a listing agent’s commission, they will still have to offer a buyer’s agent commission. This, coupled with the chances of them underselling, and in the end, they might not end up saving anything.
Additionally, you could make them aware of all the processes they need to take to complete the transaction successfully – drafting up documents, handling showings, negotiating with buyers, overseeing the closing – and how stressful these processes can be.
The basic idea is to show them how much of the behind-the-scenes work you can help them with to ensure they are safer and can sell for more.
“For Sale By Owner'' is used by homeowners who prefer to sell their property themselves. Although the main reason for this sales method is to save money on real estate agents’ commission fees, it is usually not worth it, and things could easily go wrong at any time.
One of the best ways to grow your real estate business is through word-of-mouth referrals.
Past clients and people within your sphere of influence can be a great source of new business. When someone recommends you to their friends or family, they are passing on their trust and positive experience, which helps you build trust with potential clients before you even meet them.
The key is to actively ask for these referrals. Let your past clients know that you value their recommendations and would appreciate them spreading the word about your services.
One of the best ways to grow your real estate business is through word-of-mouth referrals. Past clients and people within your sphere of influence can be a great source of new business.
When someone recommends you to their friends or family, they are passing on their trust and positive experience, which helps you build trust with potential clients before you even meet them.
The key is to actively ask for these referrals. Let your past clients know that you value their recommendations and would appreciate them spreading the word about your services.
To maximize referrals from past clients, it is important to stay top-of-mind. This means staying in touch even after a deal has closed.
Regular follow-ups, whether through email newsletters, phone calls, or even seasonal greetings, can remind your clients that you are still in business and available to help their friends or family.
Not only does this help generate new leads, but it also encourages repeat business from past clients when they are ready to make another move.
Another way to encourage referrals is by supporting your clients' businesses. Many of your clients may be self-employed, and if you can send business their way, they are more likely to refer clients to you in return.
For example, if you know trustworthy painters, movers, landscapers, or stagers, be sure to refer your clients to them when needed.
Building this reciprocal referral network not only helps your clients, but also strengthens your relationships and your reputation as a knowledgeable, connected agent who adds value beyond just buying or selling homes.
Sometimes, your clients may be moving to a city where you don't operate, but you know an agent there. This is a great opportunity to earn referral income by connecting them with a trusted realtor in that area.
Typically, the agent you refer them to will agree to give you a pre-determined percentage of their commission once the transaction closes.
This not only allows you to maintain the relationship with your client, but also earn income for making the connection.
In addition to referrals within your city, you can also refer clients to agents in other states where you are not licensed. This is done through a referral agreement and typically earns you around 25% of the commission when the deal is completed.
Referring clients to a trusted local agent helps ensure that your clients are in good hands and that the transaction goes smoothly.
When your clients have a positive experience, it also strengthens your relationship with them and increases the likelihood of future referrals or repeat business.
Another way to earn passive income is by helping out other agents. For instance, if an agent is going on vacation, they may ask you to manage their clients and leads while they are away.
Depending on the agreement, you may receive a portion of the commission or have the opportunity to take over the client relationship long-term. Similarly, if you refer clients to another agent because the deal is outside of your expertise or area, you can receive a portion of the commission.
These types of arrangements not only provide passive income but also help build trust and goodwill between agents, leading to future opportunities for collaboration.
Referrals are a fantastic way for real estate agents to earn passive income while helping others in the industry.
Whether you are asking past clients for referrals, supporting your clients' businesses, or connecting clients with other agents, referrals can help you build strong relationships and generate consistent income.
By leveraging the power of your network, you can grow your business, increase your earnings, and enhance your reputation—all without putting in much extra effort.
Start incorporating these referral strategies today to make the most of your relationships and take your real estate business to the next level.
One of the most daunting things about a career in real estate is the sales aspect - many people fear that they wouldn’t be able to handle the rejection. However, rejection is actually a good thing because it ultimately is what steers you in the right direction. Rejection is already part of daily life, and if you don’t experience rejection, chances are that you aren’t putting yourself out there enough!
Real estate is one of those careers that you have to really own and put 100% of your efforts - if you are not giving it your all, you are most likely leaving money and deals on the table. For example, when you meet new people, tell them that you are into real estate!
Part of putting yourself out there is being sure that if you fail, you will learn lessons and not beat yourself up over it. Failure is more about the lessons you learn than the act of failing itself. The worst thing people can say is “no” - and then you’re right back where you started! But if you want to move ahead, you usually have to ask for it, people are not just going to give you everything you want on a silver platter.
Again, it’s key to remember that most rejection will not set you back, but will just keep you where you are currently. For example, not getting a promotion means you’re still doing the same job. Not getting the listing agreement doesn’t mean you never will. In fact, most agents take 3-9 months to close their first deal… and that’s OKAY! Some of the most successful, biggest names in real estate took years to establish their career and get off the ground.
In fact, that’s something that most super-successful people have in common - it’s not their first business or venture! They have tried and failed, often more than once, before finding their sweet spot and success path. Failure truly can be an opportunity if you frame it in the right way.
Keep in mind that practice makes perfect, so being rejected many times will make you better at failing and better at learning lessons from your missed opportunities. Seek out opportunities to ask for a deal or put yourself out there - if you get rejected, pick yourself up and try again. If not, even better - you just got a discount or a client!
Always remember that rejection is not the end of the world - it’s often the beginning of something completely new and awesome. Have faith in yourself, keep trying, and don’t let rejection get you down. As stated previously, rejection is actually a good thing because it ultimately is what steers you in the right direction.
Let’s hear from you in the comments below - what was your biggest failure? Success story? Share it for our readers!
Timing is key in many aspects of life, but especially so in real estate. Since all real estate deals are done on a timeline, it’s very important that real estate agents are good at time management to ensure a smooth transaction process (or ANY transaction process!).
One prominent saying that definitely applies to real estate is “time is of the essence.” For example, people often go with the first agent that gets in touch with them (after they submit their name on a website, for example), so it’s important to contact your leads quickly.
As a buyer’s agent, you’ll have to be on top of your game when it comes to timing. It’s especially important in a hot market like today’s, where inventory is scarce and there is a lot of competition for each house on the market. Your buyers want to be the first to see the homes that go on the market, so they can have the first choice of the house to buy.
Once your buyers have settled on a home to purchase, they of course have to make a purchase offer. In the real estate world of multiple offers and very few days listed on the market, time is definitely of the essence when submitting an offer!
Let’s say it’s the late afternoon, and you and your clients have just come from a home they really like. You sit down in your office and come up with the terms of the offer, including the price, days in escrow, and financing. They leave, telling you to submit the offer immediately so they will be first in line. (Usually, the highest and first offer gets accepted - so if your offer is the same dollar amount, but comes in before the second offer, you will usually get the home.)
However, what if your buddies then call you from the bar, or your friends want to go out to dinner with you? What do you do? Well, if you’re an efficient time management machine like you should be, you will submit the offer right then and there like you promised your clients.
A lot of new agents fall into the trap of “oh, I’m my own boss, it’s okay.” Well, you are your own boss, but you are still working for your clients. If they find your work unsatisfactory, or you are lollygagging around, they will certainly not recommend you to their friends. They might even stop using you and go with a different agent, which would obviously lose you the commission and relationship. That’s why it’s so important to be an effective, reliable, and efficient agent!
Another area where timing comes into play is after the offer is accepted and the clients are in escrow. Escrow is usually a defined period of time, around 30 days, and both buyer and seller expect that the deal is completed in that time. Agents on both sides have to do their jobs in an efficient and timely manner so that the deal does not get delayed, or worse - fall through. Time is once again of the essence!
Once the sale is done and escrow is completed, time is still a driving factor. To gain referral business, it’s important to follow up with your clients in the right timeframe - usually a few months after they’ve settled into the new home - to make sure you’re still at the front of their minds. It's important to never fall off their radar.
As was stated previously - time is of the essence! Keep this in mind when striving to become the most successful real estate agent possible. As always, check back soon for another great installment of our blog.
Though the IRS may classify realtors as “independent contractors,” being a real estate agent is far from an independent job. In fact, all real estate transactions rely on a network of individuals doing their jobs properly to ensure the transaction goes smoothly.
Take sports, for example. There are a lot of sports out there that are independent - like swimming, tennis, or boxing. However, when you look at the sports, are the players really so independent, or do they have a crew of people behind them helping them?
They all have coaches, and a boxer will have the people wiping blood and tears from his face during the matches to ensure that he can go the next round at 100%. A real estate agent is not so different. Though you might be out there cold-calling or door-knocking alone, it’s really the team of professionals you’ve built that will ensure your leads turn into clients, and clients into satisfied customers with smooth transactions!
We have compiled a list of important people to include on your ‘support team’ once you’re a Real Estate Agent:
A sales assistant helps convert leads into genuine prospects. This person can assist the agent and make sure all leads are followed up on. Though this only applies to agents who are advanced in the process and who are receiving lots of leads, it’s an important one to mention first.
As we explained in 4 Challenges That Can Arise During Escrow, the escrow process can have many hiccups, and escrows have a way of falling through when you least expect it. Therefore, a good escrow officer can foresee any problems you might run into, and let you know ahead of time of any issues so you’re prepared!
Title representatives are also a crucial part of a good real estate agent’s support team, and there’s a reason that most real estate agents have their preferred title representatives. Title searches are only scratching the surface of an issue that can arise with title transferring, and a good title rep will know what to look for when issuing a title insurance policy. Ask around the brokerage when you’re hired who their favorite title rep is and why, and consider using them as well.
A good home inspector (and Natural Hazard Disclosure inspector) is also a good card to have in your hand. Especially if you are a buyer’s agent, you want a home inspector that will catch even the tiniest flaw, so that you know you are not proceeding with a bad home. You have a fiduciary duty to your clients, so you must keep their best interests in mind at all time. Just because the house looks good to the untrained eye, does NOT mean that a good inspector cannot spot current or future issues that will cost your clients thousands of dollars down the line - and possibly your reputation.
A good transaction coordinator (TC) can be an enormous help to high volume agents. He or she will ensure all transactions go smoothly by working with all of the people mentioned above on behalf of the agent. This enables the agent to really focus on their brand, or on gaining more business - maybe even leads that their sales assistant has vetted!
The TC tends to be a crucial position for a strong agent who has many ongoing deals at a time. The agent can focus on some of the more difficult or personal deals, and the TC can help focus on the other deals. By working with buyers, sellers, loan officers, title reps, and escrow officers, a good TC can be worth their weight in gold to a good agent!
Now that we’ve explained the different players who must work together to get the real estate “match” finished, tell us in the comments below - is real estate a team sport or is it an independent sport?
First, let’s ask a very basic question about home inspections: are they even required? The quick answer is: no. But, it’s hard to find a real estate agent who would advise against one. And why? Because home inspectors are trained professionals who have a job and a duty to disclose any problems or potential problems they see. Problems that may go unnoticed by a seller.
From the date of opening escrow, a homebuyer has 17 days to utilize the option to have a home inspection completed. Often, they will make the escrow contingent on the home inspection, meaning that the escrow process will be stopped based on the findings of the inspection report. For example, if there is a major damage, the escrow will be put on hold while the buyer and seller (via their agents, of course) negotiate on how to address the problem
They can address the problem one of four ways:
The last one is the bad one - the deal falls through and the house falls out of escrow completely. In fact - one of every 20 escrow transactions actually does fall through! And, incredibly, one in FOUR is delayed for some reason or another. Out of the 1/20 that fall through, a full one THIRD (1/3) are due to the home inspection findings.
Let’s say it was a real deal-breaker like a cracked slab or a cracked pool. These are things that, in addition to being extremely expensive to repair, can cause all sorts of damage down the line. For instance, if the gunite in the pool was cracked, that would allow water to seep out of the pool and into the ground. Or, in the case of a cracked slab, it could cause the house to shift unevenly and possibly leak water and mold into the walls. It all depends on the extent of the damage and the cost/difficulty of repair, which is why a home inspection is so crucial!
Even if the seller discloses some damage of the house, chances are that it would be cosmetic or outdated. It is important to keep in mind that the seller usually does not go on the roof frequently and inspect the house like an inspector would. Home inspectors go in every attic, attend to every part of the roof, under every eave, check the pool (if applicable), check the foundation, floors, windows, and more.
Hopefully, if any inspection issues come up on the properties you’re involved with, they will be simple ones - like mild termite damage or a few cracked roof tiles. These specific issues are easy (enough) to deal with. An air conditioner can be replaced easily, a garage door opener can be serviced or swapped out in a day, and cosmetic damage is always relatively simple to address.
In this week's blog, we answered a YouTube subscriber question (subscribe here)! Our friend asked if we should deal with real estate investors as an agent, how to work with real estate investors, and in general what investors are looking for in a property. Well, in short, it varies widely, but we wanted to give you a longer overview explanation.
Firstly - as an agent, you ALWAYS want to deal with investors. They are: (1) great clients, (2) less emotional (they're not looking for a home to permanently live in), and (3) usually have a better idea of how they will finance and pay for the house. However, investors tend to be demanding, and thus are in need of an agent who is experienced and knowledgeable
To gain experience and knowledge in the field, first you have to understand why the real estate investor is investing, and what they are looking for. It’s called ROI - Return on Investment. Though all investors want to make money, there are usually two main types: those looking for a short-term ROI (immediate cash back), and those who are looking for a long-term ROI and greater stability.
In today’s hot-hot-hot market, most investors are “flippers," or people who want to buy and sell houses quickly without ever living in them. This gives them quick cash (if the deal is executed properly) and a quick return on investment.
To flip a property, first the investor has to find a run-down property, or one in need of some love and care. This is often the shabbiest home on the block, or otherwise deficient for the neighborhood (this is key; they don’t want to over-improve). Then, they will put time and money into the property by constructing, remodeling, repainting, and otherwise improving the property. The trick to this is to bring the house up to, or above, the standard of the neighborhood.
Time is of the essence when doing these house flips. The longer the investor has their money tied up in the house, the less room and ability they have to make other investments - like buying other houses. Therefore, they want a house that can be improved quickly, and a good construction crew for any major work.
A few years ago, Robert Rico himself was listing an undesirable property here in Inglewood, Los Angeles, California. He knew that no typical family would buy this house, or be interested in it as-is. However, one day, someone with a vision approached Rico - an investor!
Rico sold the house to the investor, representing both the old seller, and the new buyer in the deal - double-ending the transaction for double the commission! Though it sounds insanely low now, the buyer was able to secure the dilapidated house for only $240,000. As his vision was executed, he put $30,000 in improvements into the house - a total of $270,000 spent.
Only a short while later, the investor put the house back on the market - and this time, it got $420,000! Rico represented him again, earning another commission (3 total) in the process. The investor also made $150,000 (minus commissions) - not a bad deal at all!!
However, with a hot market like today, most houses have been flipped recently and the quick improvements have been made, so it’s more about the long term investment. This would be someone buying a house, putting it up for rent, and (hopefully) having the renters cover the mortgage. The downside to this, besides maybe not having the house rented, is that the money is tied up in the house - it cannot be accessed immediately.
The silver lining to this is that, although it’s cyclical, real estate has always been a good long-term investment and almost always goes up in value. Therefore, buying real estate NOW, and waiting, is a better strategy than waiting now, and buying real estate later.
The key to being successful in the investor market is being diligent, competent, and efficient. Do your research, find the diamonds in the rough, and market them heavily to anyone you think might be interested in real estate investments. This is a great way to earn two commissions and repeat business.
Welcome to CA Realty Training’s weekly blog - this week’s topic is about credit scores, also called FICO scores. Are they important for buying a house? Who is looking at these scores? How do you improve them, if necessary?
First, let’s break down the acronym FICO: it stands for Fair Isaac Company - the company that came up with and computes these scores. These scores range between 300-850, giving a quick glance of how good that person is at paying back their debts on time.
These scores are compiled by three major agencies - (1) Equifax, (2) Experian, and (3) TransUnion. These three agencies will each give you one credit score, so every American adult with credit has three credit scores that are usually a little bit different from each other. Provided they are close, everything is good and there should be no red flags on your credit.
Now, we dive into the important issue - when are FICO scores used for buying a house? Well, since most real estate transactions are not all-cash, they have to involve a lender. When the lender gets involved, they are lending the buyer (“borrower”) a significant amount of money, and they, the lender, want to know that they will be paid back, in full, on time.
When a buyer first approaches a lender, they visit a bank or mortgage broker, start chatting, and then the lender/mortgage broker will start to qualify the buyer as a potential borrower. They might ask questions like, “How much money do you make? How long have you been at your job?” and more, to get a sense of how reliable your income is. However, they don’t know how good you are at paying your debts, until they run your credit score.
When they run your credit score, they get three numbers back - let’s say, for the sake of argument, that one bureau gives you a 700, one gives you a 729, and one gives you a 725. You have very good credit and they are all close to each other, so there are no red flags here. The lender (or bank) will then take the middle of those three scores (so, the 725) and use that as your credit score when determining your eligibility for the loan.
Let’s say you make a lot of money, but for some reason, you’re very bad at paying back your debts. Even though your income might be great for the loan, your FICO score will suffer if you have unpaid debts or late charges on your record. Every late credit card payment matters, every missed car payment or especially a missed mortgage payment -- these are all big dings to your credit score!
If you don’t have a good FICO score, the lender will think you are too risky to lend money to, because they might not get paid back. Since getting their money back is the most important mission of every lender, they are not likely to take a risk on you if you have a bad track record of paying back debts.
Let’s take an FHA loan, which stands for Federal Housing Administration. It’s a special loan designed to help first-time homebuyers, with only 3.5% down instead of the traditional 20%!! So, as you can see, most first-time homebuyers would be much better off with an FHA loan than a conventional loan. However, buyers have to have a credit score of 580 or better to get an FHA loan. What do they do if their score is, say, 575?
There are a number of quick, simple fixes to raise your credit score by a few points. Once your credit is run, your lender should review the findings with you if the score needs to be brought up or if there are any outstanding debts on your report.
A few small unpaid bills from years ago can impact your score negatively by a few points, so if you have any old unpaid debts, pay those off before applying for a loan! If you weren’t aware of them, don’t worry. Your lender will often counsel you to simply pay off those old debts, and then they’ll do what’s called a rapid rescore -- running your credit again quickly just to confirm that the score raised enough to qualify you for the loan.
If your score is further from the mark, there are credit counseling services to look into. There are many types of credit counseling and their main mission is to improve your credit score and get rid of your past unpaid debts or late charges.
As we reviewed, getting a good loan is dependent on having a good FICO score. So to recap, is the FICO score important? YES, YES, YES!!! Keep on top of your score, find out what it is from the three credit bureaus, and do everything you can to improve it if you are trying to buy a house or even apply for an apartment lease. It gives people a quick look at your credit worthiness on an easy, universal scale, and makes or breaks the loan.
Any questions or comments? Leave them in the comment section below, or on our YouTube page!
When you work in real estate it is bound to happen at some point. A homeowner will die on their property. As an agent, if you have never dealt with this situation before you’re going to have questions.
Do agents have to tell buyers if someone died in a house? How does the death disclosure work? What do you do as an agent if someone dies in the house and it’s in escrow?
As a real estate agent, there is essential information that you need to know when dealing with a death in the property. When you know the procedures and disclosures involved, selling a home that has had a death on the property will be easier to handle, just like managing a distressed property where additional complications may arise.
How you handle the death disclosure will be different depending on when it’s discovered. We’ll discuss each scenario, what disclosures are involved and the proper procedures to follow.
Let’s start by talking about the basic rules as it pertains to California real estate.
Death on the property is considered a “material fact” and must be disclosed.
A material fact is considered to be any information that can influence the decision of the buyer involved in the real estate transaction.
Material facts include items like a cracked slab, known plumbing issues, or anything else that can be considered a defect. Yes, “death” is included as a material fact.
This is critical because a death on the property would definitely be a deciding factor that a potential buyer would want to know.
Many people are uncomfortable with the idea of living in a house where death occurred. It could be due to superstition, the belief that the house could be “haunted,” or it could be a personal issue. The fact remains that some people are very adamant about this and will not purchase a house where someone has died.
If you are the listing agent selling a home with death on the property, you must disclose this information. But per California civil code 1710.2, you only have to disclose this information if the death occurred within 3 years of the buyer making an offer.
So as we just discussed, it’s important to disclose this information when you are representing the seller and have the listing.
But what if the death in the home happens after the offer has already been made and you are in escrow? It can happen and in this scenario, you will want to make sure you are still following the correct procedures.
Per the California civil code 1710.2, you are only required to disclose a death before an offer is made, right? Not the case and we’ll explain why.
You need to approach this like you would any other transaction once the house has been modified while in escrow. If the home had a new leaky roof or was recently flooded, you would disclose this new information to the buyer because it has affected the integrity of the house.
In this case, the death in the home is treated in the same way. It is a new variable that has modified the home and may influence the buyer’s decision to continue with the transaction. You must disclose this information.
If you are lucky enough to have the buyer agree to continue with the purchase, it’s crucial to document everything.
Whenever there is a critical change in the property materially, it’s important to document it. You can do this by using an Addendum to the contract.
When completing the addendum, be as detailed as possible. You will want to note that there has been a death on the property and include the address and date of occurrence. State that the buyer has been informed and accepts the new condition of the home.
Then, have all parties acknowledge and sign it. That includes you as the seller’s agent, your seller, the buyer, and the buyer’s agent. Once executed, send that change to escrow immediately.
Disclosures and documentation are designed to limit your liability as an agent and these will also safeguard your client.
At the listing stage, we disclose the death in the property on the seller disclosures and on the Multiple Listing Service in the private remarks.
If the death occurs during escrow, we use the addendum.
What happens if the buyer discovers that there has been a death in the property AFTER escrow closes? What then?
With all the need for disclosure and documentation, you might be wondering how this can even happen. Although it’s not the usual, there is an instance where this can occur.
We’re not referring to any properties where it has been more than three years later. Technically the death does not have to be disclosed.
However, we recommend always erring on the side of disclosure — it’s better to be honest than to conceal facts when trying to be a reputable agent.
As we discussed, it’s required to disclose a death on the property if it is within 3 years, although there is one exception.
An exception to this rule is when the house is a foreclosure or a bank-owned property. Since the bank could not have reasonably known what was happening in the house, they are exempt from the rule about disclosing deaths within the last 3 years.
Unfortunately, there isn't much that can be done at this point. If the buyer finds the information too overwhelming to remain in the home, they can always choose to sell the house and move.
As an agent, there are a couple of things you can do to prevent this from happening if you are actively seeking out bank-owned properties for your buyer.
ASK YOUR BUYER
During the consultation, ask your buyer up front whether or not death on the property is an issue.
DO SOME RESEARCH
If it’s a deal-breaker, make sure to do your due diligence beforehand to find out if there has been a death on the property. You can check public records or ask the neighbors.
Taking these simple steps will make sure you are on the same page with your buyer and can prevent a bigger issue from developing later.
Having to deal with death on the property is never the ideal situation. But knowing what to do when you are faced with that situation will make all the difference.
Whether you are representing the buyer or seller, the key to closing the deal is proper disclosure.
Death in a property will not be a deciding factor for all buyers. Make it a practice to ask your client before you start looking at houses. There is always going to be a buyer that is willing to overlook this material fact.
Remember, a death in the property does not mean the death of the deal.
Working with buyers is a great time as a real estate agent. You get to see homes with excited people, you get to show them a place where their dreams can happen, and they are usually ecstatic when you successfully complete the purchase! However, not everything is easy when working with buyers. There are a number of mistakes that can be made when doing a listing presentation, from not connecting with your buyers to insulting their home. Today, we’ve compiled a list of the more common mistakes that new agents make. Don’t make these - these can cost you a buyer, and therefore a commission!
The common mistakes new real estate agents make can be remembered with the ‘5 Ps’:
You have to be prepared as a real estate agent, or as any career! If you’re not
prepared, you’re not focused and thus buyers may lose trust in you. Be sure to be prepared with all of the information pertaining to the houses you are showing (like the routes to the house, how many bedrooms/baths, year built, etc.)
Don’t waste time, or stall time. If your buyers want a type of house that’s not on the market, try your best to go out and find what they are looking for. Be diligent and try to be the best agent you can be, for your clients, and for yourself. Being proactive requires hard focus and determination. Wasting time will only make you look sloppy and seem unreliable.
Mark Anthony said it best when he says, “If you do what you love, you’ll never work a day in your life.” We completely agree! Love what you do and let the passion illuminate through you. Your clients will see this and feel good throughout the process. Think- emotional contagion. If you are passionate and radiate positive energy, your clients will feel positive and will want to purchase a property. If you do not seem passionate, you will seem like you don’t want to be there, and this will of course make you lose clients.
Presentation is everything in real estate. Well, not everything, but certainly a good percentage! As a real estate agent, you must dress professionally, speak professionally, have good hygiene, and generally take care of yourself! Even if you have to fake it -- fake it till you make it! Another key tip is to generally look good at all times, since you are technically always “on the clock” even when you’re not with clients. It all starts with being professional and looking polished. This is a business, after all, and people love professionalism.
It is important to remember that Real Estate is a people-business. You need to be approachable, likeable, personable. It is one of the biggest purchases and investments a homebuyer's life, and they'd want to make a connection with the agent selling them their home. If you come off as an intimidating person, people will be fearful and not want to approach you, and then how would you get clients? The best way to be personable to is to be yourself, and engage with your clients on a genuine level. The best way to get to know clients is by asking questions and by simply being yourself. Talk about your kids, your pets, your hobbies!
As a real estate agent, it is crucial to have characteristics that encompass the 5 Ps - Prepared, Proactive, Passionate, Professional, and Personable. These qualities will help get you clients and not lose out on commission!
This week, we received a question from a viewer: does real estate affect the national economy, and how?
Of course, it does! Real estate is one of the primary drivers of economic activity in the country, from the transactions of buying and selling homes to all the related activities. Think of each individual home in the country -- all your neighbors, all the areas you drive through each day, and all the homes that you pass. Each one represents an investment by someone - usually a family - and the hard work that they are putting in so that they can own this piece of property.
For example, when Head Trainer, Robert Rico, bought his first house, in 1993, it cost him only $106,000! This sounds like a very small amount of money right now, but it’s still a significant amount to save. In the long run, a home is like a savings account for the homeowners -- since property values, over time, will trend upward. A home is a great place to put your money.
If you own property and hold it long enough, it can be treated like a savings account - and the Ricos were able to sell that house later for close to $400,000! That’s an enormous increase in the value and enabled them to do things like go out to dinner, and spend money on various things, which thus increases value in the national economy.
Because homes also require a lot of maintenance and upkeep, that’s another whole category of economic activity simply because it creates jobs. There will always be a need for gardeners, construction workers, and home repair workers. This drives the economy because those people drive vehicles that cost money, they use fuel which drives the national economy, and they also own or rent their own homes - and the cycle keeps going.
Home improvement is also another huge driver of economic activity. Like the gardeners and construction workers, home improvement contractors will also have to drive trucks, spend money on fuel, and further drive the economy. When people improve their homes, they buy raw materials, which drives the economy (for example, the lumber and metal industries).
If we think of the time between 2007-2008, what happened? Home values dropped, so the equity in people’s homes disappeared, and they no longer had money to spend on other things. This recession affected the economy drastically, putting people out of jobs and putting people out of money. It slowed down the economy as a whole - which is why we called it the great recession.
So to answer our reader’s questions - Does all this real estate activity drive the economy? And to that, we say, OF COURSE!!! Whether you own, invest, or work - you are driving the economy and helping it grow.
See you next week for our following blog post - and don’t forget to subscribe to our YouTube channel!
As the saying goes, there are two things in life that are certain - death and taxes. In the meantime though, the benefit of being a real estate agent is that you get to have a flexible schedule and make a good amount of money -- but be careful when it comes to paying your taxes, since it’s very different than a typical employee of a company.
First things first, after getting your license, you will interview and pick a brokerage that’s right for you. It’s very important to make sure that you’re at the right office that best fits your needs! Once you are licensed and working at a brokerage, the IRS will now classify you as an independent contractor -- meaning, you’re no longer an employee of a company and you are responsible for your own tax payments.
As we have covered in our blog, How does a real estate agent get paid?, this is a commission-only position and thus you are not going to be receiving a typical hourly or salary wage. However, the upside to this is that -- when you sell a home, the commission checks are usually very generous!
However, a KEY piece of information to remember is that when the broker hands you your check, no taxes have been taken out yet. This is a complete departure from a paycheck you’d receive as a salaried employee, where the deductions are already done and you get a tax refund at the end of the year. In fact, if you don’t set aside the right amount of each commission check for taxes, you will owe the government a heavy amount in April! The other thing is, since your brokerage is not going to do it for you, you are the one that must keep track of your income, expenses, and actual tax filing.
The best thing to do, especially as a real estate agent, is to have a certified tax professional (especially one who’s got experience with other real estate agent-clients) look over your income and see what deductions you can make. After all, as an independent contractor, you essentially are your own business, and therefore can deduct some expenses as business expenses. A great way to find a tax professional like this is to network with experienced agents and ask them who they use to do their taxes.
When you and the professional are doing your taxes, there are many things that count as legitimate business expenses that you can (and should!) deduct to reduce your tax burden. For example, the miles on your car showing houses to clients can be written off. So can expenses for advertising, some office expenses, and further out-of-pocket costs you’ve incurred over the past year.
For far too many agents, the saying applies - “money in hand is money spent.” Don’t be one of those agents -- they are the ones with back taxes that owe money to their brokerages. Since you are given so much freedom as a real estate agent, part of the tradeoff is that you have to be diligent about setting aside money for taxes so that you are not in debt later.
So, what are the takeaways from real estate agents’ taxes?
Thanks for reading our weekly blog! We’ll see you back here next week, and if you have any questions or comments, you know what to do...
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