Category Archives: Broker

Can Residential Agents Sell Commercial?

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As a realtor, you will most likely either choose to sell a commercial property or residential property. Some people may also opt to do both.

However, if you realize later on down the line that you were wrong, that is okay. You are not committed to staying in either sector forever. You can always change sides.

In this article, we will look at the similarities as well as the difference between the two types of properties to see which one is the best fit for you. This is something you will have to think hard about to see what works best with your style. That is a decision that we will leave you to make based on the information that we will provide.

What is the difference?

Somebody once said that comparing commercial and residential real estate is similar to making a comparison between apples and oranges. Both are fruits, and that is where the similarities end.

On a more serious note, commercial real estate focuses on business needs. These are properties which are leased, sold, rented out to achieve a business objective. One would call it an investment which is aimed at making a predetermined rate of return.

On the other hand, residential real estate focuses on the needs of a homeowner and his or her family. It includes properties which have been bought or built for family use. It is more so described as the provision of housing to the families.

Now that we have a basic understanding of what each entails, let’s dive deeper.

Education

Whether you want to become a commercial or residential estate agent, you will need a license. However, in terms of education for a residential estate agent, you do not need to have a college degree.

As a commercial real estate agent, you will be expected to have a college degree in business. This is to allow you to have a deeper understanding of the professional terminologies that are used in this sector. Terms such as capitalization rates, real estate analytics, internal rate of investment among others which are used in finance and investment will be the order of the day.

If you do not have a basic understanding of these terms, you may have a hard time working as a commercial real estate agent. Although it is not mandatory to have a degree, it comes as an added advantage. For those who do not have a degree in business or finance, but are knowledgeable in finance and investment terms, they can perform equally well in this field.

Training

Both commercial and real estate professionals need the training to be better agents. However, the level of training is different.

Commercial real estate agents will need more training, this more so if they do not have a background in business and finance. In the course of analyzing the real estate markets, they will come up with terms and ratios which require this knowledge. Without it, you will not make much of that information and may be a barrier when it comes to selling some properties.

If you have a weakness in this area, do not panic as there are people who can help you analyze the information, the catch is that you have to incur an extra cost in terms of the consultation fee.

Earnings

The amount you earn in any business will depend on several factors. Some people will make more than others. This is the same case with real estate.

Although there is a belief that those who venture into commercial real estate make more money, there are also some who are doing well in residential real estate. It will primarily depend on your strategy, and the type of real estate business you have ventured in will be secondary.

However, with all factors held constant, a commercial real estate agent is likely to make more money given that they are dealing with a large amount of money. In a business which is commission based, the more significant the amount of sale or purchase, the higher the agent earnings.

You can imagine of an agent who sells the property of $50,000,000 in one deal with a residential real estate who sells homes worth $5,000,000 over a period of one year. The difference will be huge, and the residential real estate agent will have to put in a lot more effort to make the same amount.

Earnings will differ due to the amount of money involved or the value of the property, but the effort which has been put towards making such an amount will vary hugely.

Ease of Selling

It has been mentioned before that it is relatively easier to sell a residential property than a commercial one. Some of the factors which have been given around include the amount of money involved. Also, the fact that we have more people looking for homes for the family than those who are in it for commercial reasons.

I think I will have to end the article with a disclaimer, these are not the only differences and similarities between these two sectors in real estate, we have just looked at a small part of it, but the information can be enough to help you make a decision on where to fall.

Why Real Estate Is The Perfect Career

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When making a career choice, there are several factors that an individual considers. These factors help in arriving at the best decision and ultimately selecting a career that will satisfy the individual. 

These factors range from the qualification requirements, ease of entry, future prospect, potential earnings, career advancement, and working environment among others.  A career in real estate can be one of the best choices that you make in your life. Here are some of the reasons why it is the perfect choice.

Low Barrier To Get In

If you have a passion for sales, like interacting with people from a diverse background, have patience and are committed to seeing other people satisfied, this is a career for you.

Unlike other careers, the entry requirements to get into this line of business are minimal.

In terms of the education requirements, with basic education and a certificate course in real estate, you are good to go.

When it comes to capital requirements, this is a career that you can enter without incurring debts. In fact, at times you do not even need to spend anything at all if you do not want to. If you have the information about a property and know somebody willing to take it, you will have earned yourself a commission without the need of a business office, office equipment, and things of that nature. You will have made your money just by using the already existing infrastructure.

Out of the money that you make from such a deal, you will have enough to set the system. I cannot think of any other business which one can start this way, beginning a venture to get some capital to do the same business.

This can only happen in a real estate business. Although it is easy to enter into this career, it does not mean it is for everyone. It belongs to those who are passionate about sales, so do not be afraid that there are a lot of people who try out this career.

Many are called, but a few are chosen. Some of those who join with a mindset of getting rich quickly will get disappointed within the first few months, especially when they find that things are entirely the opposite of what they thought.

High Income Potential

For other types of careers, employees have to wait for years before they finally get a pay raise or a promotion. You may work extra hard for a particular employer only to be recognized with a small amount in terms of a bonus. You may earn them million dollars but won’t get a cent of the business that you have brought to them.

When it comes to real estate business, things are different. Depending on the effort that you put into your work, you can be earning a pay raise every month.

How does this happen? Every month, set a goal of closing one deal a month. Then, when you accomplish that goal, aim for a bigger one than prior month. With this strategy, you will be earning more than you did last month.

If you keep aiming at closing more deals than you did in the previous months, you have an opportunity of making a significant amount of more money.

Income is not constant. It can increase every month. However, on the flipside, you can earn less than you did last month. There may be times where you may even take home nothing.

This can be avoided by having a strategy, aim at making a deal every month and ensuring each time you have more than what you did last month.

It takes hard work, so you have to be prepared to get your hands dirty and burn the midnight oil.

Use strategies that are working advertise widely, target the right market and you will never go wrong on this, you are assured of earning more every month, something that you may not get anywhere else.

Working Environment

If you have ever dreamt of working in an environment where you enjoy total freedom, flexibility and are in control of things, real estate career is what you had in mind.

Working as a real estate agent gives you the freedom to determine when, where and how to work. You will be your own boss, you do not wait to take orders from your supervisors, and you are everything.

You make decisions on which clients to approach, when to do it and how you will get them. If you do it right, you will succeed in this. If you are not a person who likes being caged in an office from nine to five, waiting for instructions from your boss and are restricted on the types of decisions that can make, then a career in real estate will provide you what you need.

It will keep you challenged every day.  It is a profession that will make you go out of the way to find real estate deals, close them, and keep doing this day in and day out. 

However, there is a disclaimer: do not get into this thinking that it will be all easy, sometimes you will be required to work for long and odd hours. You should understand right from the beginning that it can be more demanding than most of the other careers. For those who are patient, remain focused and resilient, hefty commissions await.

How Much Do Broker’s Make?

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The income earning potential of a profession plays a crucial role in making it attractive in the eyes of men and women. Real estate broker is a career that is very attractive in terms of income that an individual can make selling real estate for others. Brokers charge a fee for selling real estate for agents which is also referred to as their commission. Brokers can run their own brokerage firm or work for other realty companies and franchises. If they are working for others, they can get a salary of around $70,000- $75,000 per year. But when they choose to run their own brokerage firm, only the sky is the limit as far as income earning potential is concerned.

Based on the level of their experience a real estate broker can command a salary in the range of $56,000 to $84,000 per year. The average yearly salary of an experienced real estate broker around the country is $76,200. This amount also depends upon the geographical area or the housing market you are working in. New York happens to be the best place for real estate brokers in the country as these professionals are getting an average salary of around $137,000 per year there.

However, most real estate brokers work not based on a monthly or yearly salary but the basis of commission. They get a cut on every real estate transaction carried out by real estate agents working under their brokerage firm. The average income of a broker is much higher than that of a real estate agent because a broker has several agents working under him.

There is a considerable variation in the income levels of different real estate brokers depending upon the kind of broker they are and the functions they are performing. Some real estate brokers are managing brokers while others are associate brokers. There are also brokers who themselves sell real estate. As such, the amount of money earned by a broker can be high or low depending upon the kind of activities he is involved with.

Associate Real Estate Broker

A real estate broker who has got the license to work as a broker but chooses to work under the brokerage of any other broker is called an associate real estate broker. These individuals take this step as they find less risk in working under another brokerage firm and they also avoid many expenses that are involved with such a business. These brokers earn a median annual salary of around $55,000. This is much less than what an independent real estate broker earns, but it is certainly much more than what a real estate agent makes every year.

Designated Real Estate Broker

If a broker has his own brokerage firm, he is called a designated real estate broker. If such a professional hires and manages services of real estate agents, he also becomes a managing broker. Even in this category, there are two different types of real estate brokers. Those who hire associate brokers to manage real estate agents working for their brokerage firm are called a designated broker or the broker-owner. The associate brokers these real estate brokers hire to manage their real estate agents are referred to as managing brokers. All tasks of the real estate broker are performed in such a scenario by these managing brokers in the name of the broker who owns the brokerage firm. Managing brokers earn a high level of income, but they also bear lots of responsibilities. They not only look after their clients but also the agents working under their brokerage firm.

Many real estate agents become brokers to keep 100% of the commissions earned from their clients. There are also broker-owners who get a slice of income of other agents, but they also take over the responsibility of sponsoring these agents.

If you are a real estate agent, it is a good idea to get the license to work as a broker. You can get an edge over other real estate agents working in your area and also get an opportunity to hire them to work under your brokerage. You can continue to sell properties. While you get to keep all the commission earned by you as a real estate agent, you also start to get a percentage of the commissions earned by other real estate agents working in your brokerage. Of course, it can be very demanding, but if believe you can work hard and manage your brokerage as well as other agents, only the sky is the limit as far as your income earning potential is concerned.

Broker Owners

If one takes a look at all the real estate brokers, he finds that only about a third of these professionals are broker owners. This means that one out of every three real estate brokers owns their own brokerage firm. There is also a small percent of brokers who run the franchise of another brokerage firm. More than half of the real estate brokers around the country work for others, including other brokerage firms and realty companies, in exchange for commissions or annual salaries.

Expenses From Being A Broker

Now that you are aware of the kind of income earned by real estate brokers, you should also have some knowledge about various expenses incurred by these professionals. Average expenditure of an associate broker around the country on marketing, transportation, and technology comes to around $9,600. The average spending of a broker-owner is much higher, close to $16,000 per year. This is because they have to bear expenses on office, furniture, equipment, utility bills, and so on.

Even though the average salary of a real estate broker is higher than that of a real estate agent, he also puts in a higher number of hours of work every week in comparison to an agent. If you are prepared to work hard, the career of a real estate broker can be very profitable for you.

How Do I Renew My Broker License?

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Your real estate broker license is valid for one to four years, depending on your state. For you to renew it for another term, you will be required to complete continuing education and pay the renewal fee. Every state has set its own requirements and is subject to change, so it is important to always check with your state board. 

Continuing education is an essential part of professional development and keeping real estate agents up-to-date on current laws and regulations. It usually does not take very long to complete, and most people can complete them with relative ease. 

CE Requirements by State

California

If you live in California, your license is good for 4 years, and it needs to be renewed before the expiration date that’s on your license. The California Department of Real Estate will mail you a reminder about 60 days before you’re up for your renewal.

For first time and subsequent renewals, all real estate brokers must complete 45 clock hours of approved continuing education.

It must consist of one 8-hour survey course covering the six mandatory subjects (Ethics, Agency, Fair Housing, Trust Fund Handling, Risk Management, and Management and Supervision), or licensees can choose to take each of the mandatory subjects separately.

It must also have a minimum of 18 clock hours of consumer protection topics and the remaining clock hours may be elective courses related to either consumer service or consumer protection

If you don’t renew your license on time, you can renew your license within 2 years from your license expiring however you cannot perform any activities that are related to real estate until your license is reactivated.

Colorado

Licensees in Colorado have a 3-year license cycle. All active real estate brokers need to complete 24 hours of continuing education.

If you were just issued your broker license, your initial license would expire at midnight on December 31st of the year it was issued during this initial license. The newly licensed broker will not have to do any continuing education. However, after that initial licensing period passes, the active licensee well then start their three-year license cycle and have to complete 24 hours of continuing education during that cycle.

Your continuing education requirements during the three-year cycle must include the following:

  • 12 of the 24 hours must be comprised of three different versions of the for our Annual Commission Update Course
  • The remaining twelve hours can be any combination elective hours approved by the state

Make sure that you keep copies of your certificates for at least four years. You will need to be able to provide proof of completion if the commission asks you for it.

Florida

Once you are issued your broker license, your first time renewing will require you to complete 60 hours of post-license education consisting of a 30-hour broker investment and a 30-hour broker management course along with your renewal fee.

 If you don’t comply with these initial renewal requirements by the expiration date on your license, your license will be changed to “Null and void” status.

Following your first renewal and for all subsequent renewals, you’ll be required to complete 14 hours of continuing education and pay the renewal fees to keep the license current.

If you fail to comply, then your license will change to an “Involuntarily Inactive” status.

If your license becomes an “Involuntarily Inactive” for 12 months or less, you can easily reactivate it by completing the required at 14 hours of continuing education and paying a late fee. However, if your license has been in “Involuntarily Inactive” for between 12 months and 24 months, you’ll have to reactivate it by completing 28 hours of reactivation education as well as pay a late fee

Georgia

Anyone who has an active real estate license number that is over 100,000 will be required to complete a total of 36 hours of CE during your 4-year cycle. This must include 3 hours of License Law. 

If you have completed an approved course for CE and you want to retake the same course within your 4-year cycle, you must wait at least one full year after the initial completion date to retake the course. otherwise, it will not count for continuing education credit. 

If your license number is less than 100,000, you do not have to turn in any CE for your renewal. 

Illinois

All Managing Brokers in the state of Illinois are required to renew their license every 2 years on odd-numbered years (e.g. 2021, 2023, 2025). 

Because of the recent changes in continuing education requirements, the DRE will allow brokers renewing in 2020 to submit either of the following:

  • 4-hour Core CE course and 8 hours of education in Elective topics
  • 6-hour Core (Core A and Core B) and 6 hours of education in Elective topics

The broker renewal fee is $150. There is an additional $50 penalty fee if you do not renew on time. 

New York

Real estate brokers must successfully complete 22.5 hours of CE courses. This must include at least 3 hours of instruction related to Fair Housing and/or Discrimination in the Sal, or Rental of Real Property, or an Interest in Real Property, and at least 1 hour of coursework that involves the Law of Agency. 

You will be sent a postcard and an email as a courtesy reminder about 3 months prior to your expiration date. 

You can complete your CE at any time during your renewal cycle. However, you are eligible to turn in the certificates 3 months before your renewal date.

If you are an associate broker, you are required to provide evidence of a sponsoring broker.

Missouri

The Missouri Real Estate Commission requires that active brokers complete a minimum of 12 hours of real estate instruction during their 2-year license cycle, which ends every June 30 on even-numbered years (e.g. June 30, 2020 to June 30, 2022).

At least 3 hours of the 12 total hours must be instruction that has been approved as Core credit. 

Beginning with the 2020 to 2022 renewal cycle, brokers will have to also complete a 3-hour core course in Real Estate Ethics. The remaining 9 hours of required CE can be in either core or elective topics that have been approved by MREC. 

Pennsylvania

The real estate broker license expires on May 31 of every even-numbered year. Licensees are required to complete 14 hours of approved continuing education. 

The Commission will mail a renewal notice to the address of the most recent employer on file.  

Virginia

The Code of Virginia requires that all brokers complete 24 hours of approved CE courses to renew their license every 2 years. 

This must include the following courses:

  • Six (6) hours in Broker Management
  • Two (2) hours in Broker Supervision
  • Three (3) hours in Ethics & Standards of Conduct;
  • Two (2) hours in Fair Housing
  • One (1) hour in Legal Updates and Emerging Trends
  • One (1) hour in Real Estate Agency
  • One (1) hour in Real Estate Contracts
  • Eight (8) hours in Real Estate related subjects (elective courses)

Texas

Texas real estate brokers must renew their license every 2 years by completing 18 hours of continuing education and paying the license renewal fee. 

These 18 hours of CE must include:

  • 4 hours of TREC Legal Update I
  • 4 hours of TREC Legal Update II
  • 10 hours of elective courses

If you have sponsored one or more sales agents, served as the designated broker for a business entity broker that sponsors sales agents, or have been made a supervisor of other license holders, you will need to take the 6 hour Broker Responsibility course.

A renewal notice is mail out to the licensee approximately 90 days before the renewal date. You will not be able to turn in your certificates until you receive this notice. 

For late renewals up to 6 months past the expiration date, you can still renew your license by completing the required continuing education and paying a late fee. 

If you are late on your renewal by 6 months or longer, you will have to apply for a reinstatement of your license.

If it has been over 2 years since your license expiration date, you must retake the state exam. 

Washington

The Managing Broker license expires every 2 years. 

You must certify that you have completed 30 hours of CE during your renewal cycle consisting of:

  • 3-hour Core Course
  • 27 hours of approved elective topics

If you took more than 30 hours of CE during a renewal cycle, you can carry-over up to 15 hours of unused CE credit that was completed within 48 months of your renewal date. 

  • At least 15 hours out of the 30 total hours must have been completed within 24 months of your renewal date. 
  • If you are a newly licensed Managing Broker, the CE hours must start after the date you were issued your license

 

Everything You Need To Know About The California Real Estate Broker Exam

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It takes a lot of pre-requisites just to be able to sit for the California broker exam. Not to mention that it’s a long test that will require you to be there all day. So, if you are thinking about “winging it,” you may want to know what you will be going up against first.

This comprehensive guide will walk you through all the details you need to know (except for the actual questions on the test) about the broker state exam. .

Application

After you’ve met the pre-requisites for education and experience, you’ll need to mail your application, along with the $60 exam fee, to take the broker state exam in California.

There are two ways to file your application:

  1. Broker Examination Application (RE 400B) – This is the standard application form.
  2. Combined Broker Examination and License Application – This is the “fast track” option where you pay all fees upfront. This cuts down on the paper-shuffling, and you end up receiving your license faster. However, keep in mind that all fees are non-refundable, so if you fail the test or change your mind, you will not get your money back. 

Scheduling

The broker state exam is administered by the Department of Real Estate about once a month. You can see the current schedule of availability on their website here.

You can schedule your exam through the eLicensing online system very easily now. This allows you to schedule your test all the way up until 6am on the day of the exam. 

The exams will begin promptly, so it’s important to be punctual and arrive at least 30 minutes early.

Basic calculators will be provided, so you will not be allowed to bring your own.

 

Locations

There are 5 exam sites available:

Los Angeles and surrounding areas
1 Centerpointe Drive
Suite 370, 3rd Floor
La Palma, CA 90623

Fresno and surrounding areas
2550 Mariposa Mall
Room 3070
Fresno, CA 93721

Oakland and surrounding areas
1515 Clay Street
Suite 702
Oakland, CA 94612

Sacramento and surrounding areas
1651 Exposition Blvd
Sacramento, CA 95815

San Diego and surrounding areas
7630 Carroll Road
San Diego, CA 92121

Note: The DRE has an office in Los Angeles that is not an exam site. 

Format

The exam consists of 200 multiple-choice questions and is broken up into 2 parts.

There is a 2.5 hour morning sessions with 100 questions, and a 2.5 hour afternoon session for the remaining 100 questions.

You will need a score of 75% or better to pass. You will be notified of the examination results immediately after you finish. They will also mail you a formal notice within 5 business days by mail.

If you fail the exam, the easiest way to re-apply is through the eLicensing online system. You can try to pass the exam as many times as you need within 2 years of filing your initial application. After the 2 year mark, you will have to re-qualify for the experience and fill out a new application along with the test fee.

Content

The law requires that broker license applicants demonstrate in a written examination:

  • Appropriate knowledge of the English language, including reading, writing, and spelling; and of arithmetical computations common to real estate and business opportunity practices.
  • An understanding of the principles of real estate and business opportunity conveyancing; the general purposes and general legal effect of agency contracts, deposit receipts, deeds, deeds of trust, chattel mortgages, bills of sale, mortgages, land contracts of sale, and leases; and of the principles of business, land economics and appraisals.
  • A general and fair understanding of the obligations between principal and agent; the principles of real estate and business opportunity transactions, and the code of business ethics pertaining thereto; as well as of the provisions of the law relating to real estate as administered by the Real Estate Commissioner.
studying for real estate license

Here are the 7 sections covered in the state exam and how much each section is weighted:

  1. Property Ownership and Land Use Controls and Regulations – 15%
  2. Laws of Agency – 17%
  3. Valuation and Market Analysis – 14%
  4. Financing – 9%
  5. Transfer of Property – 8%
  6. Practices of Real Estate and Mandated Disclosures – 25%
  7. Contracts – 12%

Here’s a detailed breakdown on what’s covered in each section. This is for informational purposes only, and is subject to change.

Property Ownership and Land Use Controls and Regulations

  • Classes of Property
  • Property Characteristics
  • Encumbrances
  • Types of Ownership
  • Descriptions of Property
  • Government Rights in Land
  • Public Controls
  • Environmental Hazards and Regulations
  • Private Controls
  • Water Rights
  • Special Categories of Land

Laws of Agency and Fiduciary Duties

  • Law, Definition and Nature of Agency Relationships, Types of Agencies, and Agents
  • Creation of Agency and Agency Agreements
  • Responsibilities of Agent to Seller/Buyer as Principal
  • Disclosure of Agency
  • Disclosure of Acting as Principal or Other Interest
  • Termination of Agency
  • Commission and Fees
  • Responsibilities of Agent to Non-Client Third Parties

Property Valuation and Financial Analysis

  • Value
  • Methods of Estimating Value
  • Financial Analysis

Financing

  • General Concepts
  • Types of Loans
  • Sources of Financing
  • Government Programs
  • Mortgages/Deeds of Trust/Notes
  • Financing/Credit Laws
  • Loan Brokerage
  • Types of Loan Originators

Transfer of Property

  • Title Insurance
  • Deeds
  • Escrow
  • Tax Aspects
  • Special Processes
  • Transfer through Court Supervision
  • Types of Vesting

Practice of Real Estate and Mandated Disclosures

  • Trust Account Management
  • Fair Housing Laws
  • Truth in Advertising
  • Record Keeping Requirements
  • Agency Supervision
  • Permitted Activities of Unlicensed Sales Assistants
  • DRE Jurisdiction and Disciplinary Actions
  • Licensing, and Continuing Education Requirements and Procedures
  • California Real Estate Recovery Fund
  • General Ethics
  • Technology
  • Property Management
  • Commercial/Industrial/Income Properties
  • Specialty Areas
  • Transfer Disclosure Statement
  • Natural Hazard Disclosure Statements
  • Disclosure of Material Facts Affecting Property Value
  • Need for Inspection and Obtaining/Verifying Information
  • Reports
  • Servicing Diverse Populations

Contracts

  • General
  • Listing Agreements
  • Buyer Broker Agreements
  • Offers/Purchase Contracts
  • Agreements
  • Promissory Notes/Securities
  • Purchase/Lease Options
  • Advanced Fee

Some Final Thoughts...

It is extremely important that you do not try to cut corners and cheat. If you get caught, they will charge you with a misdemeanor. Do not talk to other test takers, copy answers, bring unauthorized personal items to the test, or try to game the system in any way.

You’ll want to reserve a sufficient amount of time to prepare for the exam. There are a lot of education providers available nowadays with practice tests and crash courses. This is a big test, so I advise doing it right the first time.

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