Becoming a real estate agent and obtaining your real estate license is the first step in pursuing an exciting and lucrative career in real estate. As a real estate agent, you need to treat your career as a business, which means being responsible for budgeting, expenses, startup costs, and marketing and management costs associated with starting a business.
Many new agents fail to realize just how expensive it can be to become a real estate agent or what a day in the life of a real estate agent entails. That's why it's important to be prepared before making the decision to move forward. Besides knowing the costs to become a real estate agent, it's also important to have an approximate idea of how much real estate agents earn, the daily activities involved in being a real estate agent, and the difficulty level of obtaining and maintaining a real estate license.
Another important aspect to note is that the costs to become a real estate agent in North Carolina will differ from becoming a real estate agent in other states.
Before you get overwhelmed by the costs listed in this article, remember that all real estate-related expenses are tax-deductible, so keeping a detailed list of all expenses is important. Even better, open a separate bank account that you use for real estate business-related payments. This will make calculating your real estate expenses easier when it comes time to file taxes each quarter. Here is a list of tax deductions for real estate agents.
How much does it cost to become a real estate agent?
Pre-licensing preparation course
Estimated cost: $300-600 (one-time fee)
All aspiring real estate agents are required to complete a pre-licensing preparation course to help them understand the terminology and concepts in the real estate industry. For example, before starting the pre-licensing course, you may not understand the difference between 'Joint Tenancy' and 'Tenancy in Common', or how to calculate square footage, but after completing the course, you will have a clear understanding of these concepts.
The cost of the pre-licensing preparation course will vary significantly from state to state. Some states offer online pre-licensing courses and it may only cost $100 or $150, while other states do not allow online pre-licensing courses and require all aspiring real estate agents to attend in-person classes.
Most online courses in North Carolina typically range from $150 to $300, depending on the school. Compare prices and evaluate different school options before committing to ensure you get the best value and instructors.
While the course will provide relevant study materials, any additional study materials you purchase to help you learn - such as flashcards, textbooks, real estate guides, etc. - will have additional costs.
Licensing exams and fees
Estimated cost: $300 and above (one-time fee)
In North Carolina, there is a $30 registration fee to attend the licensing exam, followed by a $66 exam fee. The exam fee will vary in other states, but typically ranges from $50 to $75.
You will also need to pay around $50 for fingerprinting and background checks. In other states, fingerprinting and background checks may cost $100 or more. While North Carolina does not charge for the official real estate license, other states may charge around $150 for a license.
In North Carolina and many other states, you must automate your real estate license annually. Some states only require you to renew your real estate license every two or three years. In North Carolina, the cost of renewing your real estate license is $45.
Real estate brokerage fees
Estimated cost: $25 to $500+ per month
After you have obtained your real estate license - meaning you have completed the pre-licensing course and passed the exam - you must join a local brokerage to maintain your license. You may also have to pay a fee to have an assigned workspace in the brokerage office. If you do not want to have assigned workspace, then this fee will not apply.
In addition to paying workspace fees, you will also be responsible for paying brokerage fees. Brokerage fees are usually deducted from a percentage of your commissions and cover management and marketing expenses related to the office, such as office supplies, social media advertising, signage, and flyers.
Real estate association fees
Estimated cost: $0 to $200+ per year
After becoming a real estate agent, it is recommended to join the National Association of Realtors (NAR), which provides resources to help real estate agents maximize income potential and strengthen their professional skills. It includes commercial and residential real estate agents, asset managers, sales staff, appraisers, and many others in the real estate industry. The membership fee is $150 per year.
Of course, membership is entirely optional - not all real estate agents become members of the National Association of Realtors. If you choose not to become a member, you may want to join local and state real estate organizations that have associated fees. State-specific real estate organization fees typically range from several hundred dollars per year. If you are a member of your local real estate board, you may pay the fee directly to your broker.
Real estate marketing expenses
Estimated cost: $1,000+ per year (variable)
Marketing expenses are typically the highest costs that a real estate agent has to pay annually, totaling around $1,000 or more per year (although this will vary). This is particularly applicable to new agents as you will want to spend a significant amount of time marketing yourself and promoting your real estate services.
Typically, real estate agents spend money on maintaining a website, which can range from $500 to $1,000 per year for just the website, as well as signage, business cards, online advertising, and mailers. While marketing expenses can quickly add up, they are an essential component of running a business and can lead to significant profits in the future.
Some real estate brokerages may provide marketing budgets to help new agents grow their business. Before joining a brokerage, discuss the marketing-related costs and learn about the level of support the brokerage provides when it comes to advertising and referrals.
Business operation expenses
Estimated cost: variable, but could be around $75+ per month
Management and other fees play a significant role in strengthening your business. This includes office supplies, a new computer or printer (if you work from home), mobile phone and internet bills, etc. In addition to management costs, you may also spend money on gifts, lunches, and meetings with clients during the course of working with them.
Continuing education courses related to real estate
Estimated cost: $50-300+ per year
It is crucial to maintain your real estate license by participating in the required continuing education courses of your state. While they can be costly - sometimes up to $300 per year in some states - they are necessary to fulfill the requirements so that you don't lose your real estate license.
Those who fail to continuously complete the required continuing education courses may be subject to additional fees or may even lose their real estate license altogether. If that happens, you won't be able to earn any commissions from any transactions until you retake the entire real estate licensing course and pass the exams again.
While some people view continuing education as a burden, it is a beneficial way to stay updated on new real estate trends, terminology, and resources and will help you become a stronger asset to your clients.
Frequently Asked Questions
Here are some frequently asked questions about becoming a real estate agent.
What do real estate agents do? As a real estate agent, you are responsible for finding buyers and sellers and guiding them through the transaction process. Finding new clients involves attending networking events, participating in local community events, marketing yourself on social media, and staying in touch with friends or family members who may be interested in buying or selling a home in the future.
It involves perseverance and patience, as many potential clients may take months - or even years - before they are ready to buy or sell a home. In addition to gaining clients, it is also important to have a firm grasp on the real estate market and inform your clients of any notable trends or predicted changes. This involves researching recently sold homes in various areas, understanding the rental market, and staying updated on foreclosure information.
If you have a client who is a buyer, you will meet with them to discuss what they are looking for in a home. Then, you will research the area they want to move to, find suitable homes that meet their criteria, and schedule appointments for them to view the homes.
While some buyers may find their dream home on the first home tour, that is not common. It may take weeks for your buyer to find a home they want to purchase. Once they find the home they want to buy, you will handle every aspect of the transaction, negotiate a lower price for them if necessary, and help them save as much money as possible.
If you are working with a seller, you will help them prepare their home for sale, including providing guidance on how to stage the home and other items in it to create the most appealing space possible.
After listing the home, you will host open houses regularly until you find a buyer. In addition to hosting open houses, you will also be responsible for marketing the property through online advertisements, mailers, and other marketing methods.
When you find a successful buyer, you will work with the buyer's agent to complete the transaction process. This involves negotiating the price and other costs that the seller may be responsible for, such as repairs in the home, etc. Ultimately, your job is to ensure that the seller receives the highest possible price for their home. This is how you become a successful real estate agent.
How much money do real estate agents make? According to the US Bureau of Labor Statistics, the average annual salary for real estate agents is $52,030 (as of September 2023). Real estate agents are paid on a commission basis, which equates to a percentage of the home sale price.
In nearly all states in the US, the average commission on a real estate transaction is 6% of the home sale price. The commission is split evenly between the buyer's agent and the seller's agent, meaning each agent typically earns about 3%.
The 3% commission is also shared with the brokerage - which can take up to 50% of the commission, leaving you with around 1.5%. So, if you sell a home for $300,000, you could earn $4,500 from the transaction. If you factor in the expenses you have incurred to complete the transaction, such as advertising costs, client gifts, etc., you may earn less than $4,500. This is how real estate agents make money.
Is it difficult to become a real estate agent? The barrier to entry into the real estate field is not difficult. As long as you are 18 years old and a US citizen, you can take the pre-licensing courses to obtain a real estate license. A college degree is not necessary; some states do not even require a high school diploma.
Obtaining a real estate license involves taking the pre-licensing courses, studying the applicable materials, and passing the exam. While obtaining the license is not difficult, becoming a successful real estate agent can pose more challenges.
Every transaction is different, meaning there is no one-size-fits-all approach. Completing a successful transaction involves hard work, diligence, and patience.
You may work with some very easygoing buyers, while others may be more particular about what they want in a home. Or you may work with sellers who want to sell their homes and move quickly compared to others, who are very attached to their homes and want to wait for the perfect buyer to come along. Each transaction presents a great learning opportunity and will help you improve your skills as an agent. In terms of schedule, real estate work is relatively flexible. You won't be required to sit at a desk from 9-5 every day - you are your own boss (unless you work in a team, in which case you report to a team lead). While it is important to always be available to serve your clients if they call or email with questions, you can work from home or work at a brokerage office.
What do you need to become a real estate agent? Many real estate agents give up their real estate careers too soon because they expect to see big profits right from the start. TV shows like "Million Dollar Listing" often make real estate appear easy, as they focus on real estate agents dealing with multimillion-dollar properties.
It is important to remember that even the most successful real estate agents in the world started from the same point as you: passing the real estate licensing exam and studying the industry. Those who are persistent, dedicate time and energy to learning everything about real estate, consistently follow up with potential clients and clients (without being pushy), and take the time to truly understand each person they work with will have a greater chance of success.
Real estate agents should have a solid grasp of the market and know when to say 'no', but they should also have good energy and a caring demeanor to make clients feel comfortable.
What is the average salary of a real estate agent? The average salary varies, but it is estimated to be around $75+ per month.
Management and other fees play a significant role in strengthening your business. There may be costs for office supplies, a new computer or printer (if you work from home), mobile phone and internet bills, etc. In addition to management costs, you may also spend money on gifts, lunches, and meetings with clients during the course of working with them.
Overall, becoming a real estate agent can be a rewarding career choice. It requires dedication, commitment, and ongoing learning to succeed. While there are costs associated with becoming an agent, with the right mindset and work ethic, it is possible to achieve financial success in the real estate industry.