What are the annual expenses of being your own agent?

Question

I am considering getting my real estate license.  I plan to buy several properties this year and I am assuming that I will be able to get +/_ 3% of the commission by having my own license.

What expenses will I have by being my own agent?

Bryan L. · Answer

Joseph F.  The only way to get around signing up with a brokerage is to do what Joel has done and become your own one-man brokerage firm.  However, your state may require a minimum number of years of experience before you can even sit for the broker's exam.  In my state of TN it is three years.  I'm also a licensed engineer, and I had to wait four years before I could sit for that exam.

I choose to remain an "affiliate broker" and let the broker take care of all of the overhead and stuff.  Plus, he gives me a nice office and already has a lot of systems, infrastructure, and marketing in place.

Joel Owens · Answer

Joseph I had about 50 agents at one point. I got rid of ALL OF THEM years and years ago.

Investors that are newly licensed tend to think about the bottom dollar on buying properties for themselves and not the liability of how they structure a transaction.

When you become an agent that is licensed you are held to a much higher standard and must disclose this fact on all contracts so that the other party is informed of your (unfair advantage without disclosure).

Most agents never close anything, want the world for a per trans fee, and create a ton of headaches for a broker. Personally now that I do my own investments and close deals for commercial with my clients directly I have no use for agents. My life is simple and I do not have to worry about ( What have they done today that I will have to clean up? ) anymore.

As a broker you will get IRS tax levy demands on their commission checks, suspension of license for student loan delinquencies, back child support, not paying license renewal fees on time, continuing education requirement lapses, and on and on. Personally some brokers love keeping track of agents in masses and living off the skinny per trans fees. I can't stand it and find most agents are rusty and or require heavy training to get going. Investors like J Scott are the exception and not the norm when it comes to agents and not causing headaches.

"Is there any way around getting in bed with a brokerage?" These kinds of statements is exactly why I do not take agents. Already the thought seems to be how to circumvent and just be licensed without paying money etc.

You might do well to find a brokerage that is investor friendly. Frankly I am surprised at the number of brokerages that fight over recruiting agents. My experience with 10 years in the business is it's a waste of time for a broker. Now if I am getting 50% that is a different thing all together on commercial deals. I find agents want to skip steps and the fire burns out after 1 week or so and the broker wasted all this time training them for nothing. Now when people contact me I say give me 20,000 non-refundable on a 50/50 split and when the first one closes we will take the 20,000 off of the 50 split. This forces them to have skin in the game and I would get compensated for my time. This usually gets them off the phone real quick! lol Hope you find someone to land with. I wouldn't focus on saving the 3% commission as much as what you make on your deals. It takes time to build connections and networks for a broker/agent that works the trade long term for a living.

David Niles · Answer

You must be sponsored by a brokerage to have your license, no way around it.  You will want to interview several or more of them and be upfront with your plans, some expect agents to produce regularly, some are more investor friendly.

J Scott · Answer

My experiences in multiple states have been about the same as Vladimir's above...about $1000-1500 per year in monthly brokerage costs, MLS fees, association fees, E&O insurance, continuing education, etc.  Plus, things like marketing materials (signs, cards, etc), lockbox fees, electronic key fees, etc.

If you can earn or save commission on one deal per year, you're probably making money... (though, of course, there's other overhead associated)

Vladimir K. · Answer

Your fees will depend on the broker that you will be affiliated with.

For example, some brokers let you keep 100% of earned comission, minus a fee per deal.  Other brokers may have a split, where you get to keep 60-90% and the brokerage keeps the rest.  Typically you also pay for the Association (National and State) fees,  MLS fees, sign fees, lockbox fees, etc..     All of the fees alone add to about $1000-$1200/year for me.

It's important to emphasize that when you are joining a brokerage, you are interviewing them, and not the other way around.  Ask them about the deals you are  planning on doing and whether they have any issues.  For example, some brokers may not want you (their agent) from selling on a land contract, or from selling by owner, but may require that you sell through the broker.

J Scott · Answer

Agreed.  Though keep in mind you'll still have some costs, like E&O insurance and MLS fees.  You'll also probably have a bit more paperwork and liability and fewer resources to consult if you have questions.

But, it's a good alternative if it's available...

Rob K. · Answer

I have a one man brokerage out of my house. My expenses in 2013 were as follows:

MLS dues - $128 per month (that's for two seperate MLS's. I could belong to just one for half the cost)

Board dues - $461

Con Ed - $50

Annual LLC fee - $25

I don't have E&O. I paid it for years as an agent and never had a claim. After weighing the pros and cons, I decided to go without. As an agent under a broker, I would still have all of the costs mentioned above minus the LLC fee, but plus E&O. There would also be a fee to the broker. Either monthly or a percentage of commissions.

When I first got my license, the fee was half the commission up to $15,900 per year, then a much smaller percentage. Years later, I had a flat fee of $700 per month to the broker (this included all fees - MLS, E&O, etc.) and was able to keep all of the commission. If you shop around, you will find that brokers are VERY negotiable.

Joseph F. · Answer

Is there any way around getting in bed with a brokerage?  Are there reasons why a brokerage may not want me associated with them?

David Niles · Answer

About $1000 with license and MLS fees.

What are the annual expenses of being your own agent?

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