First Year in Real Estate - Fees/Costs and Cold Calling

[Kat Wyninger]

Hi All - 

I just finished real estate classes and was starting to reach out to brokers when I was told by one broker that maybe I should consider doing something else because being a real estate agent is really expensive.  I’ve seen several people make that statement before without going too deep into the costs, and then others countering with something like, “one deal will cover your costs.” 

Most mention MLS fees, desk fees, continuing education, etc., but there are a lot more actual costs, like buying leads, marketing, signs, etc.

Real Estate Express gives an estimate of just over $6,000 a year to be a real estate agent, but I don’t know if that covers marketing, buying leads, buying a camera, etc.

There is also so much conflicting information about broker fees.  I’ve seen $1500 to $3000 up front just to join at Keller Williams?  After that, there are hundreds of KW reviews that say their monthly fees are too high, but no specifics.

I wanted to work as a real estate agent because my current job has a fixed, limited income.  It’s a decent income, but I hate that it’s fixed.  No matter how much or how hard I work, my pay isn’t going to increase.  I thought being an agent would give me the greatest chance to learn the real estate business inside and out, earn extra income to pay down debt and save money to invest in real estate, give me time to repair my credit, and give me the experience and credibility I need to convince investors to partner with me on deals.

My second concern - I’ve read Jennifer Allen’s book “Sell With Soul,” and I would love to believe that being a successful agent is possible without cold calling, however, I’ve been listening to hours of podcasts and webinars and reading books and coaching materials, and it seems like most if not all of the successful agents (with the exception of Allen) are saying the same thing - success in real estate depends on cold calling.  A lot of cold calling.  The recommendation seems to be that you need to be cold calling (FSBOs, Expireds, etc.) for around 2-3 hours/day, 5 days a week.  

Is this the reality of being a real estate agent?  That you need $6,000-10,000/year to get started, that constant cold calling is necessary, and that even if you do this you only have about a 3-10% chance of making it?

Sorry for the long post, and thank you for any feedback!

[Irene Nash]

@Kat Wyninger How many people do you currently know, who you would currently say fall into what we call our "sphere"? This means friends, family, people we've done business with, people we work with or used to work with, people we know through community groups, etc.? 

From what I've seen most new agents are told they need to get business from cold calling and ads (I'm not knocking ads, or even cold calling, but the majority of agents in actual real life are not going to cold call no matter what - count me in that group), and at the same time they don't focus nearly enough on cultivating the sales and referrals that can come from their sphere - people who already know, like and trust you, or would if they had a chance to get to know you and your level of expertise a bit better.

If this helps at all, I started out with virtually no sphere (I knew 12 people in my working area when I started in real estate) and also virtually no knowledge of actual real estate. I had no problem passing the exam but would have struggled to tell you the difference between a split-level home and a two-story colonial. 

Fortunately I did learn early through Brian Buffini's client appreciation program how important it was to communicate at least monthly with everyone I knew in a way that showed both character and competence. That specific program ended up not being the best match for how I personally like to communicate, but that's a very individual thing and I think highly of him and his training.  And I never did any cold calling. Many of the successful agents I've seen start since that time (including one who started right when the recession hit) didn't do any cold calling either. A few tips:

1) Do everything you can to increase your expertise level right away. Get to know the forms by heart. Shadow any agent who will let you (who knows what they're doing). When you see listings come on, go preview them and then go do a market analysis yourself - then see how soon the home sells and for how much to judge your CMA.

2) Communicate with your sphere at least once a month, or better when starting out is twice a month, starting by announcing that you're in RE and asking them if it's OK for you to send them helpful real estate info and updates occasionally.

3) Send things that appeal also to people who aren't buying and selling - things that help them get more value, safety and enjoyment from their real estate. People who aren't currently buying and selling are great sources of referrals, they ALL probably know at least one person who will buy or sell a home at some point in the next year, and they are actually the much larger proportion of your sphere. Most of them will need to know you're competent before they'll hire or recommend you, understandably.

4) Do everything you can to increase your conversion rate at every step. Very small increases in your conversion rate at various stages can have huge effects on your bottom line. It's not as obvious or flashy as cold calling but in my opinion is probably more effective long term.

-- Find a friendly, non-salesy way to ask for referrals that doesn't make you feel weird.
-- Then, ask for referrals in person, and in writing, including your voice mail message and email signature.
-- Do open houses to increase your sphere, and bring leave behinds that ANYONE will want to take with them, branded with your card/info, etc. For example, sports schedules, a resource list (recommended contractors), farmers market schedule, community events, etc. Even people who like you at an open house and might have called you down the road will often lose your card or forget your info - it's worth the tiny bit you spend on a leave behind that they'll want to keep for a while.
-- Do a home buyer consultation with every prospective home buyer. Don't ask them to "sit down" with you, speak in terms of their needs and explain that most people find it very helpful early on to get a step-by-step overview of the home buying process so they know what to expect at every step along the way, which is totally true. I mention some of the things we'll go over (how to pick a good lender, the right home inspector, what to look for in a home, some things to watch out for), and mention that it also gives us a chance to get acquainted and figure out if we think we'll be a good match to work together. That takes the pressure off of them and is also totally true. Doing consultations like this with every prospective buyer will weed out people who aren't serious or willing to commit to a good agent, and the buyers you do end up working with will be much better informed, less fearful, and better able to make good decisions.

Sorry for the long post. Cost-wise if you go with a split fee office you typically don't have to pay anything if you're not selling, but you split commissions with the office, usually up to a top amount after which you may get 100% or at least a higher percentage for the rest of the calendar year, then you start over again. And yes you do have advertising and buying signs when you first start, but that doesn't have to be insane. IMO the success rate for new agents is higher than the dismal rate you've been hearing. Good luck!