Thinking about becoming a real estate agent? You’ll be in good company. Estimates from the Association of Real Estate License Law Officials (ARELLO) show that there are about two million active real estate licensees in the U.S. today. One reason so many people pursue a career as a real estate agent is the earnings potential: The median annual pay is about $46,000, according to 2017 data (the most current available) from the U.S. Bureau of Labor Statistics. For real estate brokers – who have additional education, testing and experience requirements – that figure jumps to nearly $57,000. Overall, the highest 10% of agents earned more than $109,490 in 2017, and some agents earn much more than that.
Of course, working as a real estate agent has other, non-financial benefits. It offers a great deal of versatility, and with different clients and different homes you won’t be doing the same thing every day. You may also get to be your own boss, meet and work with lots of people, and enjoy the satisfaction of helping them through one of life’s major milestones. Another perk: It’s easy to get into. Compared to other careers with similar earnings potential, getting your real estate license is a relatively quick and inexpensive process – and you don’t need a college degree.
Still, if you want to become a real estate agent, you’re looking at an up-front investment of money and time, both of which will vary depending on where you get your license. To give you an idea of what to expect, here are five steps to becoming a real estate agent.
Step 1: Research Your State’s Requirements
Estimated Cost: Free
There’s no such thing as a national real estate license, so you must meet your state’s unique licensing requirements. A good place to start your research is your state’s real estate regulatory office website, which you can find by doing an online search for “(your state) real estate regulatory office” or by visiting ARELLO’s regulatory agency directory.
Each state typically has specific requirements for:
- application process and fees
- background checks and fingerprinting
- continuing education
- education requirements (such as a high school diploma or GED)
- exams and exam eligibility
- pre-licensing courses and post-licensing requirements
- process for achieving the next level of licensing
- reporting of any criminal history
Some states have reciprocal licensing agreements with other states, which means you can get your license in one state and use it in another without having to take an additional license examination. New York, for example, has reciprocity with nine states (some states have reciprocity for brokers only): Arkansas, Colorado, Connecticut, Georgia, Massachusetts, Mississippi, Oklahoma, Pennsylvania and West Virginia. As with regular licensing requirements, each state has its own process for obtaining a license through reciprocity.
Step 2: Take a Pre-Licensing Course
Estimated Cost: $300+
No matter where you live, you’ll have to take a pre-licensing course from an accredited real estate licensing school before you can sit for the real estate license exam. The required number of hours varies by state. In California, for example, applicants must take three real estate classes totaling 135 hours. In New York the course takes 75 hours.
Most states offer several ways to fulfill the pre-licensing course requirements, including online classes, brick-and-mortar real estate schools and classes at community colleges. You may be able to save money using one type of class program over another. However, be sure to choose the method that works best for your learning style and schedule. Also, do your research and be selective when it comes to picking a program. The quality of the instructors and materials will influence how well prepared you are to take the exam.
Step 3: Take the Licensing Exam
Estimated Cost: $325+
Your instructor should explain how to schedule, register and pay for the licensing exam (if not, visit your state’s real estate commission website). Exams are computerized and consist of two parts – a national portion on general real estate principles and practices and a state-specific section that covers your state’s real estate laws. Each section is scored separately, and you must receive a passing grade on both sections to pass. If you fail one or both sections, you’ll have the opportunity to retake the exam. Each state has its own rules regarding the number of times you may retake an exam, how long you must wait in between exams and the deadline for completing any retakes.
The exams are multiple-choice format, and the number of questions and the time allotted for the exam vary by state. If you do pass, you must submit an application and any required documents and fees to your state’s real estate agency. Once your application is approved, the state will mail your real estate license certificate, and your name will be searchable under the “Licensees” section of its website. Keep in mind that you’re not allowed to work as a real estate agent before your license is issued by the state’s real estate agency, so don’t start until you have the license in your hand.
Step 4: Consider Becoming a Realtor
Estimated Cost: $185
Many people use the terms “real estate agent” and “realtor” interchangeably, but they actually differ. While both are licensed to help buyers and sellers throughout the real estate transaction process, realtors are members of the National Association of Realtors (NAR) and subscribe to its strict code of ethics. The NAR is the largest trade association in the U.S., representing 1.3 million members who are salespeople, brokers, property managers, appraisers, counselors and other participants in the residential and commercial real estate industries.
Being able to call yourself a realtor can add to your credibility as a real estate agent. As a realtor, you’ll also have access to a variety of benefits, business tools, real estate market data, research and statistics, educational opportunities, and discount programs geared toward helping you succeed in business. For example, realtors have access to Realtors Property Resource (RPR), an online real estate database of 166 million properties in the U.S. built from public record and assessment information. It includes information on zoning, permits, mortgage and lien data, schools, and a large database of foreclosures.
Step 5: Join a Real Estate Brokerage
Estimated Cost: $25 to $500+ per month
As a real estate agent you typically work under the umbrella of a supervising broker, who is licensed by the state to oversee real estate transactions and make sure that you (and other real estate agents) follow the required legal and ethical standards. In general you won’t earn an hourly salary. Instead, the brokerage will likely pay you a percentage of the commissions it collects from your real estate transactions.
Depending on the arrangement you have with your brokerage, you may have to pay for desk fees, tech fees (e.g. for your website), business cards, marketing materials and other normal costs of doing business. You’ll also have other one-time and ongoing expenses, such as renewing your license each year, continuing education, lockbox fees and multiple-listing-services memberships. These costs can easily add up to several thousands of dollars per year, so it’s important to factor them into your budget when deciding if a career in real estate is right for you.
Keep in mind that a career as a real estate agent can be as flexible as you want it to be. You can limit your hours to mornings three days a week or never work on weekends. The trade-off, of course, is that this will greatly limit your ability to be successful. While you can work part time as a real estate agent, most successful practitioners treat it as a full-time business, making themselves available to clients throughout the week and on weekends. In general, the more time and effort you put into being a real estate agent, the more success you will achieve – both in terms of money and of job satisfaction.
The Bottom Line
Getting a real estate license does take time and money, but it can help secure a rewarding job in the real estate industry. For increased flexibility and career opportunities, you may eventually decide to pursue a broker or broker-in-charge license. In addition to a real estate license, you may want to consider the various real estate designations and certifications, including those specific to mortgages, appraisals, residential property, commercial property and property management. These designations can enhance your career and marketability as a real estate professional and increase your earnings potential.