Like every industry, the real estate industry works because the value of real estate tends to rise.
This means people can make a profit by selling and buying real estate. In this scenario, brokers and agents get a part of the profit by selling a service to those engaged in a property transaction. Agents and realtors live a conflicted life. On the other hand, they are salespeople, making money once a deal is sealed.
Additionally, they’re also consultants. They offer advice to buyers and sellers throughout the deal process. Sometimes, they will present their clients’ advice that’s disinterested from their financial outcome. If this is not clear enough, our guide attempts to break it down piece by piece.
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1. Let’s Start Here: Understanding Real Estate
Real estate is all property that consists of land and improvements. This may include fixtures, buildings, utility systems, roads, and structures. Because of unforeseen economic forces, these properties may fall in value or rise simultaneously during various periods. This means that making a 2% realty is a small sale compared to the real estate market’s size. The real estate consists of a segment comprising the housing market, which consists of residential properties only. Since trends in the housing market offer general welfare, this sector is closely observed by many people. Families own many residential properties. This means that if the housing market is doing well, it’s easy to assume that families are doing well since there’s an increase in their net worth.
2. Understanding the Real Estate Commission
If you’re planning to venture into real estate or are a new real estate licensee, you should comprehend the basics of real estate commission; this is how you’re paid. In recent years, some brokerages have moved to a more salary-based structure. However, the majority of brokerages still work under a commission-based system. The first action you should consider is to negotiate commission splits. Ideally, many brokerages have a primary commission split, which they offer to new agents. If you get to a specific production threshold and have some good experience, your broker will increment your commission split.
3. Working with Realtors
As we mentioned above, realtors live a conflicted life. For instance, a listing agent will make more money if he sells a house for a higher amount. Sometimes, you may find a situation where the client’s excellent advice isn’t aligned with the agent’s monetary incentives. In the long haul, many successful real estate agents are experienced experts who take the long view. In many cases, their advice is in the best interest of their clients. Some agents will go further by being transparent when a conflict arises. If you’re working with a realtor, ensure you ask the right questions. He/she should understand your financial perspective and offer you the best package available.
4. Calculating the Real Estate Commission Based on Sales
As a real estate agent, your salary will likely be commission-based. How much you make at the end of the day will depend on how many sales you have. If you’re venturing into a real estate career, start by researching your target market. How many properties are selling each month in that market? Does that market have many agents? Will this market propel me to my financial goals? If you plan to sell property in metropolitan areas, the chances of finding many business deals are plenty.
Additionally, selling real estate in small areas also has its fair share of advantages. The area may have few agents, which means you might make more. However, the downside to this is there might be few properties available for sale, which downplays your final cash at the end of the month.
5. Selling Property: To Hire or Not to Hire an Agent?
Real estate agents command a high commission when selling homes. In many cases, the range is usually 5 percent to 6 percent of the sale price of your home. If you haven’t sold a house on your own before, we would recommend using an agent. You might be tempted to do it solo, mostly if you’ve seen those “for sale by owner” signs on the lawns of many people’s houses. If you get the right agent, they will have your best interests at heart. An agent will help you set a competitive and fair price for your home. This increases your odds for a quick sale. Additionally, an agent will also level the playing field with potential buyers since they’re well experienced in the area. This negotiating experience means that you could get more money than you could on your own.
6. Finding Leads
Finding leads is the key to success as a real estate agent. If there are no buyers and sellers, this means no transactions happening, which means no commission. You can employ various strategies that focus on finding clients. The right way is finding people through friends, family, business associates, and social contacts. Any person that an agent meets is a potential client; This is because at some point, most people will sell, rent, or buy a property. The day-in-the-life of a real estate agent involves meeting and speaking with many people and giving out business cards. This is the best step towards cultivating new leads and building your career. If you make the first contact, it will help you follow up with timely calls and emails to keep you in clients’ minds.
7. Contracts and Agreements
In many cases, a realtor or agent will ask potential buyers if they’re working with another agent. If a buyer is, the agent may refrain from working with them. This is because real estate agents are paid on commission, which means doing this might mean not getting paid. Because of this, an agent will ask a buyer to sign a buyer’s agent agreement to access their services exclusively. If the client is unhappy with the current agent, they can cancel an agency’s contract by agreeing to terminate the relationship.
The real estate industry works differently in many parts of the world. However, what remains constant is that the real estate industry’s value is increasing as the economy changes. Again, you might be wondering what happens if a property is not sold. The best way to avoid this is to price your home from the beginning correctly. Since the real estate industry is evolving significantly, we expect to see new changes in the next decade.