Real Estate Q&A: Should I get my Realtor license?
YOUR JOURNEY HOME
Free Press Real Estate Columnist
Q. My in-laws live out of state and have a house in Fruita they want to sell within the next six to twelve months. Since I am working part time, they suggested I get a real estate license and be their Realtor. Please tell me what you think of this idea?
A. Thanks for asking this question before you just jumped right into it. There are a variety of things you, and they, may want to consider in making a decision.
If they are thinking that having you list the house for sale as their Realtor may save them money, make you money or at least keep some money in the family, price may be one factor to consider.
First, how much do they think the house may be worth? Home owners sometimes base their expected value on what they paid for the house, what the neighbor’s house sold for two-and-a-half years ago, or what websites (like Zillow or Trulia) give as estimates of value. Any of these numbers may serve as a starting list price, but it may be way off the actual selling price.
You, me, or any other Realtor, sign a listing contract with needs to be able to balance any of those values above with the recent comparable property sales, then advise the seller of a best starting price and strategy that will lead to a sale. Being able to do that accurately comes from lots of experience working with the data and having seen many of the comparable properties.
Another factor to consider related to price is how much real estate commission or brokerage fee is potentially in the deal? Colorado real estate law requires new licensees work for an established brokerage firm for a minimum of two years after becoming licensed. The brokerage fee is called that because it is paid to the company hosting your real estate license. Companies vary greatly in how much of that amount they keep before writing you a check.
With well over 400 licensed Realtors in the Grand Valley, statistically, another of those Realtors will represent the buyer while you are representing your in-laws, the sellers.
Let’s look now at an example of how numbers may development. For the example, let’s say it sells for $350,000. In our example the total commission paid by the sale will be six percent, half to each (listing and selling offices). That makes your office’s gross amount $10,500. Now let’s say as a new Realtor the company has you on a 60:40 commission split and you pay a five-percent franchise fee. Your adjusted income will look like this: 60 percent of the commission is $6,300, minus the franchise fee, leaves you at $5,985.
That looks like pretty good income for you or your family until you start adding up the costs to get to the point of having that license. A class to prepare for the licensing exam can cost $150-$600. The licensing test, application to the state for the license, finger printing; all these add up to another $300 or more. Once you pass the test the board of Realtors and other organizations want their $750- $1,500 in fees. You are going to need “For Sale” signs. As independent contractors each Realtor must pay for gas, Internet access, cell phone, marketing costs, and office space rental fees.
Our example does not include details of all the expenses that crop up. You can see that when the start-up costs and recurring costs get subtracted from the gross income the original $5,985 is now closer to the $4,000 range; before paying federal or state income taxes.
This is a much generalized example since we did not have an expected sales price. There is no set or standard real estate brokerage fee; six percent is just most common. However, the point is, you can see that unless you sell this house and many more each year, there is not a gold mine to be had by the Realtor or a huge savings to be realized by your in-laws in having you pursue this path.
Doug Van Etten is a local Realtor with Cherry Creek Properties, a Colorado-wide realty firm that recently opened a Grand Junction office. To contact him, email DouglasVanEtten@gmail.com.
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