Before you can create a budget for your monthly costs, knowing the requirements of getting your real estate license is helpful. Some expenses will be upfront costs associated with obtaining your license, while others will be recurring expenses required to manage your business.
All real estate agents must take a pre-licensing educational program, pass the state-sponsored exam and pass a background check. Each of these licensing requirements comes with a fee, which will vary depending on the state.
Once you’re licensed, you will also have to pay marketing costs, business expenses, broker commissions or desk fees, membership fees, insurance, and more, which could add up to several hundred or even thousands of dollars per month. Although hopefully, by then, you will be making enough in commissions to cover the associated expenses.
- Pre-Licensing Education
- Real Estate Exam and Application
- Desk Fees / Broker Commissions
- Annual Dues
- Marketing Expenses
- Continuing Education & Renewal Fees
1. Pre-Licensing Education
Every state requires brokers to complete a certain amount of pre-licensing education before applying to the state-sponsored exam. The length and cost of the course will vary greatly depending on the state, but typically costs about $250 to $1,000. For instance, applicants must complete 180 hours of pre-licensing education in Texas, which costs around $500 to $1,000. Whereas in New York, applicants must take 75 hours of pre-licensing coursework, which starts at about $250. Plus, it’s often more expensive if you take the course in a classroom instead of online.
2. Real Estate Exam and Application
Once you complete your pre-licensing education, you’ll also need to schedule your state exam, which requires a small fee. The exact fee will also change depending on the state. Many states also charge a separate application fee, which is paid along with the exam fee to process your application. For instance, in New York State, the exam fee is only $15, but there is also a $65 application fee, bringing the total to $80. The state will also want to run your fingerprints and conduct a background check to ensure you don’t have a criminal history that may impact your work as a real estate agent. This may be included in the application fee, or it may be a separate cost. But overall, the budget for around $100 to $200 in exam fees.
3. Desk Fees / Broker Commissions
Once you pass the exam and receive your real estate license, you’ll be required to work with an established brokerage for a minimum of two years. Doing so will help you learn the ropes under the supervision of an experienced mentor. However, no brokerage will train you for free, and certain costs will be associated with joining an established firm. Some brokerages charge desk fees, a flat monthly fee that you pay to use the resources provided by the brokerage, such as desks, computers, office space, phones, etc. Depending on the firm, desk fees can range from about $50-$600 per month.
Some brokers waive the desk fee and instead offer a commission split, which is based on the company and how much experience you have. Commission splits usually start at around 50% and may increase as you gain experience or close more deals. Both options have their positives and negatives, although desk fees are usually better for more experienced agents who feel confident they’ll close enough deals to cover the costs. In contrast, commission splits are better for newer agents or those that are still training and don’t want to risk having to pay desk fees out of pocket if they don’t close enough deals.
Some states require agents to also carry Errors and Omission insurance, a policy that protects the agent and brokerage against losses not covered by regular professional liability insurance – such as claims made from former clients about negligent acts, errors, or omissions resulting in a financial loss. So, if a client’s home depreciates and they try to sue you for failing to warn them about the possibility of an economic downturn, an E&O policy will protect you. Not all states and brokerages require it, but some do, and a typical policy will cost around $400 per year.
5. Annual Dues
Networking is a big part of your job as a real estate agent, so you’ll want to join as many trade organizations and networking groups as possible. Many brokerages will require you to join the National Association of Realtors, which typically costs around $150 - $200, depending on the chapter you join.
6. Marketing Expenses
You’ll also want to get your name out there as much as possible and ensure everyone knows you’re the best real estate agent in town. How much you spend on marketing largely depends on your own budget and what you can afford. At a bare minimum, you’ll want to print up some business cards and get a professional website (although some brokerages will provide this for you). Some agents go all out and spend money on TV commercials, print signs, Facebook ads, etc. But that usually comes with more experience. Initially, you’ll want to budget around $500-$1000 per year in marketing expenses.
7. Continuing Education & Renewal Fees
Finally, you’ll also need to invest some money into continuing education and keeping your real estate license active. Most states require you to renew your real estate license every two years, although it ranges from one to four years. To renew your license, you must complete a certain amount of post-licensing education and pay a renewal fee. Exact costs can vary, but budget around $50 to $300 to renew your license.
As a real estate agent, you are your own boss, meaning you will be responsible for paying certain upfront costs and expenses related to running your own company. Although it can get expensive if you aren’t careful, as long as you take stock of the necessary costs and budget accordingly, the fees should be manageable compared to your earning potential.