NEW YORK (CNN/Money) -
Sell real estate for fun and profit. It sounds almost too easy. You drive clients around for a day or two. You show them several nice houses. Then -- boom -- hello fat commission.
No wonder there are now some 2 million licensed real estate agents in the United States, according to estimates from the National Association of Realtors, and more signing up every day.
Not all licensed real estate sellers are members of NAR, but that organization has, nationally, 12.7 percent more members today than it had a year ago, a total of 1.2 million.
California has 172,320 NAR members, more than any other state and up 16.6 percent in the past year. Florida, with less than half the population of California, has nearly as many NAR members, with 131,052. That's up 16.8 percent over 2004.
The fastest growing market for agents is Arizona, where there are 18.4 percent more than a year ago.
Well, before you quit your day job to join their ranks, take a deep breath.
"Everyone thinks it's an easy way to make a living, but it's not," said Pamela O'Connor of RELO/Leading Real Estate Companies of the World, the largest network of independent real estate firms in the United States. "People don't realize how much effort goes into it."
"They come into the field with rose-colored glasses," said Daryl Jesperson, CEO of RE/Max International, a franchise system with more than 110,000 sales associates throughout the world. "But most agents do not start out of the block successful."
One reason: The business has become very complicated. There are many more financing options, for example, and additional ways, such as the Internet, to market properties.
Legal protections for both buyers and sellers have also become more arduous. There's a lot more for a new real estate agent to learn. And with prices sky-high, both buyers and sellers are nervous about trusting their transactions to greenhorns.
Jesperson said, "It used to be common practice to give the business to Aunt Sally or Uncle Don. Let them make some money. Now, it's 'Wait a minute! I'm buying a million dollar home in Southern California. Do I want to trust it to Uncle Don?'"
How much can you earn?
There's little doubt that realtors can make some coin. The last figures available from NAR show median gross personal income for all its members, which includes both brokers (median earnings $65,300) and sales agents ($39,300) hit $52,200 in 2002, up nearly 10 percent from 2000. Earnings have probably climbed since then.
Success, however, comes closely tied to experience. NAR brokers with 26 years or more in the business had median earnings of nearly $70,900 in 2002. Those with less than five years' experience made almost 25 percent less, about $53,400.
"Experienced agents are getting more and more market share," said Thomas Innes, CEO of RE/Max Commonwealth in Richmond, Va. That's not to say, however, that it's a bad time to go into real estate. "A newcomer with business experience and a good work ethic should do well," he said.
A big advantage for newcomers is the low barriers to entry. Most states require just a short (40 hours or so) real estate course to obtain a license. And it's not hard to get hired.
"There's a wide-open front door," said Innes. "There's also a wide-open back door."
In other words, the turnover rate for new agents is high. "I've been told the drop-out rate in the first year is close to 80 percent," said Jesperson. "You have to be very committed and ready to work full-time."
Successful Realtors have built up their clientele, according to Jesperson, "just like a jeweler or a clothing store or a shoe-shine stand."
Established agents get a large portion of their business from past customers and referrals. Newcomers don't have that luxury.
And you only make money after a successful sale. "Some people jump right in and do well," said O'Connor, "but most need six months or more before they have an income stream."
Before that, all they have is expenses.
O'Connor says successful real estate agents need several attributes:
- Honesty. In a business where relationships count for so much, a broker's integrity is key to establishing a clientele and getting referrals.
- The ability to focus on clients' needs. Brokers have to be able to match customers with houses they like and can afford.
- Work ethic. They have to be ready to put time and effort into the process.
If a newcomer has all that, they can make it in the business. And it's an industry where potential earnings can be extremely high. Top brokers make well into six, even seven figures, according to O'Connor.
For some of the hottest zip codes in America, click here.
Having a hard time selling your property? You're not alone. Click here for that story.