What I learned about becoming a real estate agent

2022/11/27

This is a public version of the text I wrote for friends and colleagues. It has been edited to omit some excessively personal details.

Summary

Some of you may know that I am a licensed real estate salesperson in California. From time to time I get asked about how the process of becoming a real estate salesperson went, and I figured it might be useful to write it up. This ensures that I give you the most pertinent and up to date information that I can, and that I don’t repeat myself, or omit important details by accident. Another reason I decided to write this up is to provide a fairly self-contained answer to what it means to become a real estate salesperson and what it takes to do so, since asking the Internet via your favorite search engine yields some surprisingly low quality and ad-laden results.

As I am licensed in California, and am only really familiar with Californian regulation, any claims I make below are related to how things are done in California. And since I am not a lawyer, I am not at all qualified to give an authoritative presentation on any laws. This means, if you decide that something I wrote below draws your attention, you should verify the facts yourself or consult an expert.

What does it mean to be a licensed real estate salesperson?

Being a licensed real estate salesperson means that you can legally represent other people (“clients”) in real estate transactions. Everyone can represent themselves without a license, but if you want to help other people transact in real estate and then especially if you expect to get paid for that service, you must hold a real estate license. In California, the state I am licensed in, the activities that require a real estate license are prescribed by the California Business and Professions Code Section 10031 (CA B&PC). It also allows you to make commission on real estate transactions where you exercise your real estate license as a fiduciary representative of a client.

In the United States, real estate licensing is managed and enforced at a state level. This means that it is the state you operate in that is maintaining the compliance standards for licensees. It also means that a real estate license obtained in one state is more or less worthless for another state. This is not universally true, as some US states have agreements that allow expedited licensing for salespeople who are already licensed elsewhere. California is not one of those states. If you are a licensed real estate salesperson in a state other than California, you will be required to go through the full licensing process as if starting from scratch. Of course, some parts of knowledge will transfer, such as those that have to do with federal fair housing regulation, so you might have an easier time obtaining a CA license if you already hold a license from another state. But you must complete the entire coursework and pass an exam from scratch anyways. Similarly if you are a California licensed salesperson, you will need to go through a full licensing process to get a license elsewhere.

If you want to get a real estate license so that you can get paid in exchange for your agent services, you also want to know that in California (and I assume other states have similar regulation, though I have not checked) a licensed real estate salesperson is also legally entitled to compensation. This means, a salesperson can expect that a compensation agreement will be enforced by the state if it is set up properly, but even in some situations where the proper setup may be called into question. That is, the position of a salesperson as an intermediary in a transaction is codified and to an extent protected by law.

The flip side of this privilege is that a real estate salesperson is expected to conduct business in a lawful way, and may have a fast track to legal consequences if this is not done. This is in the end the purpose of the licensing system: the state guarantees a certain professional standard, and has the power to enforce it where it is not upheld.

Types of real estate licenses

The real estate licensing system in California has a tiered structure. The entry level real estate license is called the “real estate salesperson” license. This license requires a licensee to work under supervision of a real estate broker. A real estate salesperson must have a responsible broker to be able to exercise the license privileges. A salesperson is also limited in what they are allowed to do. Mainly, real estate salespeople are not allowed to touch any client’s money. Rather, this is something that their responsible broker must do for them instead.

A real estate broker is licensed to conduct business without supervision, and is allowed to engage in a full range of real estate and related transactions. California also has a list of requirements for brokers, but since I am not a broker myself, I will not discuss those.

Why did I become a real estate salesperson?

This is a personal story, so it is only fair that you should endure a bit of self-centered diatribe. But also, as I only know what I had experienced first hand, it is the only thing I feel qualified to write about.

Mostly, I got my license because I am a huge real estate nerd, and wanted to mark my real estate journey with a recognized milestone. If you don’t have odd hobbies as I do, you may consider not following my lead.

Another reason was to distract myself and weather the weird and unknown environment that was the year 2020. The real estate coursework gave me something to think about other than the uncertain times ahead.

Yet another reason was to have some sort of a marketable trade skill. I have a colorful anecdote from way back in the past, not mine, that advocates for having a low-tech skill in life, just in case.

Yet another reason was to help friends and family in their real estate dealings. I was surprised how many of my friends and family explicitly didn’t want me to represent them, even when I offered a “friends and family” discount in commission.

Yet another reason was to help myself and my partner in our real estate dealings in California and in general.

I also wanted to sound like I know what I’m talking about when talking about real estate. That… didn’t go so well either, people are skeptical of anything and everything I say about it anyways. I’ve had people chat with me about representing them in real estate, only to turn on a dime and go for someone else when the actual time came to commit to a real estate agent. Fun times.

I passed my test with flying colors. It doesn’t matter, since the license exam is a pass or fail only. Getting licensed is literally the lowest bar in real estate that one can clear. While the license will ensure you uphold the regulatory requirements, and compliance, it will absolutely not make you a salesperson overnight. That is a completely different skill set, which you will not get by becoming licensed.

How long did it take me to become a real estate agent?

It took me from the end of August 2020 until April 6, 2021. In total about 7 months of calendar time.

The breakdown is as follows:

What do you need to become a real estate agent?

The California Department of Real Estate (CA DRE) publishes the set of formal requirements.The short list is:

The required coursework includes three courses. Of those, two are required: principles of real estate, and practice of real estate. The third one is elective among a set of several courses.

The CA DRE has prescribed a strict time control on taking and passing each of the courses. This used not to be the case, and it was fairly easy to fulfill the requirements without much resolve. So if you ask someone who took the exam prior to 2020, you may hear that it takes a very short amount of time to complete. Not anymore.

CA DRE requires you to spend at least 20 days of calendar time in each of the courses. You are also not allowed to study for more than a single course at a time. This means that it must take 60 days or more to complete the entire coursework. To progress in a single course, you must take and pass a per-chapter test before moving on to the next chapter in the course.

At the end of a single course, you must take a course final exam, and get a passing grade of 70% or more. You have two chances to pass the course, and if you fail twice in a row, you must restart the entire training. If you pass, however, you may move on to the next course. Once you are done and pass all the courses, you must pass the prep exams (which you can practice until you pass). Once that is done, you must pass the coursework final exam, which you also have two chances to try. Failing means you must go back to the beginning of the entire coursework, and you must restart the 3x20 days clock as well.

Once you complete the coursework, you will get a printable certificate that is a prerequisite for applying for the state licensing exam. To complete the application, you fill out a form, submit your certificate of course completion, and send in your fingerprint certificate. You must schedule and give your fingerprints ahead of applying for the exam, which is again a separate process.

Some time after your application, you will get a letter that gives you the time and date of your exam. You have limited options to postpone, so be sure that you are available on that day. It is also possible to consult the exam scheduling system online for the CA DRE, but it is worth knowing that you only get to schedule there if the centers allow it, and if there are open spots for online scheduling. You must attend the exam in person - there is no way to take the test remotely.

How did you study for the real estate exam?

I took the most convenient route: I paid for an online course, and met all the coursework requirements by passing the required tests online. There are many online outlets that will allow you to do so, and it’s really a coin toss which one to go with. I went with https://realestateexpress.com, mostly because their website made the most sense to me in an online search for such a service. Finding a real estate school which doesn’t seem excessively “pitchy” is an exercise unto itself. I don’t know why this is the case. The school linked above seemed to make sense, so I just went with it. It is also possible to attend courses in person. For example, reportedly City College of San Francisco has real estate courses. These would be free for San Francisco residents. It is also possible to use some of the college-level coursework with real estate focus in lieu of passing a dedicated course.

I studied the material in the evenings when my family went to bed, say between 9pm to 12pm, mostly every day - there is quite a bit of material to go through. I used the tests to gauge how well I understood the material. My goal was only to be sure that I will pass, not to learn everything there is to learn. I would keep a running tally of how many questions I got right. If I had to guess between two options, I would count half a point, if I had to guess between 4, I would count a quarter pont. I would practice until I was confident that I could get well above 80% in each such attempt.

It took a while to go through the material, but I had two ways to cajole myself into sticking with it. Firstly, I enjoyed the material, and secondly, I could fast-forward the material I was more familiar with from past experience. This came in handy at a few places, since some of the material was rather detailed and bulky, needing more time to digest. I saved some time by not going into the details of things that were familiar to me. But of course, this is something to be done carefully, since it is very easy to understand the intricate real estate web incorrectly, which may come back to bite you later.

The online course was a very efficient way to go through the material required for the test. The course is very focused, and only dwells on matters that will increase your chances at passing. This is good, because the field of real estate is huge, and an unfocused study can take a lifetime. I definitely recommend such online courses, but since my sampling pool is small, I can’t really tell whether this is the best approach or not. I only know that it happened to work for me.

What does the exam look like?

While there are different ways to take the exam, the one I took was a multiple choice test done on a computer. Together with other exam candidates, you get admitted into an exam room, which contains rows of computers placed underneath a transparent tabletop. You can not take anything of yours into the exam room with you. No bags, no watches, no phones, no calculators, etc. Everything you need to take the exam is provided for you, and you may only use the provided items. You get a wireless mouse in hand which you can use to select the answers, you get a small pocket calculator as well, a pencil, an eraser and some paper. You must return all of these when you exit. You also get checked for any concealed items, or cheating devices or markings. The experience I have not had since high school.

You have three hours to complete the exam, which is a set of multiple choice questions. Each candidate has their own clock on their own computer, so you can start whenever you want, so long as you can finish before the testing ends.

The exam is quite thorough. While it should not be a problem to pass if prepared well, it is also hard to pass by just guessing without actually having gone through the material. The 3 hours allotted are more than enough to complete the entire exam. 70% or more correct answers are required to pass, but if you pass you don’t get to learn your score, just the fact that you passed.

Once you are done with the exam, you are free to exit the exam room into the admission room, where you are checked for cheating devices again, and are given your result on the spot. If you pass, you get your license certificate immediately, and will receive your license card in the mail a few days thereafter. If you fail, you get your score, and a list of areas you must brush up for the next exam. An exam application is good for 2 years, so if you fail, you can keep applying and re-taking exams until you pass.

You passed your exam, what now?

This is an excellent question. I would say that, once you pass the exam the real work begins. For your license to be usable, you must - and I mean have to - either elect to associate yourself with a real estate broker (who will be your supervisor), or associate yourself with a real estate broker to “park” your license. In the former case you can do your own transactions with broker’s supervision, in the latter case you may do some work related to real estate transactions, such as show properties; but you may not conduct your own transactions.

The choice of next steps depends on what your career goal is. I got the license mostly because I liked the legwork, and wanted to polish up my real estate knowledge. However, someone who wants to bootstrap a career in real estate probably wants to find a brokerage that will not only accept them as a contractor, but will also have good training programs or mentorship that will bootstrap the new agent’s career.

My thoughts around this were that firstly I didn’t want to join a brokerage that requires me to work full or part time. That was simply not (yet?) going to happen. So this removed a bunch of “conventional” and “big name” brokerages from consideration. I reached out to a few friends and acquaintances who had their own brokerages and asked them if they would take me on as a contractor. Interestingly enough, all of them made this or that excuse to bow out of that potential arrangement. This was a bit of a surprise to me. I would at least have expected an honest piece of feedback so I know what I should work on. Perhaps they didn’t have the heart to tell me that I will not make it in the business? In the end, I remember that there were “online” brokerages, which will allow you to do anything for a nominal fee. Their business model is, somewhat obviously, to gather the long tail of wannabes and penny pinch them for their own profit. The general issue with those is that they are almost cartoonishly pitchy in their ads and materials, which always reminds me of various “make money quick” Internet scams. But I went for it anyway with fingers crossed, hoping that my experience with all things Internet would help me if things get too weird. And it turned out OK. The responsible broker is available and is ready to help with immediate issues. No training, though. I’m happy so far. But your mileage and goals might vary, so do figure this out for yourself on your own.

I ended up connecting with an online brokerage. This brokerage offers no training, and does not have a commission split. Rather, it lets you keep 100% of your commission, but will sell you services for a fixed per transaction fee, plus yearly membership. For example, you pay them $1000 per transaction to give you a transaction coordinator. While this was fairly easy to do, I would not recommend starting out like this for agents who are not already experienced in the business. I am not a salesperson, and I rely a lot on my experience as a real estate investor to understand the procedures related to correct conduct in real estate transactions. I had to make peace with the realization that I am a very bad salesperson (never having been trained as one, nor having a particular interest in that line of work), and if I wanted to make real estate agency a career, I would have to start from scratch.

The out-of-pocket cost for a year of having an active license, with all fees and memberships included, is about $3,000 per year.

This brokerage requires me to become a member of the local, state and national Realtor organizations, which are essentially a guild of residential real estate agents. While it is technically possible to transact in real estate without being a Realtor, in practice this is impossible: all needed software and equipment is distributed via local Realtor branches, all insurances assume you are a member, and all MLS databases are the ownership of their respective Realtor organizations. In practice, abutting local Realtor organizations have data-sharing agreements, but those don’t cover the entire state, not by a long shot. Real estate is not only local, it is also very territorial.

If I had to start on my own, though, I’d consider finding a mentor-confidante, if at all possible, and learn from them. This is understood to be easiest to do by joining one of the big real estate firms which have an established training funnel for newcomers.

At the moment, however, I use my newly-acquired real estate license to help friends and family out with transactions, to the extent that they would allow me to represent them. Not many do. It would be nice to once talk to someone who would sincerely reveal why they would rather go with someone else. I learned that people suddenly get pearl-clutchy when a friend offers to help with real estate purchases. They’d rather take advice from someone who hasn’t a first clue and has never done any transactions, than from a licensed friend. I also enjoy thinking along with friends and colleagues about their particular real estate situations, as a voluntary, unpaid, but licensed advisor. I like to think I’m helping.

Was the license worth it?

It made sense for me as a milestone in my learning process. It was a little bit of therapy as well, as stressful as 2020 was. Maybe at some time in the future it may also make financial sense.

If you only want to invest in real estate, you may not need this. The reach of a single-state real estate license may not be all that, if your sights are set to a nation-wide market. A team of knowledgeable agents in the markets of interest to you may give you better value.

I have read that some people went through the coursework only to save on the commissions when buying their own home. In a way that makes sense if you are selling in the Bay Area.

Conclusion

These were the brief, and long overdue notes about my real estate licensing journey. I am happy to expand the text as inspiration strikes, what you just read is the very first iteration so it probably omits things. One omitted thing that comes to mind is an account of possible ways you can exercise your license when working for a broker, and the commission splits. I am happy to answer questions if you have them. Leave them as comments into the document, and I’ll rework the text to answer to the best of my ability.