Agents Only Blog

Kinds of Agents:

There are over 50,000 licensed real estate agents in the state of Missouri alone, and nationally there are over 200,000 new licenses issued each year. Suffice it to say, it would be a pretty tough industry to work in if we were all doing the exact same thing. That’s why the next part of this discussion is to look at some of the various options, or specializations, real estate agents have available to them.

Residential Real Estate

The vast majority of licensed real estate agents (just under 75%) work in residential real estate- which means they are selling residential homes or condos that people live in. Although the majority of agents I’ve met I would classify as generalists- meaning they work with anyone to sell anything- there is a growing trend to specialize on a specific kind of client, property or geography. By specializing, this allows the agent to standout from the crowd of other agents as an expert in their field.

The most common specializations include people who focus on just buyers or just sellers. These are broad specialization. Within them you will find agents who take a much more targeted focus of working with just first-time buyers, condo buyers, loft buyers, retiring buyers, relocation buyers, buyers of luxury or vacation homes, buyers of farmland, etc. You may also find selling agents who just work with a similar subset- selling condos or lofts, farmland, luxury homes, vacation homes, etc.

Obviously where the agent lives and works has a lot to do with these specializations. If an agent lives in a typical suburban environment (like Chesterfield, MO) they probably aren’t going to be successful selling only vacation homes or farmland because the suburbs just don’t offer a lot of either (a better location for that specialization would be in a small town like New Melle, MO or near a vacation home community like Lake Innsbrook). With this in mind, another common subset is to focus on the specific geography an agent lives or works in- like an agent who only sells lofts in a downtown loft district (like Downtown St. Louis’ Washington Street) or within a small neighborhood or community (like St Louis’ South City or a standalone town like Eureka, MO).

Another specialization is working for a new home builder selling just the builder’s new homes. These jobs are often great for beginners since some states won’t require an “agent” to be licensed (since they fall under a “for sale by owner” clause). They also often carry a salary (as an employee) or a draw against future commission (as a contractor) so you aren’t unable to pay your bills while you wait for that first home sale to close. More important it’s a great way to learn a lot about housing construction and real estate.

Other agents focus on the buying or selling of foreclosed or R.E.O. homes (Real Estate Owned by a bank). Along these lines there are agents who work with real estate investors in the buying or selling of fixer-upper or rehabbed homes or rental properties (My own sales team has created a division to specialize in just this).

The other form of specialization is to work on a sales team or at the corporate headquarters of a brokerage and only handle part of the real estate process. For example, on our sales team we have an agent who handles all of the paperwork that occurs from the time a contract is written to the time it closes. That allows our other agents to not get bogged down with paperwork and focus on clients. These people are called Processors or Transaction Coordinators and may or may not be an agent and may get paid a part of the commission, a salary or a combo of both.

Some real estate teams will also have inside sales reps (people who talk to clients on the phone and work leads) that partner with an outside sales rep (basically the person who leaves the office and works with clients directly). You may also have agents who specialize in marketing and lead development, sales management, or other areas of management and coordination (such as a relocation coordinator who manages the relationships with large corporate companies in order to get relocation leads for their buyer’s agents).

Commercial Real Estate

Commercial Real Estate is the selling of office space, retail space, manufacturing or warehouse space (basically everything other than a standalone home or condo someone lives in). In real estate, this is generally considered the other side of the coin from residential sales- meaning you either do one or the other. Why the two are usually separate is because they attract different kinds of buyers with different agendas (corporations and businesses looking to make money instead of home owners looking for a place to live). More important, the contracts, state and local laws, even the requirements of the sellers are different than that of a home buyer.

Within Commercial Real Estate you will find people who specialize in office space, warehousing, retail, manufacturing or residential investment (apartment buildings). Within all of these specializations, you will also see people who specialize in larger properties and people who specialize in smaller properties (because the business who seeks 20,000 sq feet of warehousing is vastly different to work with than the business who is seeking 2,000,000 sq feet of space).

As an agent trying to decide between residential and commercial real estate, realize that the large commercial real estate agents can get huge commission checks when a multi-million dollar deal closes but might have to wait (and work) for years to earn that check. As I don’t work in commercial real estate, I would encourage anyone looking into it to talk to commercial agents about the up and downs of their business.

Although few agents do both residential and commercial (at least successfully), there are generally no legal requirements that separate the two. As a result, there is often times overlap. For example, a four unit apartment building could fall into the light (i.e. small) commercial space or could be sold by a residential agent. In small (rural) towns you may find that commercial retail property (like a small store front) and residential property still fall on the same agent’s desk because there isn’t enough commercial property for sale to warrant a specialist. The decision of how a property is sold (and by whom) is really up to the seller. As an agent, it is really up to you to decide what you can handle and what is over your head.

Other Real Estate Options

What most people don’t realize is that there are a lot of other things to do with real estate experience (or a license) besides sell a home. Being a property manager managing other people’s investment properties, for example, will usually require a real estate license. Many appraisers, lenders, lawyers and developers will also get licensed.

There are also real estate people working for most large corporations buying and managing their holdings. On top of that there are real estate people at railroads, utility companies, local and state government agencies, cell phone companies, etc that buy or lease land for the roads, railroad tracks, power line and highway easements, as well as buildings, cell phone towers, governmental zoning and assessment, etc. Depending on what state you are in, these people may or may not need a real estate license (and might be salaried employees rather than a commissioned agent).

There are also a lot of jobs for an experienced real estate person in the supporting industries that touch real estate- title companies, insurance companies, lending, appraising and inspecting just to name a few. Also, with 200,000 individuals getting licensed each year (and every licensed person needing continuing education) the real estate education industry has become a sizable industry in its own right.

Limits! What Limits?

The real estate industry also gives you freedoms that other industries just don’t have. Even though many agents focus on a specific geography to sell in, there are no requirements to do so other than to be licensed or registered with the appropriate governmental agencies. As such, I have met several agents who sell homes in the St Louis area during the week and at the Lake of the Ozarks on the weekend (Lake of the Ozarks is a vacation community roughly 2-3 hours outside of St. Louis). Because both towns are in Missouri, and a lot of the lake buyers are out of St. Louis, it works for all parties.

I have also met “snow-bird” agents who sell homes in Missouri during the summer and Arizona or Florida in the winter (they are licensed in both states). In this case, their specialty in the winter is to work with Midwesterners looking to buy that winter home (and they had a partner back in Missouri to work with clients over those winter months while they were gone).

There was even one agent I ran into who had listings in both Kansas City, MO and St Louis, MO- towns which are 250+ miles apart. Don’t ask me how they accomplished it or why they were doing it, because it’s still a head-scratcher for me. But all that matters is that it works for you and more importantly your clients.

Full vs Part-Time Agents

This brings us to the other major aspect of agent compensation that makes every individual unique- many agents perform other tasks besides selling properties. Thanks to that independent contractor status we discussed yesterday, it is quite common for agents to have a full-time or part-time job outside of the real estate industry and only sell homes on the side. For example, I know an agent who is a full-time medical sales representative who looks at real estate as a few extra dollars a year on the side. New agents may also maintain a job on the side in order to stabilize their income until their real estate career takes off.

Real estate is also often a “secondary” family income for a spouse or partner that would otherwise be a stay at home parent or spouse. Even though these agents don’t have another income producing job, they may still work less than full-time at real estate. (Usually agents who work “less than full-time” will have a specialty that focuses on family and friends as clients because they don’t have a large advertising budget or the time to handle an extensive marketing plan).

Even full-time real estate people may split their time between real estate sales and other tasks- often to provide a turn-key solution to their clients. In both the commercial and residential space, for example, agents or the companies they work for may provide things like property management services (leasing, renting or maintaining a building after the sale).

Agents may also serve dual hats by being a real estate investor, builder, general contractor, rehabber or owner/worker of some other related business- such as a construction company, appraisal company, a mortgage company, or property management company. In many cases the agent’s sales leads might come from the other side of the business (or vice-versa). The only requirement is that the agent discloses their roles in all of their businesses and follows all state laws regulating both industries.

All of this effects compensation because the “agent” in question isn’t spending all of their time focused on selling properties. On my own sales team, for example, Brad Padratzik- manager of The St Louis Agent Team’s Investment Division- also runs a small contracting company that paints and lays flooring. Although it might seem to be a distraction from selling, the truth is most investment clients appreciate the fact that Brad can offer a more “turn-key” solution- and that leads to repeat business. (By the way, this is why real estate is a perfect career for someone with attention deficit disorder…)

Tomorrow’s Installment

Tomorrow we will wrap up this discussion with how commissions are paid out and how much money an agent can expect to make.