Real estate agents work in all types of environments. Many residential real estate firms employ fewer than ten people, while large development companies may build hundreds of housing units or huge shopping centers, thus requiring hundreds of employees. Other agents choose to concentrate on one of the specialized areas of real estate such as appraising, property management, or commercial leasing. There are also many fields closely allied to the real estate industry that offer employment to those who have an interest in real estate. Lawyers, builders, and mortgage officers all work closely with real estate agents. Real estate closers, escrow agents, and title researchers handle important elements of the real estate transaction. Wall Street analysts assess the performance of real estate-related stocks.
Real estate agents play a fundamental part in the use and exchange of one of this country's most important resources-real property. The industry offers a wide variety of opportunities to men and women of all ages and backgrounds. Advancement is limited only by an individual's determination and interests.
In this book we will explore some of the areas of specialization open to the prospective real estate agent. We also will describe some of the typical activities of a real estate agent and discuss educational and other requirements for entering the field. Finally we will look toward the future and try to predict what the real estate business and real estate agents will be like in the years to come.
Real Estate Ownership
For legal purposes, real estate is defined as land and all the natural and man-made improvements attached to that land. An improvement is anything that is permanently attached to property, such as trees, buildings, or roads. When you buy or sell real estate, you usually buy both the land and the improvements. But you do not just buy the land and the buildings. Real estate usually also encompasses the rights to all of the air above the property and to the minerals and water underneath the property. This means that when you buy property, you also buy the rights to all of the oil, minerals, and water that are under your property. Likewise, with the exception of rights for airplanes and utilities, you also buy the rights to the airspace above your property. In fact, when a person buys an apartment in a high-rise building, he or she is actually buying part of the airspace that belonged to the land s owner.
The example above illustrates an interesting legal point about property ownership. Although most buyers purchase all of the elements that are a part of the real estate, it is possible to buy or sell only one of these elements. For example, a property owner can sell the oil or mineral rights to a property and still keep the ownership rights to the land itself. There are actually brokers who specialize in buying and selling mineral rights.
Historical Overview of the Real Estate Field
Like many other transactions in our society, real estate sales are governed by a series of laws and regulations. These laws developed gradually to meet the needs of the society.
Property Law
In primitive societies, property was often owned and farmed by the tribe as a whole. Families of several generations lived in the same house, and property passed naturally from parents to children. During the Middle Ages, great nobles consolidated their power and gained control of large tracts of land. To administer these holdings, the nobles granted the use of the property to lesser nobles in return for loyalty and service. However, under this so-called feudal system, the nobles still owned the property; the landholders had only the use of the property for their lifetimes. When they died, the use of the land returned to the noble.
By the seventeenth century, the feudal system had been replaced by the allodial system of land ownership. Under this system, individuals owned land outright. They were able to sell the property or to pass it to their descendants. The English colonists brought the allodial system to the Americas. After the Revolutionary War, Americans' rights to own and dispose of real property were guaranteed under the Bill of Rights. Real estate law has become much more complex in the last two hundred years. Federal, state, and local governments have enacted laws and regulations that control real estate transfers. However, real property law in the United States is still based on the allodial system to possess, dispose, and enjoy property.
The Real Estate Agents Job
Just as property law has changed to reflect the needs of society, the real estate profession has come into existence to meet the demands of the people. In earlier times, most people lived in small communities for their entire lives. If property were transferred from one person to another, every member of the community knew about it. Even in colonial America, most people moved around very little. When settlers moved to unexplored areas, they established ownership rights by living and working on the land.
By the late 1800s, however, society in America had changed drastically. The settled areas of the United States extended from coast to coast, railroads and roads spanned the continent, and the population was about fifteen times larger than it had been in 1800. These changes made it much more likely for American citizens to find opportunities in new parts of the country and, therefore, less likely for them to know their neighbors. More and more real estate was bought and sold, and more and more often the buyers and sellers were strangers. These increased sales created a need for an individual who knew about property and was able to act as a trusted agent between strangers. At first the role of agent was performed by lawyers or other professionals, but gradually real estate emerged as a distinct field of expertise. Today there are more than 750,000 real estate agents in the United States and 66,000 in Canada engaged in helping businesses and individuals carry out their real estate transactions.
The Emergence of the National Association of REALTORS' (NAR)
The importance of the real estate profession was greatly increased by the founding of the National Association of REALTORS in 1908. Begun by a group of real estate agents, this trade organization was established to set standards of conduct for agents and to help increase public confidence in the real estate profession. Today the majority of real estate agents are members of the NAR (approximately 750,000 in 2000). The organization and its local chapters, or "boards," offer numerous courses and educational materials to help their members increase their professional abilities and also provide additional services such as information on trends in the industry. Other trade organizations such as the National Association of Real Estate Boards also conduct courses and provide services to their members. The Canadian Real Estate Association had more than 66,000 members in 2000.
Specialized courses are offered through a variety of associations such as the Appraisal Institute (appraisal), the Institute of Real Estate Management (property management), the Commercial-Investment Real Estate Institute (commercial brokerage), the Community Associations Institute (condominium management), the International Council of Shopping Centers (mall development and management), and the National Apartment Association (apartment development).
Many colleges and universities also offer graduate and undergraduate degrees in real estate, land-use planning, or urban economics.
Brokers and Salespeople
Although real estate agents can be engaged in a variety of jobs, all real estate agents are legally classified as either brokers or salespeople. These designations are set down in state real estate license laws. All states and the District of Columbia require real estate agents to be licensed in the state before they can work in the real estate business. Although state laws vary, most define a real estate broker as an individual who for compensation (money or other payment) buys, sells, leases, exchanges, evaluates, or otherwise negotiates a real estate transaction for another individual.
Most laws make certain exceptions to these requirements for licensure. For example, if you are selling or leasing real estate that you own, you usually do not have to be licensed. Some states also exempt on-site condominium management from licensure.
Under state laws, a salesperson also must be licensed if he or she performs any of the activities listed above. Salespeople dealing in Real Estate Investment Trusts (REITs) also may need a license from the Securities Exchange Commission. In addition, real estate salespeople are prohibited from engaging in the real estate business unless they work under the supervision of a licensed real estate broker. Usually salespeople have to meet fewer educational and experience requirements than brokers to receive a license.
Real Estate at Home and Abroad
Buying a home is often the largest investment of a person's life. With the median price of a U.S. home reaching $143,500 in the first quarter of 2001, this is truer than ever. The average price of an existing home in Canada was $177,817 (Canadian dollars) in April 2001. Home mortgages paid over a fifteen- to thirty-year period represent the work and savings of a lifetime. And the time and money most owners spend on their homes further increases the property's value.
Despite higher home prices, low mortgage interest rates and rising personal income have helped home ownership remain affordable for the average American. In the first quarter of 2001, the National Association of REALTORS' "Housing Affordability Index" had risen 9.2 percent over 2000 levels. In early 2001, NAR found that the average family would have 42.9 percent more income than was needed to obtain an 80 percent mortgage and buy the averaged-price home. In this survey, housing was most affordable in the Midwest and least affordable in the West.
Real estate is also important in that it represents a greater than 50 percent segment of the U.S. economy. For this reason, the real estate market is strongly influenced by the condition of the American economy as a whole.
Housing starts have remained strong in the United States with approximately 1.67 million new starts in early 2001. In Canada, 1995 saw 147,000 new starts and sluggish sales because of continued concerns over slow economic growth. Houses in both countries are getting larger, with more bedrooms, more bathrooms, and more amenities. According to the National Association of Home Builders, the average size of a new U.S. home in 2001 was more than two thousand square feet.
Office and industrial construction has been moderate in the United States in the last few years, as banks and other lenders have kept a tight rein on funds. As a result, office vacancies have been below 10 percent in most markets and rents have risen significantly over the last few years. Although recent economic slowdowns have created some concern and somewhat higher vacancies, most experts believe that thanks to a limited supply, office and industrial rents will remain fairly stable in the early 2000s.
Both the United States and Canada predict growth rates of between 2 and 4 percent for the next two or three years, with low inflation. If these predictions are accurate, demand for all types of real estate should remain stable.
Tax laws and other government policies also have an effect on the real estate market. Federal tax laws that allow for substantial deductions for mortgage interest payments and the cost of real estate purchases encourage real estate construction and investment by individuals. Currently, real estate is a favored investment for tax purposes in the United States because home owners and many commercial owners can deduct interest and property taxes from their overall income. This makes home ownership more feasible for many families. Some real estate professionals are concerned that discussions of flat tax proposals may eliminate or reduce this deduction. However, sales thus far have not been affected.
In Canada, high property taxes in several provinces are having a negative effect on real estate values.
Although the real estate market tends to fluctuate more than do many other industries, there will always be a demand for real estate. For most people, home ownership is still a desirable goal. As long as there is a demand for real estate, there will be a demand for real estate brokers and salespeople to help people meet their needs.
Real Estate and the Web
Perhaps no single factor has had a more significant change on the real estate industry than computerization and the use of the Internet to transfer information. The Research Institute for Housing in America found that in 2000, 75 percent of home buyers used the Internet to check mortgage rates, and 17 percent actually obtained their loans via the Internet. Likewise, the NAR 2000 Profile of Home Buyers and Home Sellers found that 37 percent of home buyers first investigated homes on the Internet. However, 87 percent of those home buyers still used a real estate agent in making their transaction.
Nor is the effect of technology limited to consumers. Real estate developers and builders can transfer building drawings and bids via the Web to save time and money in the construction process. Real estate agents now can access home listings from an Internet service on their laptops or even on their personal digital assistants, and then E-mail housing information to clients. Far-flung international companies can use private intranets to oversee properties in Singapore and Paris. Management companies have developed private websites for their building tenants to make it easier to request repair services or to stay up to date on community activities. Several companies, including the NAR, are working to develop complete "transaction management platforms," which will allow all aspects of a typical real estate transaction to be conducted electronically.
A LOOK AT THE INDUSTRY
JUST AS THERE is not only one real estate job, there is not only one type of person who can succeed in the real estate field. The characteristics that make a good property manager are not the same as those that make a good residential salesperson. For this reason almost anyone can find some area of specialization in the real estate industry that will match his or her abilities and interests. In this chapter we will explore some of the characteristics of the successful real estate agent.
As we recall from Chapter 1, real estate agents are divided into two major categories-brokers and salespeople. Most people begin their real estate careers as salespeople, and the career span of a real
'Unless otherwise specified, all the statistics that are cited in this chapter are taken from the 2001 Membership Profile published by the National Association of REALTORS. Canadian information was based on a 1998 member survey by the Canadian Real Estate Association.
Estate salesperson may be as little as one month or as much as twenty years. To work as a salesperson, an individual must hold a salesperson's license from the state where he or she lives. Even after they are licensed, real estate salespeople cannot engage in the real estate business unless they are associated with a licensed real estate broker.
The real estate broker oversees the activities of the salespeople with whom he or she is associated. Real estate brokers must meet more advanced educational requirements than salespeople and in most states, must have been in the real estate business for a certain number of years. Any person who operates his or her own firm must hold a real estate broker s license.
A Diversified Profession
Background
More than many other occupations, people enter real estate from different backgrounds and with different goals. To some extent this is because of the relative ease of entering the real estate field. Although all states now require a high school diploma or its equivalent for licensure, a college degree is not required. For this reason many people who cannot afford or are not interested in pursuing higher education find real estate an attractive career option. Another reason for the diversity in the profession is the large number of agents who select real estate as a second career. Many begin working in real estate on a part-time basis to supplement their regular incomes and find real estate a stimulating and rewarding career. Other agents turn to real estate when they find that their earlier jobs did not supply sufficient income or challenge. Others are attracted to the real estate field because it offers the opportunity for self-employment. Overall, eight out of every ten brokers and nine out of every ten salespeople have worked in another occupation before entering real estate.
Education
As with any other profession you might choose, a good education is important for success in real estate. All fifty states require real estate agents to be high school graduates or to hold an equivalency certificate. However, the trend in real estate is more and more toward a college educated sales force. In the National Association of REALTORS (NAR) survey of 1978, only 58 percent of its members had at least some college degree work. By 2001 this number had risen to 67 percent, with 23 percent having completed at least some graduate study. However, the number of brokers with a four-year college degree declined slightly from its high of 37 percent in 1984: For real estate salespeople, 72 percent of the NAR membership had completed college, while another 16 percent had gone on with graduate work.
For brokers in a 1993 study, the most common area of college study was business administration. About 36 percent of the brokers held degrees in business, while only about 12 percent held college degrees in liberal arts. About 12 percent of the brokers gave real estate as their college major.
Business administration also accounted for the largest number of college majors among salespeople (33 percent). Other fields of study for real estate salespeople include liberal arts and education. About 8 percent had majors in real estate.
Although real estate agents enter the profession with degrees in almost every specialty from economics to agriculture, it is clear that courses in financing, economics, marketing, and other business topics are seen as the most helpful to those considering real estate careers. As real estate majors become more prevalent and younger agents continue to enter the field, more agents are likely to hold real estate majors. And for those considering more demanding careers in appraisal, finance, or counseling, an advanced degree in a real estate specialty may become more common.
In addition to college educations, most real estate agents have taken one or more professional courses in real estate. In fact many states require that agents take a set number of hours before they can obtain a real estate license. Licensing requirements and education will be discussed in Chapter 3.
Brokers and salespeople also hold a variety of professional designations showing expertise in a real estate field. In 2001, 80 percent of brokers and 32 percent of salespeople held designations. Of that group approximately 35 percent of brokers held or were working toward the GRI (Graduate, Realtor Institute) designation. Other popular designations with brokers were Certified Residential Specialist (20 percent) and Certified Real Estate Brokerage Manager (62 percent).
Over 14 percent of salespeople in the 2001 NAR survey held the GRI designation, and 9 percent either held or were working toward the Accredited Buyer Representatives' designation.
Age
As might be expected, since real estate agents often are employed in other fields before entering real estate, the median age of real estate brokers is high-52 years-with the majority of brokers in the 45 to 59 age range. While there are only 3 percent of brokers in the age 29 or younger category, 16 percent are still active at age 64 or older. The median age for salespeople is 50 years. Approximately 5 percent of the sales force is age 29 or younger, with the largest percentage in the 40 to 59 age range. The average age of a Canadian real estate agent was 48, up from 47 in 1995.
Earnings
Most real estate brokers and salespeople receive between 50 to 60 percent of commissions earned, with the remainder going to the brokerage company to cover expenses. About one-fifth of agents earn 100 percent commissions and pay all their own business expenses.
As many people do not enter real estate directly from school, it is difficult to make a comparison between an agent's age and his or her earnings. However, as in most occupations, earnings do increase with experience. According to the 2001 NAR survey, the average broker had a gross personal income of $47,700, an increase of 10 percent over 1998. The 1999 Occupational Outlook Hand-book pegged the average salary for a salesperson at $28,020. Median gross personal earnings for all brokers with one to five years of experience averaged $38,800; for those with eleven to fifteen years of experience, $74,300, in 2001. Twenty-three percent of brokers in the NAR survey earned more than $100,000.
Canadian agents and brokers averaged earnings of between $28,000 and $56,000 (Canadian dollars). The latest Census of Population conducted by the Canadian government showed an average salary of $40,471 for real estate agents.
Earnings also will vary depending on an agent s area of specialization. Agents in development or management average higher earnings while those in the residential area average the lowest. Salaries for different specialties will be discussed in Chapter 6.
There is the same correlation between experience and earnings for salespeople. In 2001 the real estate salesperson who had been in the business for one to five years earned a median net salary of $ 18,800 annually. Those salespeople in the business eleven to fifteen years earned a median of $44,900. Sixty-four percent of part-time salespeople had a median income of less than $10,000 per year.
Hours
Brokers and salespeople have traditionally put in long hours, and the trend seems to be increasing. In 2000 the typical broker worked forty-five hours per week, and 13 percent worked sixty hours or more. Salespeople worked a median of forty-one hours per week, with 8 percent working sixty or more hours. Only 14 percent of salespeople worked part-time.
Ownership Interest
In 2000, 41 percent of brokers had some sort of ownership interest in their firms. Approximately 20 percent of the brokers questioned in the 2001 NAR survey owned their own businesses, and another 18 percent owned either a partnership or corporate interest. Salespeople are not allowed to own a real estate business under most state license laws, but some do hold stock interest in their firms. However, in 2000 the NAR survey found that 95 percent of salespeople worked as independent contractors.
The average Canadian real estate agent worked for a firm with thirty-six members, up from twenty-eight in 1991.
Experience
The average real estate agent in the 2001 NAR survey has been in the real estate business for a median of thirteen years. Brokers who belong to NAR have been in the real estate business a median of twenty years. Approximately 63 percent of brokers have been in the business for more than sixteen years.
Opportunities for Women and Minorities
As much of the success in the real estate business depends on a person's ability to sell or list property, there are greater opportunities in real estate for women and minorities than there are in many other fields. Any person who can sell successfully can be certain of a job and reasonable earnings. And the opportunities are increasing every year. Approximately 56 percent of all real estate agents in the 2001 NAR survey were women. Approximately 46 percent of brokers were women in 2000. However, like many other fields, women and minorities will find that while they can succeed, their earnings will not usually be as high as those of white males.
Much of the cause for women's lower earnings is the result of their concentration in residential real estate sales. This traditionally women's field of selling single-family homes still accounts for most of the women in real estate. Also, more women work part-time than do men. Although it is certainly possible to earn a good living in residential sales, the earnings per transaction are usually lower than those in commercial or industrial transactions. In addition, the lucrative areas of commercial and industrial sales, as well as specialties such as mortgage banking and appraisal, have very few women participants. However, as more and more women enter specialty areas, the median income for them should rise.
Another problem that confronts women engaged in the real estate profession is their traditional role as the principal parent. The long and irregular hours worked by most salespeople make it extremely difficult for women to care for their children, especially if they are single parents. Women may find it difficult to work as many hours as their male counterparts, thereby lowering their overall earnings.
Unlike women, ethnic minorities tend to be poorly represented in the real estate profession. In the 2001 NAR survey, only 1 percent of respondents were African-American, 2 percent were Asian, and 5 percent were of Hispanic origin.
Because of the past and present discrimination, many African-Americans and other minorities have lower incomes than whites. They are more likely to be unable to buy their own homes, and the average price of these homes tends to be lower. Thus commission rates on these sales will be less than those for more expensive homes.
According to the 1999 NAR Profile of Real Estate Firms, approximately 9 percent of real estate firms were at least partially owned by a member of a minority group. Nearly one-third of all firms have minority agents.
What Makes a Successful Real Estate Agent?
As we saw in Chapter 1, there are so many specialties in the real estate industry, it is difficult to select any one set of characteristics that will ensure success in the field. However, there are a few qualities that are necessary to almost every area of the business.
People- Oriented
Perhaps the most important quality that a prospective real estate agent should have is the ability to work with people. Real estate is essentially a service business. Obviously some jobs, such as sales, may take a higher level of people skills than more technical jobs, such as appraisal. But all brokers and salespeople work on behalf of one or more clients, and they need to be able to understand what clients want in order to perform their jobs.
Salespeople must be able to communicate with people on two different levels. First they must have a good knowledge of and interest in people. They must be able to understand the needs of the client and must learn to ask probing questions that help to point out the client's needs. To do this successfully, a broker or salesperson should have a real interest, beyond the financial rewards, in helping his or her clients meet their needs. Especially in the case of residential sales, there is a great deal of emotional involvement in the purchase of real estate. And the best salespeople are those who recognize this and become involved themselves. It really should matter whether the couple who buys the house will live happily there, not just whether they will sign the sales contract.
The other side of the need for communication skills in the real estate field is the ability to convince people of your opinions. Even though buying a house is a private decision, the real estate agent is the expert and should try to assist the client by giving him the benefit of expert knowledge. Many people find it difficult to make decisions on large or important purchases. Others are inclined to make a decision on emotional factors rather than on a realistic assessment of their needs. In such cases the real estate agent must use his or her people skills to gain the confidence of the parties and help to direct their decision. This need to establish themselves as reliable experts in the field is also an essential skill for those in other real estate areas. In all cases they must be able to convince their clients of their professionalism and clearly convey the knowledge that they have.
Detail- Oriented
Much of the real estate business is concerned with handling the small details correctly. It matters a great deal to the prospective buyer whether the house has been inspected for termites. The care a property manager uses to compute expenses can make the difference between a loss and a profit for the owners. Every real estate transaction involves contracts and affidavits that must be completed correctly if the sale is going to be legal. The successful real estate agent must be able to coordinate all of these elements. He or she also must be careful and conscientious enough to be sure that all the details are correct.
Enthusiastic
The last and perhaps the most important characteristic of a good real estate agent is enthusiasm. The agent must enjoy and be interested in the real estate field. The agent must believe in the importance of the job and in his or her ability to do it well. Without this certainty, the agent will find it difficult to convince prospective clients of his or her abilities. And sooner or later this lack of enthusiasm will make it hard for the agent to give his or her best to the job.
Of course, these are not the only qualities you need to succeed in real estate. Like many other professionals, real estate brokers and salespeople need to be mature, hardworking, intelligent, and honest. But if a real estate agent is going to move ahead in the field, he or she must be people-oriented, detail-minded, and enthusiastic.
The Advantages and Disadvantages of the Real Estate Business
Up to this point, we have focused on the advantages and rewards offered to those who choose real estate as a career. However, like any other business, there are some disadvantages to working in this field.
Flexibility in Scheduling
Because salespeople usually work as independent contractors rather than as employees, they can set their own work schedules. Even though brokers may ask that salespeople be in the office to cover the telephones during certain hours, salespeople are free to set up their own appointments with clients. This makes it easier to handle personal business and emergencies. But keep in mind that those who work fewer hours are likely to earn less.
The reverse side of this flexibility is that most agents' work schedules are both long and irregular. According to the 2001 NAR Membership Survey, the average real estate broker worked about forty-five hours a week with 10 percent putting in more than sixty hours. Residential brokers have to be available to show houses on weekends and in the evenings when other people are not working. And all real estate professionals must be prepared to provide services when the client wants them. Since it is a rare real estate broker who can work a traditional nine-to-five week, these irregular hours can place a strain on family relationships. Another pitfall is that since there are no definite hours for stopping work or taking vacations, many real estate agents develop the habit of working continually. In addition, because they are independent contractors, they are not paid for vacations and holidays, and so there is even less incentive to take time off.
One new trend in the real estate industry is a growing interest in having real estate agents work as salaried employees of the firm. Although this practice is much more common in specialties such as property management and appraisal, agents who work as employees in residential sales companies are on the rise, although they still account for only 3 percent of the sales force. For the agent, being an employee often means more regular hours, more regular income, and more fringe benefits. In some cases employees also will receive a bonus based on sales. Companies that use employee salespeople believe that not placing the agent in a position of earning a fee only if the sale closes promotes better customer service and more ethical conduct.
Irregular Income
Another mixed blessing in the real estate business is the irregularity of the income. Most real estate agents work on a commission basis, which means that their salaries depend on the number of sales they make. Although agents engaged in some specialties may receive a set salary, in most cases at least part of the income is based on commission. A commission is a percentage of the sales price, rental payment, or other fee that is paid to the person finalizing a transaction. Commission rates usually vary depending on the location and the type of specialty. Some agents are given a small monthly payment called a draw, which is charged against their future commissions. Some receive higher commission percentages as performance improves. Because salary is based on performance, the successful salesperson has the opportunity for unlimited earnings, restricted only by the time he or she has to spend on work.
However, because income is based on sales, there is not a set amount that the agent can count on receiving each month. Some months he or she will receive a large commission for a big sale while other months there will be little or no return for the hours worked. There is always some time-lapse between the time the sale is closed and the commission is received, which further increases the irregularity of the agent s income. This problem is particularly prevalent for those working in commercial and industrial brokerage, where it may take many months or years to complete one transaction. However, commissions for these transactions tend to be larger than those for residential sales.
This irregularity of income places a burden on the real estate agent to budget his or her money to allow for slow periods. In cases where the real estate field provides the family's sole source of income, it may be necessary to establish a substantial savings reserve to cover irregular income flow. People who have particular difficulty adapting to the irregular income should consider working as a salaried employee in an area such as appraisal, where many agents work for institutions rather than as independent businesspeople.
Few Entry Requirements
A third advantage of the real estate profession is that unlike many other businesses there are very few requirements for entry into the field. All fifty states and the District of Columbia do require a high school degree or its equivalent. However, most states require only limited training before allowing a person to take the real estate licensing examination. (Educational requirements will be but that first year was tough. Rojas worked as a baby-sitter two mornings a week to bring in money while she waited for her paychecks. However, she turned her problem into an advantage by selling homes to several of her baby-sitting clients.
Rojas made the move to RE/MAX in January of 2001. She loves being her own boss and making her own hours. She works a lot of evenings and weekends, but likes the flexibility. She also likes the opportunity to be up and away from her desk and to interact with people. "I've always been a people person," says Rojas, who had earlier considered a career as a teacher.
The toughest part of selling real estate, she says, is staying organized and getting all the transaction paperwork completed. "You also have to be patient and not let yourself get frustrated if things don t work out," she says. "You have to be persistent."
And was age an issue-when the average age of a real estate salesperson is forty-seven years old? According to Rojas, it isn't for her clients. They like her enthusiasm. "It was tougher gaining the respect of the older salespeople in my office," says Rojas. But her knowledge and success gradually won them over.
Earl W. Fernelius, SRAP, ASA-Earl Fernelius, Inc., Birmingham, MI
While working as a residential real estate broker, Earl W. Fernelius found that a great many of his clients wanted appraisals of their properties. And, he said, "Since no one else wanted to monkey with the job, I did it." Thus began his career as a real estate appraiser. Like so many other real estate professionals, Ferneliuss real estate career began in residential sales. After receiving a Bachelor of Science degree and a teaching certificate from Eastern unlimited earnings, restricted only by the time he or she has to spend on work.
However, because income is based on sales, there is not a set amount that the agent can count on receiving each month. Some months he or she will receive a large commission for a big sale while other months there will be little or no return for the hours worked. There is always some time-lapse between the time the sale is closed and the commission is received, which further increases the irregularity of the agent's income. This problem is particularly prevalent for those working in commercial and industrial brokerage, where it may take many months or years to complete one transaction. However, commissions for these transactions tend to be larger than those for residential sales.
This irregularity of income places a burden on the real estate agent to budget his or her money to allow for slow periods. In cases where the real estate field provides the family's sole source of income, it may be necessary to establish a substantial savings reserve to cover irregular income flow. People who have particular difficulty adapting to the irregular income should consider working as a salaried employee in an area such as appraisal, where many agents work for institutions rather than as independent businesspeople.
Few Entry Requirements
A third advantage of the real estate profession is that unlike many other businesses there are very few requirements for entry into the field. All fifty states and the District of Columbia do require a high school degree or its equivalent. However, most states require only limited training before allowing a person to take the real estate licensing examination. (Educational requirements will be but that first year was tough. Rojas worked as a baby-sitter two mornings a week to bring in money while she waited for her paychecks. However, she turned her problem into an advantage by selling homes to several of her baby-sitting clients.
Rojas made the move to RE/MAX in January of 2001. She loves being her own boss and making her own hours. She works a lot of evenings and weekends, but likes the flexibility. She also likes the opportunity to be up and away from her desk and to interact with people. "I've always been a people person," says Rojas, who had earlier considered a career as a teacher.
The toughest part of selling real estate, she says, is staying organized and getting all the transaction paperwork completed. "You also have to be patient and not let yourself get frustrated if things don't work out," she says. "You have to be persistent."
And was age an issue-when the average age of a real estate salesperson is forty-seven years old? According to Rojas, it isn't for her clients. They like her enthusiasm. "It was tgugher gaining the respect of the older salespeople in my office," says Rojas. But her knowledge and success gradually won them over.
Earl W. Fernelius, SRAP, ASA-Earl Fernelius, Inc., Birmingham, MI
While working as a residential real estate broker, Earl W. Fernelius found that a great many of his clients wanted appraisals of their properties. And, he said, "Since no one else wanted to monkey with the job, I did it." Thus began his career as a real estate appraiser. Like so many other real estate professionals, Fernelius's real estate career began in residential sales. After receiving a bachelor of science degree and a teaching certificate from Eastern unlimited earnings, restricted only by the time he or she has to spend on work.
However, because income is based on sales, there is not a set amount that the agent can count on receiving each month. Some months he or she will receive a large commission for a big sale while other months there will be little or no return for the hours worked. There is always some time-lapse between the time the sale is closed and the commission is received, which further increases the irregularity of the agents income. This problem is particularly prevalent for those working in commercial and industrial brokerage, where it may take many months or years to complete one transaction. However, commissions for these transactions tend to be larger than those for residential sales.
This irregularity of income places a burden on the real estate agent to budget his or her money to allow for slow periods. In cases where the real estate field provides the family's sole source of income, it may be necessary to establish a substantial savings reserve to cover irregular income flow. People who have particular difficulty adapting to the irregular income should consider working as a salaried employee in an area such as appraisal, where many agents work for institutions rather than as independent businesspeople.
Few Entry Requirements
A third advantage of the real estate profession is that unlike many other businesses there are very few requirements for entry into the field. All fifty states and the District of Columbia do require a high school degree or its equivalent. However, most states require only limited training before allowing a person to take the real estate licensing examination. (Educational requirements will be discussed further in Chapter 3.) Because of its limited educational demands, real estate is an attractive career choice for students who do not want to go to college or cannot afford the tuition. It also makes it easier for older people to enter the field without the need to return to school for an extended period. According to the 2001 NAR survey, only 7 percent of agents entered real estate as their first career.
Opportunities for Self-Employment
Many Americans dream of owning their own businesses, and this is a dream that was realized by 20 percent of the real estate brokers in the 2001 NAR survey. Since real estate is a service profession, brokers who want to go into business for themselves do not have the high capital outlays that are incurred in retailing or manufacturing. For this reason many brokers decide to set up their own firms after several years in the business. Although it is certainly appealing to be your own boss and have other people work for you, there are a great many problems in establishing and running a business. You will be able to hire salespeople and receive a portion of their commissions. However, you will have to devote a portion of your time to administrative duties and paperwork. This will limit the time you can sell and possibly reduce your own commission income. Also, the growing importance of computers in real estate transactions requires capital outlays for buying and upgrading technology. Because of real estate's irregular income flow, you will have to have cash reserves to live and pay the firm's expenses until commissions come in. In any case, even if setting up your own firm is a long-range goal, real estate agents should not consider this step until they have at least three to five years of sales experience.
A Cross Section of Careers
Over and over again we have made the point that the real estate field offers a variety of different jobs to many different types of people. In this section we will try to present brief portraits of men and women who have chosen real estate as their careers. You can see that although there are certain similarities in these people and their backgrounds, the differences far outweigh these similarities.
Juli Rojas-RE/MAX Properties Unlimited, Morristown, NJ
Although she thought real estate seemed like an interesting business, the then twenty-one-year-old Rojas didn't consider it a viable career because "everyone was older; it didn't seem like a business for a young person." Plus, she says, a lot of her friends and family didn't care for the idea. They all knew of someone who had tried their hand at real estate and failed, and they were quick to point out all the drawbacks-no regular salary, no benefits.
But when Rojas lost her financial aid, she decided to tem-porarily curtail her college career at Rider University and return to the local community college near her home in Montclair, New Jersey. After a stint working part-time in a day care center, her boyfriend encouraged her to give real estate a try.
Rojas began her career in 1999 as a residential sales associate with the Morristown office of Weichert Realty, a larger regional company. "Being able to start with a large company was a big advantage. I received training and I had a mentor I could turn to with questions," says Rojas. In just three weeks she had written her first sales contract. And by her second year in the business, her sales had reached $2.3 million.
But that first year was tough. Rojas worked as a baby-sitter two mornings a week to bring in money while she waited for her paychecks. However, she turned her problem into an advantage by selling homes to several of her baby-sitting clients.
Rojas made the move to RE/MAX in January of 2001. She loves being her own boss and making her own hours. She works a lot of evenings and weekends, but likes the flexibility. She also likes the opportunity to be up and away from her desk and to interact with people. "I've always been a people person," says Rojas, who had earlier considered a career as a teacher.
The toughest part of selling real estate, she says, is staying organized and getting all the transaction paperwork completed. "You also have to be patient and not let yourself get frustrated if things don't work out," she says. "You have to be persistent."
And was age an issue-when the average age of a real estate salesperson is forty-seven years old? According to Rojas, it isn't for her clients. They like her enthusiasm. "It was tgugher gaining the respect of the older salespeople in my office," says Rojas. But her knowledge and success gradually won them over.
Earl W. Fernelius, SRAP, ASA-Earl Fernelius, Inc., Birmingham, MI
While working as a residential real estate broker, Earl W. Fernelius found that a great many of his clients wanted appraisals of their properties. And, he said, "Since no one else wanted to monkey with the job, I did it." Thus began his career as a real estate appraiser. Like so many other real estate professionals, Fernelius's real estate career began in residential sales. After receiving a Bachelor of Science degree and a teaching certificate from Eastern Michigan University, he taught school for one year. That summer, at the suggestion of the parents of one of his students, he sold real estate. At the end of the summer, he found that he had made more money than he got for teaching all year long. He gave up teaching for real estate.
Although he worked in residential sales for several years and still does some work in the area through his brokerage firm, the former teacher now spends about 95 percent of his time on appraisals and market and feasibility studies through Earl Fernelius, Inc. Along with the challenge of the specialty, Fernelius likes appraisal because there is less daily frustration than there is with selling. There is nothing worse, he reflects, than working with a client for a month and then having him or her buy a house from the owner. Even though he still works on a fee basis, he likes the idea that if you do a job, "you know you're going to get paid." Even then, Fernelius noted, many clients believe that since they are hiring you, the appraisal should say what they want it to say. But, Fernelius says, "You have to look at yourself as an impartial estimator of value." You can't be "winking at" the person who hired you to agree upon a price. To help preserve appraisers' impartiality, no semblance of advocacy is permitted.
Fernelius believes that there is a great future for young people in real estate appraisal. But, he admits, it is difficult getting started, and many young people are not willing or able to accept the low fees or salaries of the first few years. There are a few apprenticeship programs, but other appraisers don't have the time to devote to training new members of the profession.
Fernelius does his part toward helping prospective appraisers by teaching appraisal courses at the University of Michigan extension program and at Oakland Community College. He is also a member of the advisory board to the Oakland Community College real estate program and a lecturer on appraisal and professional standards for the National Association of REALTORS and the Society of Real Estate Appraisers. Fernelius serves as a vice governor for the Michigan region of the Society of Real Estate Appraisers. In the past he has served as president of the Oakland County Chapter of the Society of Real Estate Appraisers, vice president of the Michigan Association of Realtors, and president of the Birmingham-Bloomfield Board of Realtors.
Allen S. Pesmen-Managing General Partner, Bannockburn Park Concepts, Inc., Bannockburn, IL
Real estate development started as just a sideline to a successful law practice for Allen Pesmen. As the developments became larger, more successful, and more time consuming, he realized he could no longer perform two jobs at once. He chose to put his energy into real estate. Today Pesmens law firm practice is strictly limited to services for his company's affiliates.
A native of Chicago, Pesmen received his law degree from the University of Illinois in 1960 and from 1960 through 1981 was principal of a law firm, which was eventually known as Pesmen & Weil, PC. Although his practice was general and business related, Pesmen found that a significant amount of his work was in real estate, including zoning and annexation for development. In 1969 he began accumulating the first of ten parcels of land for future real estate development.
Pesmens first project was an eighty-six-acre complex to house Bannockburn Lake Office Plaza, Bannockburn Green Retail Center, and Bannockburn Bath and Tennis Club in north suburban Chicago. Construction began in 1978. The complex consists of office buildings carefully placed among landscaped wooded areas and artificial lakes, which create a sylvan setting far removed from the nearby expressways.
The buildings' park like setting received wide acclaim and was innovative at the time for the area, but it was chosen by Pesmen because of his personal preference. "I felt people wanted to get away from the congestion and the frustrations of the inner city, just as I did after two decades in the heart of Chicago's financial district," he said. "At Bannockburn Lake, our tenants can picnic at the lake, stroll the nature trail, or use the facilities of our Bannockburn Bath and Tennis Club next door without sacrificing the institutional features of quality office space."
Today Pesmen's properties include the Bannockburn office complex; the neighboring Bannockburn Green Retail and Office Center, which won a Distinguished Building Award from the American Institute of Architects and a Gold Award from the Illinois Landscape Contractors Association; and the Doe Run Lodge resort and condominiums in southwestern Virginia along the Blue Ridge Parkway. His company employs approximately fifty people at the central office. Among them is his wife, Enid, who acts as property manager for several of the firm's development projects. Additional staff are employed at each of the properties.
Pesmen's real estate enterprise rests on the foundation of his accounting, legal, and financial knowledge and on considerable firsthand real estate experience-a foundation he believes is essential to long-term success. "Today," he says, "many young people are attracted to real estate as a career primarily because they read about the fortunes having been made by developers and syndicators. What they don't realize is that there are numerous pitfalls and no guarantees in real estate development. The real estate market is like a pendulum, swinging back and forth between opportunities and disasters. It takes experience and good banking contacts to recognize in which direction the real estate financial markets are going and to adjust to those changes. In addition it takes considerable luck and good fortune."
Sandra Dzinski-CPM, Vice President, Equitable Real Estate, Irvine, CA (Equitable Real Estate is a wholly owned subsidiary of The Equitable.)
"I really got into real estate because I went bowling," jokes Sandy Dzinski. A social sciences graduate from the Colorado State University, Dzinski found it difficult to find a challenging first job. When a friend told her about a secretarial job with a real estate developer, she decided to apply.
At first the position was mostly clerical, but Dzinski kept her eyes open and demonstrated her abilities. Soon she was assisting in the preparation of feasibility studies and client reports. "An entry-level position provides the opportunity to do more; to prove that you have the intelligence and the drive," she says.
Soon another company was looking for a property management trainee and offered Dzinski the job. The firm encouraged her to attend local and national Institute of Real Estate Management meetings and to take courses in property management. At the courses and meetings, she also made contact with other professionals in the field and shared solutions to common problems.
After six years working for these two smaller companies in the west, Dzinski joined Equitable Real Estate. With offices in fifteen cities, the firms national perspective and presence gave her the opportunity to work with larger, more challenging properties and in addition, offered greater long-term financial rewards than smaller concerns.
After nine years with Equitable as a property and commercial leasing manager, Dzinski moved into the area of representing the company's real estate services to its institutional accounts. In this position she acts as a liaison between Equitable's real estate investment services and the large public pension funds that want, or have placed, real estate in their investment portfolios.
The job involves new responsibilities, a new learning curve, and a great deal of travel, but Dzinski believes that her property management background helps in her new position. "Property management is really a people business," she says. "And in my current role, the ability to listen and to understand how to respond to needs is fundamental."
The diversity and flexibility of the real estate field is one of the factors that attract Dzinski. "A real estate career can move in many directions," she summarizes. "There are tremendous challenges, and every day is different and stimulating."
Jerline Lambert-President, Lamberts Realty, Chicago, IL
Certainly the real estate career of broker Jerline Lambert is a prime example of the opportunities in real estate and the equal importance of determination and luck in shaping an individual's life. Now the president of her own brokerage firm on Chicago's west side, Lambert cut short her education in the tenth grade to marry and have children. After her children were born, she began working as a secretary and completed her journalism degree and two and one-half years of business education courses at the Chicago Central YMCA College. She found that her secretarial position did not offer her the freedom or opportunity she wanted, but she did not have any idea what she wanted to do instead. At this point fate stepped in.
Looking at houses with her husband and a local real estate agent, she was so interested in the business and asked such intelligent questions that the broker suggested she come and work for him. After taking a number of real estate courses, she acquired her real estate license. Then, after working briefly in a dime store to get some sales experience (which she had never had), Lambert went to work for the broker. After about a year, Lambert went to work for another successful broker, Geraldine Wells. She chose to work for a woman, she said, because "women use different techniques than men in selling, and I wanted to learn how a successful woman did it." After two and one-half years of practice, Lambert decided she was ready to go out on her own and opened Lamberts Realty. The firm's single office handles residential, commercial, and property management work with the help of a few salespeople, including two of Lambert s children. Lambert decided to move into property management when the real estate market slowed down. As she sees it, "There may be times when you can't make a sale and a little income from property management helps pay the rent and keeps you from becoming desperate."
Like so many other successful real estate agents, Lambert is committed to real estate education and says she owes her success to reading, education, and positive thinking. The first African-American woman to hold a certified Real Estate Manager designation from the National Association of Real Estate Brokers, Lambert has also completed many courses in real estate and business management. She now hopes to study appraisal in order to "have a career for my retirement."
Lambert has also been active in community and real estate committees. She was president and chairman of the Dearborn Real Estate Board in 1980-1981 and received the organizations outstanding leadership and service award. In 1974 she was appointed by the Governor of Illinois to serve on the Governor s Commission of Mortgage Practices. Her numerous awards include the "Sanctity of Contract" award from the Intercounty Title Company of Illinois and a certificate for supporting democracy in housing from the Cincinnati Association of Real Estate Boards. Active in African-American causes, Lambert believes there are good opportunities for African-Americans and other minorities in the real estate field. But she also believes that African-American brokers are excluded from many larger and more lucrative land and development projects.
