Does becoming an agent help you get ahead as a property investor?

Uncapped income, a plethora of potentially profitable properties at your fingertips and a flash car. 

What’s not to love about being a real estate selling agent? 

It’s no surprise many property investors, at some stage in their lives, have considered becoming selling agents.

Probably because much of their time is spent searching for properties, inspecting them, imagining how they would improve them and how much equity they could make in 20 years’ time.

With all this time invested, they might as well turn property transactions into their day job, right?

Becoming a selling agent just appears the obvious choice for many.

But as we find out, becoming a selling agent isn’t always the natural next step after property investor.

For starters, the selling agent’s client is a seller, which means you would be selling a property, not buying one. 

Your time would be spent achieving the highest price and best contract conditions for the seller rather than the lowest price or best conditions for the buyer.

But surely these skills could give you, the investor, the ultimate advantage when buying properties for your personal portfolio?

Perhaps it’s time to delve into the underbelly of a selling agent to find out.

Slip on your sharpest suit, shades, designer shoes and your slickest smile, then sign the lease on your favourite luxury car.

Hurry up, your first open home inspection starts in 20 minutes, and that’s the exact time you need just to drive there, unlock the house, put up the signs, display the brochures and set up your registration book.

LET’S TALK MONEY

In the selling agent’s first year he or she could expect to earn circa $40,000, in line with the Real Estate Industry Award 2010, according to Tasmania’s Real Estate Institute chief executive Mark Berry.

This is simply the retainer, he explains, which is deducted from the sales commission when that eventually starts to come in.

“Agents really need to be writing in the vicinity of $150,000 to $200,000 to be in a breakeven situation for the agency principal.  This is essential to cover desk costs,” he notes.

Berry says the expectation is that agents can take home 50 per cent of the fees, while the other 50 per cent goes straight to the agency owner.

Other agents with proven experience might approach an agency principal offering their services for no retainer.

What they might do is enter into an aggregated contract highlighting a commission share arrangement only.

The contract might also stipulate that fees can be paid once a deemed level of sales is reached.

This usually happens in times when a real estate agency can’t budget in more employees or the agency has cash flow issues, Berry says…

“This is often in tougher selling times.”

Berry notes in this case, an agency owner would only take on someone with proven selling experience.

“If that individual doesn’t perform and minimal commission is made, then the agency might face an issue with Fair Work Australia for not paying the minimum award rate.”

The Macquarie Relationship Banking 2012 Residential Real Estate Benchmarking Report reveals that 43 per cent of real estate sales staff are on commission only, while 50 per cent receive a fixed salary plus commission, and seven per cent are on fixed salary only

Real Estate Institute of New South Wales president Malcolm Gunning says the more sales and profits the selling agent makes for the agency, the larger the share they can often negotiate to take home.

“For example, an agency may have a good selling agent writing $1 million in commission fees from vendors,” he explains.

“The take-home might be $600,000, but that’ sonly the tope one per cent of Melbourne, Sydney and Brisbane agents who can write these very large fees. These agents will often have one or two assistants helping them, so they’d need to cover their costs also.”

The report also states the top two percent of selling agents earn in excess of $500,000 a year.

Though when comparing the national average top salesperson of each agency, the same report states that an average of $250,000 in gross sales commission for the business was the highest in 2012, down from $323,000 in 2009.

Gunning believes the average selling agent is more likely writing around $200,000 per year, which can return them something equivalent to a $70,000 salary.

The report also says the average business gives away 43 per cent of gross sales commission to the sales agent.

HOW DO YOU BECOME A TOP TWO PER CENT EARNER?

There are skills that every selling agent must have to simply make a crust in the profession, such as being able to price property accurately for the seller.

Also, to understand the differences across a wide range of properties and be able to write them up in legible real estate terms.

It’s also important the selling agent knows what each property’s affectations are, where the sewers and easements are located and how this could affect the decision of a potential buyer.

“Every selling agent also needs to have a general knowledge of property law, marketing and computer skills, then be able to talk the talk and express themselves in property terms, language or words that meet industry standards,” Gunning says.

He adds that the minimum education and requirement to become a selling agent may be basic, but what separates an average one from a highly successful one often comes down to the agent’s inherent skills.

Being a selling agent isn’t as simple as standing in front of a house in a smart suit with a clipboard greeting or showing people through.

There’s a lot more to it, such as personality and work ethic.

It’s also about the ability to match personality with the seller demographic. 

About understanding the market, having strong interpersonal skills, being very organised and being prepared to work hard; at odd hours and over weekends.

“It’s a numbers game so you need to understand how the numbers work,” Gunning adds.

“The biggest property doesn’t always mean he bigger the fee you’ll earn that year. The property may be $1.5 million however, your fee is still up for negotiation. Often this can mean a lower percentage commission is negotiated compared with percentages negotiated compared with percentages negotiated on lower priced properties.

“Often the very successful agents aren’t operating in the high end, rather in the middle-priced housing where a higher volume of properties is turned over.  In Sydney, this is often around Castle Hill, Baulkham Hills and Liverpool.”

They’re also adding to and updating their contact databases, which is the lifeblood of their income. 

The toughest part for many selling agents is dealing with buyers and sellers seven days a week, Gunning says.

“Many selling agents burn out from conflict between the two parties and the lack of personal time off. You can get hammered if you don’t have confidence to handle the situation.”

Most people generally respect Sundays as a day of rest for agents, Gunning notes.

“While many agents are given a day in reprieve on Monday or Tuesday for working Saturdays, this doesn’t mean they turn the phone off because a missed call could mean a missed commission.”

Gunning says to be one of the top earning selling agents you need to consider the job as your ‘additional’ child. 

This means long days, sometimes finishing at 7pm or 8pm, so your clients can be given a private viewing outside of their work hours.

“Unless you see it as part of your life, you’re not going to be highly successful.  As an agent you’re on call constantly, a bit like a doctor often is,” he says.

“Only very successful agents can balance this well.  Instead of lengthy holidays taken in blocks, they take short breaks every four or five months, but if they’re in the middle of an auction campaign then time off is impossible.”

Holidays are often restricted to the Christmas period, through to January and early February, Gunning adds.

“The Christmas holiday period is often when most sellers don’t want potential buyers tramping through their house.”

CAN BEING AN AGENT HELP YOU GET AHEAD?

Your first consideration is probably whether the income as a selling agent could help pick up your pace in building your property portfolio, or at least make servicing the loans easier.

Your second consideration is also about whether the gained skills of a selling agent and daily exposure to property are also likely to help.

Let’s take a closer look.

1. As a selling agent, your negotiation and people-reading skills improve every day, because you’re the middle person between sellers and buyers on a daily basis.

The advantage:  When negotiating to buy your investment property you’ll have the inside scoop on how it all works, and you’ll know how hard and far you can go on price and conditions. 

2. Through other agent colleagues, you’re alerted to properties coming up for sale well before they’re marketed. You also know when new infrastructure, gentrification or developments are proposed for an area often before anyone else does.

The advantage:  This means you have more time to undertake due diligence and negotiation, and can potentially buy a property with good future gain potential in a less crowded market.

3. Your day-to-day knowledge of the property market and its cycles is not only better than most property investors, but you can also tap into a wealth of knowledge from your colleagues; industry experts who’ve worked through many more property cycles than yourself and often across several more property markets than what you know intimately.

The Advantage:  This helps you know when to buy, when to sell, when to renovate for profit, or when to release your triplex development to the market for the best price or rent.

4. You can see firsthand what adds value at transaction time.

The advantage:  When you’re renovating or building new, you know where to spend the money to add value and gain the highest price.

5. You’ll understand more about buyer demand – where people increasingly want to live and what dwelling type they want to live in.

The advantage:  You’ll know what will rent and sell fastest.

HOW TO BECOME A SELLING AGENT

As the national real estate licensing system proposed for implementation in December has now been canned, it’s licensing business as usual across each state. 

Despite the false start of the nationalised system, three consistencies already appear to be evident across the nation when it comes to selling agent requirements.

These include: the minimum requirement of a year 10 high school certificate, the age of 18 to practice, and the recommendation by real estate institutes that new selling agents start out as assistants to selling agents, also commonly known as ‘agent representatives’, before they become a selling agent.

What that means is that as an agency representative, they’ll learn all the tricks and traps of the selling agent profession. 

It’s essentially a more glamorous name for an apprentice.

An introductory course of study is usually completed, most can be undertaken online or in class, and generally run for two weeks full-time.

This entitles the selling agent to either represent the licensed agent in transactions, or he or she can undertake a more intense course to register for their own licence.

TASMANIA

Minimum requirement:  A selling agent is referred to as a ‘property consultant’ in Tassie.

Their only legal requirement is to pass an exam with the state’s real estate regulator the Property Agents Board.

To sit for this exam, students are required to attend three weeks of classroom training or distance learning.

Within two weeks of sitting the exam with the Board about 95 per cent of candidates are successful.

After passing the course and securing a job, the candidate’s details are registered at the real estate office where they their first role.

QUEENSLAND

Minimum requirement:  Selling agents must be a ‘suitable person’ as defined under The Property Agents and Motor Dealers Act 2000 (PAMD Act).  People affected by bankruptcy or criminal convictions may not be eligible.

Brisbane city central business district skyline by day

The PAMD Act requires all individuals undertaking the functions of a salesperson or property manager in Queensland to have a registration certificate.

To obtain a registration certificate the individual must complete the registration course, which they have six months to complete from the moment of registration.

They can study from home, at their own time by distance education, or attend a four-day block course in any Queensland region.

Individual must also complete and submit their registration certificate application (a PAMD form 3) to the Office of Fair Trading.

In Queensland, a holder of a registration certificate may undertake the work of a salesperson, property manager or assistant to those roles as an employee within a real estate agency.

This certificate authorises the holder to work across the spectrum of residential real estate, commercial and industrial, business broking and buyer’s agency.

Note: Queensland is the only state where a capped commission percentage exists, but this is likely to change under the Property Occupations Bill 2013, which will deregulate real estate commissions.

Currently, selling agent fees are capped at five per cent of the first $18,000 of the sale price, and 2.5 per cent of the balance of the sale price.

VICTORIA

Minimum requirement:  Agent’s representatives undertake a one-week Agent’s Representative Certificate course at the Real Estate Institute of Victoria or an approved training institution. 

Once successfully completed the individual is eligible to be employed as an agent’s representative provided they haven’t been found guilty of a disqualifying offence such as fraud, dishonesty, violence or drug trafficking, nor have been declared bankrupt in the previous 10 years.

NEW SOUTH WALES

Minimum requirement:  Certificate IV in Property Services (Real Estate) will allow individuals to meet the Agents Regulations Act 2003 requirements to become licensed to transact property.

SOUTH AUSTRALIA

Minimum requirement:  Certificate IV in Property Services (Real Estate) will allow an individual to register with Consumer and Business Services for a real estate licence.

WESTERN AUSTRALIA

Minimum requirement:  The CPP07 Property Services Training course will allow an individual to become licensed.

Individuals must also be a person of good character and repute and a fit and proper person to hold a certificate of registration. 

NORTHERN TERRITORY 

Minimum requirement:  An accredited short course in real estate or property services needs to be successfully completed.

Selling agents must hold a certificate of registration, be represented by a real estate agent and obtain a National Police Certificate.

AUSTRALIAN CAPITAL TERRITORY

Minimum requirement:  Certificate IV in Property Services (Real Estate) will allow individuals to meet the Agents Regulations Act 2003 requirements to become licensed to transact property.

So now you’ve weighed up the pros and cons of making property transactions your day job.  Still flashing that slick smile?

THE PROS AND CONS

Pros

• In a good selling market, commissions can be lucrative.
• You don’t need a university degree to become a selling agent. Most licensing courses can be completed within two weeks.
• The longer you’ve been in the industry the bigger your database of contacts will become, and the more money you could earn.
• You’re out of the office a lot.
• The negotiation and people-reading skills gained can help you negotiate better on your own investment properties.
• You hear about properties before they enter the market. Also, you hear about when new infrastructure, gentrification or developments are proposed for an area often well before anyone else does.
• Your day-to-day knowledge of the property market and its cycles is far superior to most property investors.
• You can see firsthand what adds value at transaction time, which means when you’re renovating or building new, you know where to spend the money to add value and gain the highest price.
• You’ll understand more about buyer demand – where people increasingly want to live and what dwelling type they want to live in. This means you’ll know what will rent and sell fastest, giving you a good advantage as an investor.

Cons

• Having to tolerate the reputation of a selling agent. Many still joke they’re as dodgy as a used car salesperson.  They’re often labelled as ‘untrustworthy’, though many selling agents believe this stigma is fading.
• During a slow market, a great income can be more difficult to achieve.  
• Giving up weekends to open houses, conduct auctions, trying to tie up a deal before the infamous Monday morning meeting. Even on the weekday reprieve, the phone is running hot. And breaks are unheard of when agents only 15 or 20 minutes between open homes, to drive there, put the ‘open for inspection’ signboard out, unlock the door, put the brochures out and welcome in the prospective buyers.
• Evenings are also difficult for agents to shut off. Buyers can’t always get to a property during normal work hours, so evenings are when private inspections often happen. This means the agent can work up until 8pm many nights of the week.
• Having to smile and remain confident despite any faults the property might have.
• The personal mobile phone number becomes the advertised contact number. So agents can never really shut off.
• Limited workers’ rights. If a selling agent isn’t performing to the agreed level, at least to cover their peak cost, they can be sacked with little notice – two weeks in most cases.
• Dealing with angry and disappointed buyers.
• A free, no obligation market appraisal can take up a lot of time for little or no return.

This artcile was written by Nicole Navarone and originally published in Australian Property Invetsor Magazine and has been republished with their permission