So, you've decided to become a real estate agent? Congratulations! It's time to get to work. The process, qualifications, cost, and timeline for becoming an agent differ from state to state, so it's important to consult your local bureau of real estate to learn exactly what steps you'll need to take.

However, most states require you take a pre-licensing course, submit an application and appropriate fees, and renew your license before it expires. Here are the steps and approximate costs you should expect when applying for a real estate license. Good luck and happy selling.

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1. Understand state licensing and education requirements.

First, get your bearings. The requirements for pre-licensing courses and licensing applications are different in every state. Check with your real estate commission to understand what's required to obtain your license.

Most states require 60-90 hours of college-level education on real estate basics including titles, deeds, contracts, and property ownership.

Classes are available in person and online, but your courses and school must be approved by your state's real estate licensing authority. Before you pay for a real estate school, make sure it's accredited and acknowledged by your state.

If you're already a licensed real estate agent, see if your new state has a reciprocity agreement with the state where your license was issued. If a reciprocity agreement exists, your pre-licensing requirements might be less. This doesn't mean you don't need a license in your new state -- but you might be able to skip a step or two in the licensing process.

Real Estate License Reciprocity

Idaho has reciprocity agreements with Wyoming, Oregon, and Montana. If you have an Idaho real estate license, you're not required to take real estate pre-licensing courses if you're applying for a license in one of the other three states. You are, however, required to take state-specific portions of the exam in Wyoming, Oregon, and Montana.

Other parts of the country have reciprocity agreements in place as well -- read this guide to learn more about these agreements if you're interested in taking your real estate license across state lines.

Your pre-licensing requirements also might be less if you have a degree in real estate or are a licensed attorney.

2. Take a pre-licensing course.

Becoming a real estate agent requires time and a financial investment. Understand what resources you'll need to budget before you begin.

For example, some pre-licensing schools meet for a set number of classes over several weeks, while others allow you to move through courses at your own pace. Know what your options are, and choose the one that's right for your lifestyle and schedule. Likewise, the cost of pre-licensing courses vary per school and state, but you can expect to pay between $200 and $1000 for your courses.

3. Pass your state licensing exam.

Once again, depending on your state, the licensing exam will take between 1.5 and 3.5 hours to complete. Be prepared to pay an exam fee between $15 and $60.

The test will be approximately 100 multiple choice questions and cover national and state principles and laws. While the minimum score for passing differs per state, many require between a 60% and 75% score to earn your license.

Make sure you obtain an official real estate transcript or certification of completion from your school and a copy of your exam score to include in your real estate license application -- which brings us to our next step.

4. File a real estate license application.

Once you've successfully passed the exam, submit your test results, license application, and application fees. License application fees will cost between $50 and $250, and you might be required to undergo a background check which will cost between $40 and $80.

Check your state's real estate commission to find out whether you need to have Errors and Omissions (E&O) insurance before you apply. E&O insurance protects real estate agents from financial losses and lawsuits filed as a result of their real estate work. Sometimes, your brokerage will sell you E&O insurance. If not, you might be required to obtain it before you submit your application.

In every state, you must be at least 18 or 19 years old and have either a GED or high school diploma to apply for a real estate license. Also, you should be authorized to work in the United States, and many states require you to be an in-state resident.

Once you've submitted your application, your license will take between one week and two months to process.

5. Find a real estate brokerage.

You have your license. Great! But that might not mean you can start selling houses right away. Most states require you to work with a real estate broker who sponsors your first two-to-three years as an agent.

A real estate brokerage is simply an agency or office where real estate agents work. Because you'll likely need a brokerage to generate income, it's a good idea to find a broker before graduating from your training course. Here are a few things to consider when choosing a brokerage:

The Brokerage Type

The brokerage you work for determines the type and volume of work you do, the training and mentorship you receive, and the company culture you're a part of every day. Here are three common types of brokerages:

National Franchises 

National franchises like Keller Williams Realty, RE/MAX LLC, and Coldwell Banker provide structured training, instant name recognition, and more resources for new agents.

Boutique-Style Brokerages

Smaller or local brokerages may provide personalized training and more room for growth and advancement.

Virtual Brokerages

SaaS -- or Software as a Service -- has ushered in a new type of real estate brokerage that's entirely online. Benefits of working with a virtual brokerage include higher commission splits (more on that below), lower desk fees (desk rent you pay to your brokerage), and better technology.

Company Culture

You need to like where and with whom you work, so here are a few questions to ask:

    • Does the brokerage require additional courses or training?
    • Do they offer a mentorship program for new agents?
    • Do they require a certain number of hours of "floor time" or work for other agents?
    • How are leads distributed?
    • Will you be required to do all your own marketing?

Commission Structure

Before accepting an offer from a brokerage, make sure you understand their commission structure. Here are three common structures:

Traditional Split Plans

You get 50% of the commission and your brokerage gets the other half. These plans are usually accompanied by low or no desk fees.

High-Split Plans

You get a higher percentage of the commission -- anywhere from 70% to 100% -- but these commission plans are usually accompanied by high monthly desk fees.

Hybrid Plans

These plans combine attributes of the two plans listed above. Hybrid plans usually offer agents a 70% split at the beginning of the year and increase that rate to 100% when agents meet certain monetary goals.

Additionally, some larger franchises charge "franchise fees" ranging from 5% to 8%. Ask potential employers whether additional fees are taken out of your commission, so you understand exactly what you're signing up for.

6. Join the National Association of Realtors (NAR).

You've earned your license and found a sponsoring brokerage, so you're a realtor, right? Still (kind of) wrong. While not legally necessary, you must join the National Association of Realtors (NAR) to call yourself a REALTOR®.

This designation is also required if you wish to participate in most Multiple Listing Services -- also known as MLS -- which allow you to see other realtor's listings.

If you aren't a member of NAR, you claim the title of real estate agent and are legally able to work in the field, but your earning potential is limited without access to the MLS.

Step 7: Renew your license regularly.

Getting your real estate license is a lot of work, so don't forget to renew it. Check your state's requirements to see when your license will expire -- usually every two or four years.

Many states require agents to complete a set number of course hours to be eligible for renewal -- between 22 and 90 course hours every two years. These additional courses ensure you're up to date on the evolving national and state markets and regulations.

Check with your state's licensing office to learn their renewal requirements so you're not scrambling to fit 90 hours of coursework into the four days before your license expires.

Becoming a real estate agent is a big decision requiring time, attention, and dedication. But the result is almost unlimited earning potential and the possibility of someday being your own boss -- two things that make many salespeople tick. Sound like something you're interested in? Get started today.

Learn more by reading our list of real estate business card ideas.

This article does not constitute legal advice. The steps required to obtain a real estate license may differ from state to state, so you should seek your own legal advice to ensure you follow the correct process.

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Originally published Dec 12, 2018 4:45:00 PM, updated May 28 2021


Real Estate