What real estate agents do

A common question from people outside of the real estate industry is “what do agents do to earn a whopping 5-6% of the largest purchase of my life?”. The answer is a lot of different things.


Building a business and getting new customers

Real estate agents are almost always independent contractors. They work for a brokerage but  run their own business. This means a lot of their time is administrative tasks and business development:

  • Running the business: managing expenses, software, and service providers is a large time commitment for agents. The brokerage of course helps with some of these, but each agent and/or team is a mini-business.
  • Prospecting: finding new business is a constant battle. This is especially true for new agents. Some brokerages provide leads but most agents have to find their own sources of business. Often this is building out a strong network of prospective buyer and sellers. Agents also explore paid channels like Zillow.

Helping buyers

Many new agents focus on buyers more than sellers. That said, even veteran agents often help many buyers. Buyers can be high-effort but are important for building long-term relationships with. It’s hard to tell how close a buyer is to making a decision, meaning that the time investment can be significant.

  • Searching: Assisting clients with their home search is a key responsibility of a buyer agent. They will learn the client’s preferences first. Then they scour the multiple listing service (MLS) to recommend potential matches.
  • Touring: Once a client has picked some prospective homes to look at, the agent helps set up tours with sellers and agents. This can take a lot of back and forth. It can also be pretty seamless if there is an open house or showing management system in place.
  • Negotiations and closing: A buyer’s agent will spend time negotiating offers on behalf of their client. They will also support ongoing questions throughout. Many also provide suggestions for mortgages, home inspectors, and other service providers.
  • Post-closing support: A buyer’s agent work isn’t done when the home sells. Agents make recommendations for handymen, home warranties, and other home services.
Running a search on a Multiple Listing Service such as Bright (DC/MD/VA/PA) is an early task for a buyer’s agent. Source: bright MLS.

Working with sellers

Agents representing the seller are also called listing agents. They have a more predictable path than buyer’s agents do. Often there is an existing relationship with the client - they may have helped them buy. Even with no relationship, it's usually not a question that the client is going to sell their home. On the other hand, some buyers go on 25 home viewings and then decide they don’t want to move.

  • Listing presentations and CMAs: Seller’s agents compete with other agents for listings. They will put together materials to prospective clients on the value they add. They then present these materials in a listing presentation. One component is showing how they will price a home to move fast and at the best price. To do this, they put together a comparative market analysis or CMA. The agent will look at similar homes that were recently sold. Then they will present these as a comparison to where they recommend the client's home would sell.
  • Pre-sale prep: Agents supporting sellers provide a lot of advice on how to prepare a home for sale. This ranges from recommending painters and stagers to coordinating the work themselves. Agents also help with photographers to ensure a listing stands out.
  • Marketing and listing: Marketing a listing on the multiple listing service (MLS) is a key task. All agent-represented homes offering buyer commissions are on the MLS. The listing agent posts a compelling description, accurate data, and beautiful pictures. They  replicate this process on major marketing platforms like Zillow. They will also recommend other marketing channels. Sometimes this may be local magazines. Other times, it may be online channels like Facebook or Nextdoor.
  • Coordinating open houses and tours: Seller’s agents oversee a lot of touring work. They schedule open houses to attract walk-in traffic. They also coordinate tours with buyer agents or the end buyers. In many markets, agents use software like ShowingTime to coordinate tours online.
  • Negotiation and closing: Listing agents spend a significant amount of time negotiating offers. They also support any ongoing questions related to the transaction. Finally, they  recommend any service providers related to closing.
Presenting a comparable market analysis (above using Cloud CMA software) is a key task. Agents use this to recommend how to price a home. Source: W+R.

Rentals and property management

Most veteran real estate agents focus on home sales, but rentals are often an entry point for agents.

Rental real estate agents and in-house licensed staff

In most markets, there aren’t separate licenses for leasing agents. Illinois is a an example of an exception, where there is a license that only allows for rentals. Many agents will start with rentals to grind earnings early in their career. Others use them to generate income between home sales.

In rentals, there are buyer’s and seller’s agents, but the buyer is the renter and the seller is the landlord. The process is the same as sales for responsibilities. But the process is faster (a few weeks) and the dollar amounts are smaller.

The typical commission for a rental is a month of rent. This is split between the buyer and seller agents. If the landlord is not using an agent, they keep their commission and only pay the buyer side. In some markets commissions can be as high as three or four months of rent. Unlike home sales, many rentals occur without an agent involved. Agents often support hands-off landlords who are out of state. These landlords don’t want the hassle of preparing, marketing, and showing. For larger properties, agents help fill hard-to-move units in a building.

Another source of income in rentals is application fees. Credit checks are cheap (under $25). Application fees above this amount becomes income for the landlord or agent. In some cases, application fees have become very high. Some states have created legislation to limit how much can be charged.

Application fees, historically a rental revenue opportunity, have come under fire recently. Source: Curbed.

Property management

Many agents focus on property management to generate income. They help landlords with ongoing operations of rentals. Some of this includes marketing, staffing, and maintenance. Property management fees are often 5-15% of rent. In some cases a property management license is required. Often a brokers license covers property management licensing. As a result many brokerages launch property management arms. This way, they can sell a property to an investment client. Then they help find a renter. After securing a renter, they manage the property. This generates three revenue streams (sale commission, rental commission, property management fees).

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