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Posted On: 12/30/2015

QUESTION:

I’ve just completed my training to obtain a real estate license and passed the state test. I can hang my license with a referral company and keep virtually all the commissions I earn, however, they do not offer training and support. The other option is to go with a local broker who will split the commission and also charge an office fee and a transaction fee on my first three sales. They do have training and mentors, but the mentor also gets a piece of the commission – plus the broker has a franchise fee. I’m concerned that with the splits and fees the second option is too costly.

ANSWER:

“Cost” is in the eye of the beholder, and to this viewer the charges you describe for the second broker are cheap. Here’s why:

You have taken classes and passed your license exam but lack any practical experience. This is a very real issue because when you represent a buyer or seller you’re handling one of the largest financial transactions they will make. You have a professional and moral obligation to protect their interests, but since you lack experience it’s easy to miss something. For this reason it’s crucial to first have a mentor or to work as an assistant to an established agent when starting out.

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State licensure laws require brokers to carefully oversee the actions of the licensees who work under their authority. This means the broker can be penalized if you do something that violates state standards. It also means that a broker who takes on a new licensee will have to give more time and attention to get you started. For these reasons the broker should have additional charges related to your initial transactions – after all, once you get more experience you can affiliate with another broker, and the original broker will lose the benefit of the time and training that have been provided.

When you start, potential clients will ask about your experience, but to this point you have none. The probability of getting business at first will be vastly stronger if an experienced professional goes with you to listing presentations and explains how he or she will work with you to represent your clients.

The knowledge and experience you gain from your first transactions will help you for the rest of your career. It pays to learn the hidden day-to-day work that’s essential to both get clients and successfully represent them. Essentially the fees the second broker wants are a form of tuition, fees that are likely to be far cheaper than a lost client or a botched deal.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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