The real estate industry is a large part of our economy. It entails 17.3% of the Gross Domestic Product  and is a large window on the health of the US economy. When real estate is up, the economy is doing well and vice versa. People have been buying, selling, and investing in real estate for thousands of years. It even goes back to Biblical times:
There was a landowner who planted a vineyard, put a wall around it, dug a wine press in it, and built a watchtower. Then he leased it to tenant farmers and went abroad (Matthew 21:33)
The purpose of this post is to discuss the numerous types of jobs in real estate. In fact, CBU has many alumni in the real estate industry and most of the donations for the Jabs School of Business building came from wealthy real estate developers. As far as wealth building is concerned, it is number two behind stocks and bonds.
There are multiple opportunities to work in the real estate industry part time. As an example, I have had my broker’s license since 2005. I was a business broker for a short time, I used my license to flip and redevelop properties (which was a blast). What an ethical way to make money. I bought the ugliest homes in great neighborhoods and made them a great place for a family to live! Now, I concentrate on buying and selling my own homes, and helping my family by forgoing my commissions and allowing them to use them as part of their down payment.
Sales Agents and Brokers
There are two types of real estate salespeople: brokers and agents. With three real estate courses and passing the State of California Exam, you yourself can be a licensed realtor and sell property. When an agent works for a broker, the standard commission for selling a house is 5-6%. The agent who obtains a listing (someone who wants to sell their home) will get half of the commission minus the fee charged by the broker for overseeing the transaction. The other half goes to the selling agent/broker. To be a broker requires nine classes and passing the broker’s license exam. A broker can open their own real estate firm, and manage agents selling homes under them. Agents and brokers see the entire market of what is for sale, and often invest personally, flip homes, or manage their own rentals.
A career in real estate sales is by far the most prevalent. Most agents specialize in residential sales, a few decide to be a business broker and represent buyers and sellers of small businesses. The commission to sell many businesses is 10%. Remember, real estate is straight commission, there are no salaries. The harder you work, the more you make!
Some agents/brokers also engage in property management. For a fee of usually 10% of the monthly rent, they will find and screen tenants, make sure repairs are made, and rent is paid for the landlord.
Large commercial brokers represent buyers and sellers of large commercial properties such as apartment buildings, warehouses, shopping centers, and raw land tracts. Large commercial firms require a broker’s license and a bachelor’s degree. Imagine the commission on a multi-million-dollar property!
The next position needing a sales license is the mortgage broker or loan broker. For a commission, this person obtains a loan enabling someone to buy a home. There are fees and charges for obtaining the loan. This person is very detailed oriented and the math required is very basic.
These salespeople offer title insurance to home buyers to make sure the property is as described and guarantees there are no clouds on the title, liens, or easements that would harm the valuation of the property.
Appraisers value the property while it is in escrow. This is required if the buyer is financing the purchase. The appraiser has specialized knowledge of valuation principles and will value the home several ways, the most common being the comparable approach or “comps” as they are called. This means researching past sales for a similar house in a similar neighborhood and making adjustments for improvements etc. This position requires specialized training.
When a house is sold, it enters escrow which is an unbiased third party who has a fiduciary responsibility to make sure everything is done correctly. It oversees the contract, the funding, removal of any liens against the property, and makes sure the taxes and insurance have been properly treated. When all is done correctly, the deal is “closed” and the buyer can pick up the key and move in.
Real Estate Development
Developers buy raw land and develop it into shopping centers, housing tracts, warehouse parks etc. It is very lucrative, and usually requires significant financial resources and people. These are most often corporations. However, may people can start small by redeveloping small properties and grow from there.
Real estate as a career can be very fulfilling. Helping people buy or sell their homes, helping clients invest, or investing in real estate yourself are all valuable pursuits.
Keanon Alderson, Ph.D.
Professor of Business
Member of Internal Review Board
Featured photo from: http://arikeadl.com/real-estate-purchase-tax-iran/