Do Real Estate Companies Pay for Licensing (Whats the Catch?)
Day 16 of 30 – Robert Earl’s Prospective Agent Mentorship Guide – Digital Agent Show
The cost to get a real estate license will vary by the state, but it’s not unusual to shell out over $1,000 in total. Between the pre-licensing course, exam fees, and application costs, it all adds up quickly. So is there a way to get your company to pay for your license, and is there a catch?
Some real estate companies will pay for licensing for brand new agents. But there’s a catch; you’ll either start at a lower commission split, be forced to work under the broker’s name and not your own or have the cost of licensing and more taken out of your commission checks.
There’s no one size fits all answer for this question, as all real estate companies (and even individual offices) run the show differently. So let’s go over whether real estate companies pay for licensing, and if they do, what’s the catch?
THE COSTS OF GETTING LICENSED
Getting your real estate license is a process that tends to be quite costly, making it just out of reach if you’re currently living paycheck to paycheck. Just when you think that’s the last they’ll milk you for; another unavoidable fee suddenly stands in your way.
That’s why many new agents opt for a real estate company willing to pay for licensing.
So take a look at the standard costs that come with licensure:
- Pre-licensing courses or real estate school: $200-500
- Exam prep programs: $100+
- Exam fee: $85-200
- Fingerprinting and background checks: $25-70
- Application fee: $100
- License fee: $50-200
By the time you get your license (assuming you pass your exam and pre-licensing course on the first attempt), you might be out $1,200 or more. And this doesn’t take into consideration the costs of marketing your brand, buying business cards, and subscribing to paid platforms like Zillow Premier Agent.
So having your real estate company pay each fee along the way sure sounds convenient.
In another article, I take an honest look at how difficult it is to get a real estate license.
GETTING LICENSING PAID FOR
Not surprisingly, real estate companies probably won’t pay for your licensing after the fact. So that means you’ll need to reach out to local brokers and companies in the area before you enroll in pre-licensing courses. This could set your career back a few weeks or months as you make appointments with all local companies.
What exactly do they pay for?
The smallest portion of cost for the prospective real estate agent is the expense for the real estate school itself. Most prospective agents don’t understand all of the cost involved. They see the cost of the real estate school, look at their bank account or the available balance left on their credit cards and panic.
This panic leads to them making deals to try to get the cost of the course covered as a short term solution. These short sighted decisions can end up costing the newly licensed agent in the long run.
As I explain in this article about financial aid for real estate schools, there are a few options to pay for your real estate school that are much better than asking your future employer to cover the bill. One of the schools that I recommend here at the Digital Agents Show offers a payment plan for the classes that help the student manage their cash flow as they are meeting the education requirements.
Yet, this also has a few benefits as a new agent.
Most importantly, you might be able to find a real estate company willing to cover all of your licensing fees from start to finish (with caveats, of course). Though rare, some companies will make this offer apparent in their online job listings, writing something similar to “will pay for real estate license” somewhere in the ad. Other companies will keep this offer under wraps but might be able to negotiate to cover the fees when you meet with them.
But even if you don’t find a company willing to do so, you’ll have experience interviewing brokers, and you might just find one that you’ll want to work with once you get your license. This is something that all new agents that want to hit the ground running should be doing anyway!
Regardless if you can get a broker to agree to pay for licensing, still interview brokers before you get your license (and while you’re taking your pre-licensing course).
THE CATCH BEHIND GETTING YOUR LICENSE PAID FOR
There are real estate companies out there that are willing to pay for the real estate course to license new agents looking to work with the company. But of course, like anything in life, you should never assume that having your licensing paid for comes at no cost to you. Did you really think a company was going to bite the bullet and spend $1,200 on an agent they don’t know can produce?
Having your pre license real estate license cost paid for sounds great right now, but you might end up paying more in the long run. Here’s why (and how):
COMMISSION SPLITS
As a brand new real estate agent, your commission split (how much you earn vs. how much you share with your broker) can range anywhere between 50/50 and 70/30—though some companies have more complex splits that change over time.
To make up for what you cost the company for your licensing fees, don’t be surprised if you start on a lower split to “pay off what you owe.” Instead of a 60/40 split like your company normally starts new agents at, you might be at 50/50 for your first year. This can be a difference of tens of thousands of dollars in your bank account by the end of the year.
On top of starting you at this lower commission split, you might also have to sign a contract stating that this split will last for several years along with added processing fees. Or, you might not be entitled to an increase in your commission split that many agents look forward to after a period of success, despite proving yourself to be a high volume producer.
There’s also the chance that your broker or company will let you off easy.
And when we say that, we mean that they’ll simply take the total cost of licensing (and maybe a little more) out of your first commission check to pay the company back. This is the best-case scenario, but it still highlights the fact that having your license paid for is absolutely not an offer for “free” licensing.
That $1,000 you saved by having your company pay for your license up-front has now cost you $10,000 or more. If this is what a company is willing to offer you, and you want your license paid purely to save a dime, it’s not worth it!
If you’re brand new to real estate, you might not even realize just how big of an impact each percentage point on your commission split makes. You are just happy to start your real estate career as a licensed real estate agent and get started selling a couple of homes.
In most cases, real estate agents are independent contractors
The real estate license cost are a small portion of the invest that you will need to make to start your real estate business. You will also need to pay more money for the real estate license exam, the national association of Realtors, the multiple listing service and continuing education.
You are starting your own business and you do not want to feel like you are in debt to a company when you first get started. A good real estate broker should not put you into this position.
Myself, I like to work independently. I remember too clearly what it was like to have a job and a manager looking over my shoulder. And I sure don’t want to been in a position of owing them or the company any money.
I learned early on that some companies prey on unsuspecting agents that don’t know any better.
BROKER VS. AGENT
Some brokers or real estate companies say all the right things right off the bat. They know what to say to make new agents feel comfortable and willing to sign on with them once they get their license. But remember, you are your own real estate business. Being affiliated with a brokerage is a requirement of the state’s real estate commission.
You’ll be surprised to hear they’re eager to offer a 60/40 split, similar to what the other companies are willing to offer without paying for your license.
They might not be dropping your commission, but they’re sneaking in another way to benefit the brokerage instead of the agent. And it’s not at all uncommon for a real estate company to require you to do all business under the broker’s name rather than your own.
They might also keep you in a certain commission split for a longer period of time, earning the company more money as a pay back for the small price they paid for your education requirements.
You might not realize how dangerous this is during your first few months, as you’re still getting a decent split and getting experience under your belt. But with your broker’s name on all MLS listings and yard signs, you’ll never be able to build your brand, reputation, or referral business.
You’ll always be in search of new listings—they won’t come to you on name recognition alone, something all agents look forward to after years in the real estate industry—and your broker will make a killing off all your hard work.
Again, this is a choice you have to make, but this could be a career-ruining caveat. (I posted about my experience with changing real estate companies)
This is only the beginning. If the company that offered to pay for your required education is not able to train you how to do your own residential real estate lead generation and expects you to dependent upon the company for leads, you could be starting off in the real estate industry on the wrong foot.
I have also heard of companies that pay in advance requiring higher desk fees from the agent or a set number of open houses per month to benefit the company and the established agents, all at your expense.
Real estate is an equal opportunity, unequal reward business. Starting off with the cost of the class is a small price to pay to ensure your own success.
What about Keller Williams Realty offering free real estate classes?
A handful of specific Keller Williams office announced in 2022 that they would be rolling out some pre licensing course in select offices. Again, the devil is in the details with this program. The Keller Williams website states the following: “Each market center is independently owned and operated and may have a unique process for onboarding students to their program.” That being said, if you would like to find out more information about if the program is available in your state or area, please complete this form that we can better assist you.
The only time I can see a company paying for the real estate classes and continuing education
If you are an employee of a business that has to work as a property manager with commercial real estate I can see the company and not a real estate brokerage paying for the real estate classes as a protection for working with real estate property. Doing so would protect the company from the exposure of conducting real estate business without a license.
In this scenario, the employee would hold a license, but not be active with a real estate brokerage.
The real estate agent would not be actively working with home buyers and sellers in the residential real estate market. Their license would assist them in the areas of property valuations, lease agreements and tenant management.
Too many companies have been burned
I can tell when the latest real estate investment seminar is getting ready to be held at a local hotel and the investment guru holding the event starts advertising in the area. The phone starts ringing and the inquiries about going to real estate class start coming in just before the event and after it has been held.
A new batch of real estate investors has been born and they have been told that getting their real estate agent license will give them access to more potential deals. They are also trying to do it as cheap as they can.
They are not looking to become professional Realtors and generate ongoing commission splits for the real estate brokerage company that they work with. Rather, they are going to do a deal here and there over the course of the years their license is active. Frankly, this is not a reason to get a real estate license.
This is a tremendous risk to the real estate company. As such, they are not going to be looking to pay for the real estate class on behalf of the part time investor. Companies would prefer these investors work with already licensed agents that are plugged into the latest regulations and brokerage required education.
Real Estate License Cost are just part of the investment
Now you have a choice to make: Are you going to pay for your real estate license out-of-pocket, or will you agree to have your real estate company cover the costs?
If you choose the latter, do your due diligence and analyze every detail of the contract before signing it. Ask yourself, Is it worth the cost? Take note of things like commission splits and how they’ll last, whether you’re allowed to do business under your own name, and how much will be taken out of your first check to pay your broker back.
Don’t ever sign a contract if you feel it’ll limit your career or your income.
If you are ready to get started, you can explore the 7 best ways to become a Realtor in this linked article.
