Common Real Estate Agent Mistakes To Avoid
Congratulations on earning your real estate license! You're ready to make a splash in the real estate industry, but what if we could help you skip some of the stumbles and hurdles other new agents face? This real estate guide covers five common mistakes that new real estate professionals often make so that you can start your career off on the right foot.
1. Poor Budgeting and Overspending
People start working in real estate because they can earn a significant salary, but with the high financial ceiling comes great responsibility. Consider what you'll be taxed, what you'll need to save, and any rough spots that may pop up along the way. You didn't choose a real estate career to hurt your financial standing, so it's crucial to be thoughtful about your finances and build good habits from the beginning of your career.
One of the major struggles new real estate agents face is not having enough financial reserves to support them in the first few months of their careers. Knowing what you need and budgeting for it prevents a great deal of anxiety. Before committing to the real estate industry full time, sit down and figure out your monthly bills, unexpected expenses, necessities like groceries and gas, business overhead, and spending money.
At a minimum, you should have a few months' reserves set aside to allow for you to comfortably build your business and close your first sale. Maintaining that three-month buffer is just as important for experienced agents as it is for those new to the profession. Real estate invariably has slow periods when you make less income than in more productive months.
Here are some tips to help you avoid any financial missteps:
- Know Your Budget: Before you allocate funds to cover your personal and spending budgets, set aside self-employment taxes from each commission check. Keep three separate accounts:
- Taxes: Stay up to date on current self-employment tax rates and put that money in its own account. Make quarterly payments to the IRS. This is incredibly important!
- Personal: Account for all your monthly personal expenses, including mortgage or rent payments, utilities, groceries, and gas.
- Business: Create an itemized list of what you need to operate your business, such as gas, Broker fees, insurance, training, and marketing.
- Budgeting Tools: Find a budgeting program or app that you can easily access and keep track of your finances. Excel's spreadsheet, for example, is a powerful platform that allows you to manage your finances in one place.
- Actual Spending vs. Budget: Tracking what you actually spend on a monthly basis and comparing it to your budget forecast helps you make necessary adjustments and improve money management.
2. Choosing the Wrong Real Estate Brokerage
Choose a brokerage that shares your values and will help set you up for success as a real estate agent. Once licensed, new agents are often too eager to select a brokerage without conducting the appropriate research. Remember that brokerages are real estate businesses created with the intent to make money, so ensure your brokerage aligns with your desired work environment, communication style, and business expectations before committing.
You should research a few brokerages and compare what they offer:
- Look at each company's online and physical market presence.
- Does it have a well-organized website?
- Do they have a regular social media presence with helpful content?
- How inviting is the building's exterior and interior?
- Does it have an eye-catching logo that's easily recognizable?
- Compare the support each brokerage offers its agents.
- Will you work with a mentor in your first year?
- Are there in-house training opportunities?
- Is there office space and phone service?
- Do new agents receive quality leads?
- Will the brokerage help you grow your sphere of influence?
- Evaluate the Broker's fee schedule.
- Are you responsible for a flat monthly fee?
- Do you split commissions with the Broker?
- Does the split change as you gain experience and your numbers improve?
3. Failing to Create a Marketing and Business Plan
First-time agents often forget that they'll need to market themselves to succeed in this industry. As such, you'll need to create a business plan with an emphasis on your marketing plans. Setting these up properly, and early, helps to prevent avoidable problems down the road — like wasting your time on efforts without tracking whether or not those strategies deliver.
Unfortunately, real estate agents can become complacent in their marketing efforts and take too long to create a solid business plan. They may rely heavily on referrals to bolster their new client contacts or invest in creating a professional-looking website, and then fail to regularly update it with new information. It's true that real estate is one of the most competitive professions, but there are also more opportunities than ever to market your expertise. Successful real estate agents are usually firing on all cylinders, so set yourself up properly.
Leverage every opportunity to market your brand. Take advantage of traditional and digital marketing platforms. Start with your inner circle of contacts; let your family and friends know that you're available to assist them with their real estate needs.
Join professional organizations where you can expand your sphere of contacts. You may want to start with a real estate-specific membership, such as the National Association of REALTORS®. Don't overlook other organizations, though, like your local chamber of commerce or rotary club. Your sphere of influence can grow anywhere, so keep an eye out for opportunities to connect with your community.
Then, begin building your online presence. Dive into digital marketing with your own SEO-optimized website and keep it refreshed with new material. Establish yourself as an expert in a niche real estate market, offering timely and informative blogs on the subject. Participate in Facebook, LinkedIn, and Twitter conversations., and focus on building conversations. You may be surprised just how many leads you're able to attract by having a reliable social media presence.
4. Failing to Learn the Real Estate Market
There's nothing wrong with wanting to know how the real state market's doing from a national or global perspective. You got into real estate because it interests you, and you should learn as much as you can about it.
But don't overlook the importance of staying on top of your local market. In fact, that's the only market that matters to your clients. Hone that focus a step further and keep tabs on the specific neighborhoods and types of property you frequently market.
Stay current with local comparative market analyses. Research comps of current and recently sold properties at least weekly. Stay within a few-mile radius of your niche market, and note the condition, price history, and days on the market for each listing.
Talk to area residents and business owners to get their perspective on the neighborhoods you frequent. They have first-hand knowledge of the area's amenities and activities that could appeal to potential buyers.
Then, network with other real estate agents with area listings, and don't overlook local Mortgage Loan Officers. They can add another layer of information about neighborhood properties while exchanging referrals.
On the digital front, enter your zip code into Patch to gain access to current local information and news. Nextdoor and Facebook Neighborhood also provide neighborhood-specific real estate data and general area news. Facebook Recommendations is an extension of Neighborhood, offering local business recommendations from area residents.
Finally, old-fashioned city newspapers and neighborhood papers deliver local news reporting and current events, so be sure to pick some up every now and then to become an expert in your niche market and the go-to real estate agent for your neighborhood.
5. Expecting Immediate Success
You've earned your real estate license and set up shop with a brokerage, now you're ready to get out there and take the world by storm. The biggest mistake that new real estate agents make is forgetting that they'll need more than just their Pre-Licensing education to find success; they'll likely need a mentor. A mentor can help you navigate your local market and offer insight into their past missteps so that you can learn from their mistakes.
If your brokerage doesn't match you with a mentor, look to forge relationships with someone experienced in the type of real estate that appeals to you. It's important to partner with someone with whom you have a rapport and who shares your values and goals. Just remember that you'll need to add value to the relationship, too. For more mentorship tips and tricks, check out our blog here.
Above all else, remember that real estate is a long game of building relationships, so don't expect immediate success. It takes continued and focused effort to become a trusted member of the community. Be willing to listen and learn.
Bonus: Legal Protection for Real Estate Agents
Now that you know which missteps newbies often fall into, it's time to examine the impact that real estate agents' mistakes can have, including the risk of being sued, which is why the most successful real estate agents never stop learning about industry updates (thanks, Continuing Education!). Familiarize yourself with issues below that could result in litigation:
- Failure to Advise and Identify: A real estate agent is obligated to disclose any issues or concerns identified during the walkthrough.
- Breach of Contract: A real estate agent may be found in breach of contract if they fail to adhere to the strict timeline outlined in the contract. They could also be in breach of contract due to negligence, including the sharing of confidential information.
- Negligence of the Real Estate Agent: If the client believes there is an issue with the property the real estate agent failed to notice or share, there could be grounds for a lawsuit.
- Failure to Disclose: The seller may fail to disclose property issues or concerns, but the real estate agent could also be liable if it's proven they became aware of a problem and failed to report it.
Finally, carrying errors and omissions (E&O) insurance protects the agent and Broker from mistakes that might occur while performing professional duties. In essence, it's liability insurance that may include reimbursement for the following if legal action is taken against you:
- Attorney fees
- Court costs
- Administrative fees
- Settlement costs
While E&O insurance provides you with protection against losses and damages as mentioned above, separate liability coverage is typically needed for bodily injury or property damage occurring at an open house.
Now that you have a better grasp on the biggest mistakes that first-year real estate agents make, we hope you spend less time feeling unsure of yourself or your real estate knowledge and more time selling homes. Best of luck!