Brooke D'Sousa

          As a practicing real estate Sales Agent working in residential sales, I have the responsibility of helping my clients pursue their real estate goals in a way that results in the most favorable outcome for their particular situation. I have come to know that no two transactions are the same because everyone has very different, very specific needs, and it is my job as their agent to inform them of their options and alert them to any potential risks, allowing them to ultimately decide their own course of action. Whether they are selling their house because they took a job out of state, or because they’ve outgrown their current house and need to up-size to fit their growing family, or maybe because this is their very first home purchase, I need to be cognizant of the challenges each circumstance presents given the current market to best help my clients navigate to a successful closing. I am in love with my current career, but I would like to reach higher, and becoming a Principal Broker presiding over multiple sales agents is my ultimate goal.

 

Job Description

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          The duties of a Principal Broker in real estate transactions are broad and requires the wearing of many hats. Arguably the most important responsibility is the compliance with state and federal laws that govern the sale of real estate, where each state has its own laws. Violating laws could result in fines or penalties, suspension or revocation of a license, and in some cases imprisonment. Other responsibilities are similar to that of other business owners in that they must create the company’s policies and operating procedures, recruit sales agents and other employees, provide training, manage budgets, oversee payroll, and maintain errors and omissions insurance to name a few. Principal Brokers are ultimately responsible for the actions of the sales agents who work for them, so it is imperative that they monitor the actions of those sales agents closely. This would include regular auditing of sales agents’ files to ensure legal compliance, confirm agents have met their continuing education requirements prior to each renewal cycle, and verify the agents license status remains active and in good standing (United States, n.d.).

 

General Career Path

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          In order to become a Principal Broker for the purposes of selling real estate in the state of Utah, you must meet multiple prerequisites and pay a non-refundable fee in the amount of $158. The Utah Department of Commerce Division of Real Estate lists the first prerequisite for broker registration as meeting “statutory licensing qualifications of honesty, integrity, truthfulness, reputation, and competency.” I think it’s important to note that this is the first item listed as a requirement for qualifying because as a broker, you will be the legal Agent for another person, acting on their behalf in legally binding ways. Applicants will be denied a license if they have bene convicted of a felony in the last five years, or if they have any misdemeanor that was the result of fraud, misrepresentation, theft, or dishonesty within the last three years.   

          Other preconditions to becoming a Principal Broker in Utah include having been a licensed, active, full-time real estate agent within the last three years of a five-year period, and within that five-year period, accumulate at least sixty documented experience points. All real estate sales transactions have different point values based on whether the transaction was for a residential or commercial property, and what type of property was sold or leased (i.e. one-unit dwelling, two-to four-unit dwellings, vacant land, hotel, office building, etc). A person can also earn points for activities pertaining to property management and other optional experience such as being a CPA or a licensed title agent. For the purposes of calculating experience points in my area of work, I will likely add points for one-unit dwellings where I am awarded two and a half points per transaction. This means that I will need a minimum of twenty-four documented transactions to meet this requirement.

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General Education Experience

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          A person will also need to complete and pass one hundred and twenty hours of education at a state certified pre-license school which consists of thirty hours of Utah Law with three hours of testing, forty-five hours of Broker Principals with four hours of testing, and another forty-five hours of Broker Practices with four hours of testing. This needs to be completed prior to taking and passing the Broker exam. In addition to the requirements outlined above, and applicant will have to obtain signed and notarized forms from their current and previous brokers which detail their experience and provides a recommendation as to whether or not they would make a good Principal Broker, as well as two fingerprint cards and a completed Certification of Legal Presence declaring your citizenship status (Utah Department of Commerce, n.d.). The process can be quite time-consuming and arduous, but given the responsibilities of the position and the lack of requirement for any particular level of education or degree, it makes sense that licensure should be somewhat difficult to obtain.

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Average Salary

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          The salary expectations of a Principal Broker vary greatly as the pay is commission based and not paid until the close of the real estate transaction. Commissions are typically calculated as a percent of the total sales price, so depending on the percent charged to a buyer or seller and the market prices in a particular area or region, the salary could be vastly different from broker to broker. The U.S. Department of Labor Statistics calculates that the national average annual salary for a real estate broker is $74,480 as of May 2017. They also calculate the average annual salary for brokers in the state of Utah as $57,650, and $61,090 in the Salt Lake City area (Bureau of Labor Statistics, 2018). In addition to the local market conditions and commission charged to a client, a Principal Broker’s salary also depends on whether they employ sales agents, the number employed, how many transactions the sales agents are completing each month, along with the type of commission structure the broker has established with the sales agents, and lastly, whether the broker is actively transacting themselves. All of these factors have an impact on the annual salary one can expect in the role of Principal Broker.

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Career Outlook

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          The market for real estate sales changes from time to time, and there’s really no way to know what is going to happen before it happens. One thing that is certain is that it’s cyclical. In a blog post written by Teo Nicolais for the Harvard Extension School, Teo described the market cycle in four phases; a recovery phase, an expansion phase, a phase of hypersupply, and a recession phase (Nicolais, 2017). In Salt Lake City, we are currently in the expansion phase of the cycle. We have seen an increase of new construction over the last couple of years, and home prices, along with rents have seen a steady increase. It can be said that this market favors sellers, as buyers currently outnumber sellers, which contributes to higher sales prices as buyers compete with each other over fewer properties. Once the market shifts into the phase of hypersupply, the market will begin to favor buyers as more properties sit for longer periods before being sold at lower sales prices. From the perspective of a Principal Broker, both situations can be lucrative if you are educated and understand the challenges each market presents.

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          Currently, the Salt Lake Board of Realtors has projected household growth and in-migration to hit record levels in Salt Lake County for the year 2018. This will continue to provide the local housing market with a strong demand, which puts upward pressure on prices, resulting in larger commissions to brokers. The median sales price of a single–family home in Salt Lake County is forecasted be near $350,000 by year’s end, with a total volume of residential sales to be near $6.6 billion. If all brokers charged their clients three percent to retain their services, they would split around $198 million between them if calculated using the estimated sales volume for the year 2018 (Salt Lake Housing Forecast, 2018).

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Biography of a Principal Broker

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          I had the opportunity to interview Robert Aubrey, Principal Broker at Aubrey and Associates Realty, and ask him about his twenty-six years of experience in the Utah real estate market. He originally licensed as a Sales Agent in 1992, and then as a Principal Broker in 2013 so he could open his own brokerage and began employing sales agents. Additionally, he holds a Continuing Education Instructor license and helps to educate real estate professionals on matters pertaining to real estate in Utah. He has always enjoyed teaching and says that is the reason he decided to go into business for himself. He saw a need for a brokerage that could provide quality training to its sales agents on more than just law, delving into lead generation and strategies for getting your offer accepted in a multiple offer situation. He also touts his low overhead costs because he doesn’t lease a typical office building as most of his agents work from home offices and correspond with him online or via telephone. The commission model he uses with his agents is referred to as 100% commission in the industry, as the agent retains the entire commission and only pays a flat fee to the brokerage once a transaction has closed. This fee covers administrative costs such as payroll (the commission must be passed from the broker to the sales agent per Utah law) and the maintenance of an online portal for transaction coordination, as well as E&O insurance. In the five years since opening Aubrey and Associates Realty he’s recruited a total of fifty-eight sales agents that he oversees in residential real estate transactions. He has never regretted his choice and appreciates the opportunity to serve others (Robert Aubrey, 2018).

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Pros and Cons

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          Real estate as an industry generally sees an influx of new agents in hot markets, and a portion of those agents don’t make it past their first renewal period which spans two years. There are a lot of pros and cons to consider when deciding on whether or not a career in real estate is right for you. Understanding the rewards and challenges prior to licensing can save you time and money. In researching some of the more common positive and negative attributes, it seems as though for every one thing someone sees as positive, another sees that same thing as negative. For example, as a Sales Agent or Principal Broker, you are your own boss. This can be a good thing for some people who are self-motivated because your growth is only limited by your efforts. Others might see this as a negative because they are largely left to learn the business on their own. Being successful requires a ton of work on lead generation and networking relationships, not to mention the money and time spent on marketing.

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          Another example is the notion that you can make a lot of money in real estate. This is true for agents and brokers who invest a lot of time in cultivating their leads as sales is often a numbers game. But as the saying goes, “it takes money to make money.” When starting out in real estate, you will have immediate costs associated with education, licensing, fees and dues, and equipment such as keyboxes and signage, and all of this is required or necessary before you’re able to make even your first transaction. The typical timeframe of a residential transaction is thirty to forty-five days. Depending on your market and existing relationships, it can take some time before you ever see your first commission. Another pro is that schedules are flexible. But the con is that you have to be flexible and work around your clients’ schedules too. This often means working nights and weekends because your clients work the nine to five. And as a Principal Broker, you also need to be available when your agents need you, which happens on nights and weekends because that’s when they’re serving their clients (Brightwood College, 2017).

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My Fit with this Career

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          In assessing whether a career as a Principal Broker is right for me I have to consider what I have accomplished so far as a licensed sales agent, and also everything I’ve learned while writing this paper. Come the beginning of May, I will have been licensed for three years. In that time, I have completed eighteen residential real estate transactions where I’ve sold single family homes, so I’ve accumulated forty-five experience points to date. I currently have three more properties under contract, all of which will close in the next month. With the seven and a half experience points those transactions will earn me, I will only need another three transactions to meet the sixty-point requirement. The next step would be completing the educational hours and taking and passing the exam.

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          I have the desire and drive to become a Principal Broker so I can truly run my business the way I think is best. This does come with a level of risk of course, and I won’t necessarily have my broker to go to when I need one because I will be the broker, so I’ll want to make sure I have a network of brokers who might still be available to me during times of need. I am in the final weeks of finishing my Associate of Science degree in Business at the Salt Lake Community College, and I’m enrolled in the University of Utah’s School of Business where I plan to start in the fall and complete my Bachelor of Science degree in Marketing. Once these goals are complete, I will be free to work towards Principal Broker licensure, and towards building my own real estate brokerage. I am eager to begin, but I also see the value in obtaining more practical experience in the field prior to being responsible for other agents who will rely on my expertise to see them through.

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Sources

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Brightwood College. (2017, December 11). Is a Career in Real Estate Right for                    You? Retrieved April 22, 2018, from https://www.kapre.com/resources/real-              estate/is-a-career-in-real-estate-right-for-you/

 

Bureau of Labor Statistics. (2018, March 30). 41-9021 Real Estate Brokers.                         Retrieved April 21, 2018, from                                                                                       https://www.bls.gov/oes/current/oes419021.htm#(1)

 

Nicolais, T. (2017, July 19). How to Use Real Estate Trends to Predict the Next                   Housing Bubble. Retrieved April 21, 2018, from                                                           https://www.extension.harvard.edu/inside-extension/how-use-real-estate-                   trends-predict-next-housing-bubble

 

Robert Aubrey: Principal Broker [Telephone interview]. (2018, April 11).

 

Salt Lake Housing Forecast Executive Report (pp. 1-4, Rep.). (2018). Sandy, UT:              Salt Lake Board of Realtors.

 

United States, Vermont Real Estate Commission, Office of the Secretary of State of          the State of Vermont. (n.d.). Broker and Associate Duties and Best Practices.              Retrieved April 17, 2018, from                                                                                      https://www.sec.state.vt.us/media/188464/2012_2014_Mandatory_Course_

        Outline.pdf

 

Utah Department of Commerce Division of Real Estate. (n.d.). Broker Registration.          Retrieved April 17, 2018, from https://realestate.utah.gov/realestate/broker.html

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