When you first get into real estate, it may seem like there’s endless fees and expenses going towards your real estate education. From licensing and broker fees, to marketing costs and membership dues - the list goes on. This is because, at a traditional brokerage, you are considered an independent contractor and are expected to cover these real estate expenses. The good news is that many of these real estate agent expenses are tax-deductible so you can get some of your money back.
So how much does it cost to be a real estate agent? Let’s walk through typical real estate agent expenses and what to expect at a traditional brokerage, then we’ll dive into what expenses Redfin covers for their real estate agents.
Real estate agent expenses at a traditional brokerage
How much does it cost to get a real estate license?
It costs about $525-$1,325 to get a real estate license, including education and other fees. The first step to getting your real estate license is enrolling in the regulatory education required to become a real estate agent at an accredited real estate school. Then, you’re required to complete the real estate exam with a passing grade. After completion, you can apply for a real estate license. Let’s dive into what expenses to expect at each step.
How much is real estate school? Pre-licensing classes and training
On average, the estimated total cost of pre-licensing classes and training is $200-$1,000. Every state requires agents to enroll in a pre-licensing real estate class, take the exam, and obtain a real estate license. The licensing costs can vary due to the number of credit hours required for your state, and the style of real estate course you enroll in - online or in-person. Online course work is typically less expensive than classroom classes.
Real estate exam fee and licensing fee
On average, the estimated total cost of the real estate exam fee and licensing fee is at least $325. You’ll need to pay the license application fee, the cost of a background check and fingerprints, the exam fee, and the cost to purchase the license itself. Just like the pre-licensing requirements, the fees associated with each step vary depending on your state's requirements, the examination provider, and where you get your fingerprints taken.
Additional real estate agent expenses at a traditional brokerage
Other costs to consider are real estate broker fees, membership fees for REALTORS®, business expenses, and marketing costs. These costs and fees are almost entirely independent of the state you choose to get licensed in. Additional out-of-pocket real estate expenses amount to at least $7,200 per year, and include:
Real estate broker fees
The estimated total cost of real estate broker fees is $25-$500+ per month. Real estate agents are only licensed to act on behalf of a broker, so you'll need to find a brokerage that’s right for you. The managing broker typically covers business expenses associated with day-to-day operations. You may be required to pay a percentage of your commission to the broker to cover these items.
Real estate membership dues
The estimated total cost of real estate membership fees is $200+ per year. Real estate associations like the National Association of REALTORS® (NAR), your state and local real estate boards, and your local Multiple Listing Service all have membership dues associated with them in order to remain a member of the association.
Business expenses
The estimated total cost of real estate business expenses is $500-$1,000 per year. Expenses like your cell phone and internet bill, office space and supplies, computer hardware and software, client meetings and lunches, and client closing gifts fall under this category.
Marketing costs
The estimated total cost of marketing is $1,000 per year. In your first year as a real estate agent, you’ll likely spend a significant amount of your budget on marketing expenses, including maintaining a website, business cards, signage, advertising, and marketing materials. In fact, in your first year, total marketing expenses may break $1,000.
Real estate continuing education
The estimated total cost of continuing education is $50-$300+ per year. One of the most important facets of any career, and real estate is no exception, is to continue growing and learning about the industry. Realtors are often required to take a certain number of continuing education (CE) classes per year. These are a great way to stay knowledgeable about the current market and industry trends.
What real estate expenses does Redfin cover?
All real estate expenses are covered for Redfin agents. At traditional brokerages, agents are considered independent contractors and are expected to pay for all their business expenses out of pocket. Redfin, however, covers the traditional costs of doing business, brokerage fees, and, because Redfin agents are W-2 employees, they aren’t required to pay self-employment taxes. This saves each Redfin agent $14,000 on average every year. This includes expenses like:
MLS dues
Short for Multiple Listing Services, this database of property listings helps real estate professionals market their listings to a wider audience to better match potential buyers with available properties.
Cell phone, phone bill, and internet
Your monthly cell phone bill, cell phone, and laptop are covered by Redfin.
License renewal fees
In order to keep handling transactions, agents will have to renew their license before it expires to keep it active. The cost of the renewal fee varies depending on your state.
Association fees
The NAR, state, and local real estate boards have membership dues.
Listing materials and marketing expenses
Including signage, lockboxes, flyers, postcards, 3D scans, online advertisements, and other advertising materials.
Mileage and transportation
Most agents drive their own car to showings and other work-related events. Redfin covers work travel costs such as mileage, tolls, parking, and more.
Training, coaching, and continuing education
For the rest of your career, you’ll be required to continue your real estate education through training, coaching, and continuing education courses. Registration fees and materials for further education and training courses are paid by Redfin.
Redfin agents are also eligible to participate in employee-sponsored benefit programs including medical, dental, and vision plans for themselves and their families. Redfin agents receive benefits like paid vacation and parental leave, and disability insurance. They can enroll in a 401(k) retirement plan, health care and dependent care flexible savings accounts, employee stock purchase plan, and coverage for fertility treatments.
Real Estate Agent Tax Deductions
Most real estate agents and brokers receive income in the form of commissions from sales transactions. And, as previously mentioned, many of the typical real estate agent expenses are eligible tax write-offs. Here are some real estate agent tax deductions that may help reduce the taxes you owe each year:
- Licenses and renewal fees
- Commissions you paid
- Productivity software
- Marketing expenses
- Desk fees
- Education and training
- Office supplies
- Cell phone, phone bill, and internet
- Travel costs
- Business, E&O Insurance
- Home office furniture
Interested in a real estate career with Redfin? Learn about the different agent career paths offered at Redfin: