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Checking Out Real Estate Licensing and Exam Basics

Every state has at least two license levels for its real estate agents: salesperson and broker. (Briefly, a real estate broker is someone authorized by the state to perform certain activities such as sales on behalf of another person for a fee. A salesperson is someone licensed to do those activities but only under a broker's supervision.) Some states may have other levels of licensing, such as a time-share agent, associate broker, or salesperson apprentice or trainee. In any case, a state agency administers real estate license exams in each state (different states may have different names for their licensing agencies). In the following sections, you'll find the lowdown on licensing procedures, the differences between the licensing and exams for salespeople and brokers, and the format of the exams themselves.

Figuring out licensing procedures

After you decide to pursue a career in real estate, the next thing you need to do is get as much information as you can about the procedure for obtaining your license. Every state has specific requirements regarding age, citizenship, criminal background, education, and so on. For specifics about all of these necessities, you need to consult your state's license law directly. Each state's real estate license law typically has provisions about how to become a real estate agent in that state. In addition, it often has specific requirements regarding procedures to follow in your actual real estate business.

Your state licensing system may treat real estate licensing educational requirements and testing in a wide range of ways. Some states may have no educational requirements whatsoever and require only that you pass the state exam. Other states may require you to take (and pass) a minimum number of classroom (or online) hours of education before you take and pass the exam. And still other states may require you to take not only a minimum number of classroom hours, an apprenticeship, and more educational courses, but also a state exam after one or both classroom experiences. Expect to become a salesperson first and get some experience before you can move up to the broker level. You probably will have to take more coursework and pass another exam to become a broker.

Assume that where education is required, and it is in most states, you'll have to pass a course exam in addition to the state exam. Your state may have only an attendance requirement, but be prepared for a course exam nonetheless.

As for the state exam, believe it or not, at least one state allows you to walk in and take the state salesperson exam before you complete the required education. Not much point in doing so, because the education always helps prepare you for the state exam.

Knowing the difference between salesperson and broker licensing and exams

In most cases, you'll probably be pursuing the first or basic real estate license level, which in some states is a salesperson's license and in others is some form of salesperson trainee. How you move up the real estate ladder varies among the different states.

In one case, you complete all of the necessary requirements, including taking and passing a state exam to become a licensed real estate salesperson. And that's it. You can stay a salesperson for the rest of your career. To become a broker in this situation, you'll probably have to gain some experience, take additional coursework, and pass yet another state exam.

In the second case, you begin your real estate career by getting a license at whatever level your state provides as an apprentice or trainee, which can involve taking a course and/or a state exam. After a prescribed period of experience, you're required to move up to the level of a full-fledged, licensed salesperson, which can mean more coursework and another licensing exam. You can remain a salesperson for your entire career in this case, too. Moving up the next rung on the ladder to the broker's level usually involves additional coursework, an exam, and additional experience.

Some states may have a way for you to skip part of the salesperson licensing procedure. Although it rarely occurs, doing so usually requires previous real estate experience. The experience may not exempt you from taking all of the required courses, but it may enable you to skip the salesperson exam. You can find out whether your state allows this exemption by checking the license law and speaking with your state licensing agency.

Your job is to identify the particular exam you're going to have to pass at this stage of your real estate career. If you're taking your first-ever exam, you're at the salesperson level; if you're already a licensed salesperson, you're shooting for the broker level. Then you need to find out the subject matter on the exam. In the vast majority of states, you'll be required to take coursework to get your license. If you're not required to take coursework to get your license, you can find out your particular exam's subject matter by checking with your state licensing agency.

In general, fewer topics are covered on the salesperson's exam than on the broker's exam. Broker's exams cover more subjects because more topics have been added to the list of things you learned at the salesperson's level. For example, in one state, property management is a subject tested on the broker's exam but not on the salesperson's exam. So, if you're taking the salesperson's exam in that state, you don't need to worry about property management, but if you're taking the broker's exam, it's time to brush up on your property management knowledge.

Be aware that many broker's exams presume that you learned and remembered everything you covered in your salesperson's course. Although the emphasis may be on broker subject matter, topics typically on a salesperson's exam are fair game on the broker's exam.

The topics at the salesperson's level are also covered in a more basic level. Definitions and terminology are most important on the salesperson's exam. The broker's exam will not only cover additional topics but will most likely require you to apply the knowledge you have to specific examples and questions that are like case studies.

Looking at the format and other exam details

At any point in time, a state may decide to change its exam content or structure. Therefore talking with any certainty about exam formats is pretty much impossible. Ultimately the format of the exam really shouldn't matter when compared with a mastery of the material you have to know. Different structures have different approaches to the same material. If you know the material, the structure won't matter.

Most (if not all) states currently use a multiple-choice question format. Most people feel more comfortable with this format, and students believe these exams are easier to pass because the choices already have been narrowed down for you.

Exams either are a single, undivided exam or are broken into two parts: a general part that covers key concepts, such as forms of real estate ownership, fiduciary responsibilities, and fair housing law, and a state-specific part. This type of information may end up on the state-specific part of these exams. In addition, any questions about state license law are covered in the state-specific part of the exam.

You should check with your course instructor or the state licensing agency about the following exam details:

  • Number of questions on the exam you're taking. The salesperson's and broker's exams may have a different number of questions.
  • Whether the exam is a single exam or whether it's broken into general and state-specific parts. If the exam is divided into parts, find out how many questions are in each part.
  • Whether the questions are multiple-choice or whether any other question format is used.
  • The form of the exam (paper and pencil or computer).
  • The time available to complete the exam.
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