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Commercial vs. Residential Real Estate Sales

Commercial vs. Residential Real Estate Sales

Photo courtesy flickr user "[TheTruthAbout...]" under a Creative Commons 2.0 attribution license.

Dona DeZube, Monster Finance Careers Expert

Considering a career in real estate sales? In most markets, your first choice will be whether to sell commercial or residential properties. An entrepreneurial, aggressive salesperson can succeed in either, but there are some distinct differences you should know about.

Residential is easier to break into, says Mike Winkeler, owner of RealtyPlusUSA, a St. Louis-based residential brokerage. “You can achieve success in a short period of time — 90 days to six months,” he says.

Not so in commercial, where it can take 10 months to close your first sale, says Sandra Sellani, vice president of marketing for commercial real estate brokerage Sperry Van Ness in Irvine, California. “The people doing [commercial sales] right are young and living with their parents,” says Sellani, who has worked as both a residential and commercial sales agent.

Payday

The commercial sales cycle may be slower, but per-deal commissions are higher, because properties are more expensive and agents get a percentage of the sale price. Sperry’s average deal is $3 million to $4 million. Compare that with a national median sale price of $218,000 for a US home.

The average commercial Realtor makes $85,000 annually versus $39,300 for residential Realtors, according to National Association of Realtors’ (NAR) surveys of its members. You must belong to NAR to be a Realtor. Commercial Realtors’ incomes are higher, because they’re more likely to collect 100 percent of the commissions they earn and they’re more likely to hold a broker’s license rather than an agent’s license, NAR says.

Commercial Harder to Enter

For either job, you’ll need a real estate license. Residential agents aren’t expected to have a college degree, but they do need to know the community they serve, says Wayne Etter, director of the Land Economics and Real Estate graduate program at Texas A&M University.

Commercial real estate firms, on the other hand, tend to have tougher hiring standards. They’ll look for sales ability coupled with a finance or business degree that shows you can talk to clients about internal rates of return, capitalization rates, gross rent multipliers and other analytics.

“When one of our master’s-degree graduates elects to go to work for a commercial brokerage firm, they apply everything they learned about commercial development and finance,” Etter explains.