WHAT’S THE DIFFERENCE? COMMERCIAL VS RESIDENTIAL REAL ESTATE

When most people think about what it means to be a real estate agent, they think about selling single-family homes. However, that’s just one option when it comes to the many types of properties real estate agents specialize in.

If you’re on your way to being an agent, you’ll want to understand the distinction between Commercial Real Estate vs Residential Real Estate. Then, you can effectively choose the right specialty for you.

What’s the difference between the two? Do the salaries differ? We’re answering both of these questions and more in our guide below.

Table of Contents

Table of Contents

What Do Real Estate Agents Do?

In the simplest of terms, a real estate agent is responsible for arranging the selling, renting, or buying or homes, buildings, land, or offices on behalf of their clients.

However, this definition is just the tip of the iceberg in terms of what real estate agents actually do day-to-day. It also doesn’t explain the difference between residential and commercial real estate and how responsibilities differ for each.

Real Estate Agent Responsibilities

A typical day for a real estate agent doesn’t simply involve managing sales or helping clients buy homes.

Here are just a few of the many responsibilities you can expect as a real estate agent:

Research local listing (active, pending, or sold) online or in directories like Activity Report
Stay on top of industry news, trends, and policies
Complete paperwork and submit agreements to the appropriate state agencies
Coordinate appointments with your brokerage or clients
Create a marketing strategy to land more clients
Respond to client calls and emails
Host open houses and showings
Generate leads for your real estate business
Take photos of properties for marketing materials and flyers
Stage the home for showings
Network with other real estate professionals
Research the current market to establish a fair asking price
Renew your license as needed
Take continuing education course

If you plan on becoming a real estate agent, know that your days won’t be limited to touring nice houses and closing deals. There is much more that goes on behind the scenes.

That’s why you want to be sure to choose a niche you’ll enjoy.

What are the Services Provided by Real Estate Agents?

Real estate agents offer services that cover everything from the pre-listing phase all the way to the follow-up phase after they have closed the sale.

While every agent and agency is different, here are the most basic services a realtor may offer:

Pre-Listing Services

Set an appointment with your client
Research currently listed properties to compare prices
Prepare a “Comparable Market Analysis” to establish a fair market value
Research property’s ownership, deed type, information regarding lot size and dimensions, the property’s land use coding restrictions, current use and zoning, etc.
Prepare listing package
Give your client an overview of market projections and current conditions
Present a marketing plan
Prepare property/building for showings
Schedule showing times
Collect mortgage loan information
Discuss other financing options

Marketing the Listing

Coordinate showings with potential buyers
Create and launch ads (print and online)
Create an email list of potential buyers
Mail out “New Listing” notices via mail and email
Submit ads to local, regional, or national real estate sites
Update seller with marketing reports, pricing changes, etc.

Reviewing Offers

Review all “Offer to Purchase” contracts
Talk to your client about the offers
Contact the buyer’s agent to discuss the offer
Create contract and send copies to buyer
Place buyer’s deposit in an escrow account
Update listing as “Sale Pending”
Order mold, termite, and septic inspections

Closing the Contract

Confirm that contract is signed by all parties
Update forms and files
Coordinate the closing process with seller, buyer, and buyer’s agent
Schedule final walkthrough
Secure payment
Check paperwork for errors
Set status as “Sold”

Following Up

Clarify any questions or concerns with your client
Respond to any follow-up calls and tie up loose ends
Pat yourself on the back for conducting a successful sale!

Who Does a Real Estate Agent Work for?

Many people (potential agents included) are under the impression that all agents work for themselves.

In reality, nearly all agents start out by working under a brokerage. A real estate “agent” is really a salesperson who is an agent of a real estate broker.

Therefore, to get started, you’ll need to get hired on by a brokerage. Then, you’ll be able to represent buyers, sellers, or renters in finding or selling residential or commercial property.

There are 3 ways to represent a client. You can…

Work only one client (“single agency”)
Represent both the buyer AND seller (“dual agency”)
You put together the deal without representing the client (“transaction broker” or “statutory broker”)

In most cases, you’ll end up representing a single client under one brokerage. In which case, you facilitate their side of the process (buying or selling), negotiate on the deal, secure the terms, sign the contract, and tie up the final sale.

Then, the broker you work for gets a cut of the commissions and you make your own share of the commissions. You may or may not also make a base salary at the agency.

What is the Difference Between Commercial vs Residential Real Estate?

There are two main categories of real estate: Commercial and Residential. And the difference between the two simply comes down to the type of property in which an agent specializes.

Commercial real estate agents specialize in the buying and selling of commercial (business) properties.

Residential real estate agents specialize in the buying and selling of residential (home) properties.

Both types of agents are required to get the same basic education and certification. But, once they decide to specialize, they take on additional training in order to effectively deal in either commercial or residential real estate.

Differences Between Commercial vs Residential Real Estate Agents

There are 4 primary differences between what a career in commercial real estate vs a career in residential real estate looks like. These include:

Salary Range – Commercial real estate agents tend to make considerably more in terms of annual income compared to residential agents. This is because commissions tend to be higher and because the residential real estate market is more sensitive to fluctuations.
Hours – Commercial agents tend to work “regular” 9-5, 40 hours per week business hours. Residential agents tend to do a lot more after-hours work.
Training – On-the-job training can look different for commercial vs residential agents. Commercial agents tend to work for commercial brokerages and get a lot more specialized training. Their role is math and analysis intensive and they need to understand business concepts, like Net Operating Income, profit and loss, tax strategy, Return on Investment, Cap Rate, and Internal Rate of Return to name a few.
Volume – There are far more residential properties than there are commercial properties. As such, there are far fewer real estate transactions on the commercial side.
Transaction Length – The transaction on a residential property is relatively simple. A typical transaction will take 30-45 days to close. A commercial transaction can last up to a year, but rarely is done in less than 60 days.
Commissions – Because commercial property sells for more than a typical home, in general the commissions are much higher on a commercial sale.

Another difference to note is that commercial brokerages tend to have stricter hiring requirements, making it harder to get into. The typical residential office culture is usually more laid back in comparison to the more “corporate” commercial sector.

How Much Do Commercial Realtors Make?

According to the popular job board site, Monster, commissions tend to be higher for commercial real estate agents vs residential real estate agents, despite commercial real estate having a slower sales cycle.

Due to these factors, the average commercial real estate realtor salary (nationwide) is $85,000* per year.

According to the National Association of Realtors (NAR), this high salary is also due to the fact that commercial realtors are more likely than residential realtors to make 100% of the commissions (and consider that the average commercial deal is around $3 million vs $154,000 for the average price of a US home) and they are more likely to hold a broker’s license.

* Note that the average realtor salary AZ is $89,000 per year.*

How Much Do Residential Realtors Make?

The average salary of a residential real estate agent is $39,300 per year; less than half that of a commercial realtor. Residential agents tend to earn smaller commissions (on much smaller sales compares to commercial deals) and tend to work for agents vs being their own broker.

However, the sales cycle is much faster, there’s a lower barrier to entry, it’s less competitive, and it tends to be more flexible than commercial real estate. Additional, many agents find residential real estate more “relatable” and therefore easier to sell.

How to Sell Commercial Real Estate

If you are drawn to selling commercial real estate as a career choice, then you’ll want to take the required steps to launch a successful and lucrative career.

Assuming you have already obtained your real estate license, you can kick your career into high gear by following the steps below:

Find a Brokerage or Become a Broker. Get hired on at a commercial real estate firm or apply to get your broker’s license so you set all of your own commissions.
Study the Market. You want to be an expert in your field. Take time to understand the market so you can work as an advisor to your clients and be able to negotiate effectively.
Lay Out a Marketing Plan. Create a marketing strategy to help you secure new real estate leads, gain recognition, and become a trusted expert in your area.
Find a Mentor. Find someone more experienced than you to help you fine-tune your skills and market yourself the right way.
Network with Other Real Estate Professionals. Go to events and network with other pros in your industry to form lasting (and potentially lucrative) relationships.
Market Your Properties. Study the market to set a competitive asking price. Schedule showings, follow up with leads, launch ads, publish content on your website, and get your listings in front of more people.

Keep Learning. Sign up for continuing education classes to improve your skills over time, gain more certifications, and maximize your income potential.

How to Sell Residential Real Estate

The path to selling residential real estate isn’t incredibly different from that of becoming a commercial agent. The main differences are that you likely won’t join a commercial real estate firm, and, obviously, you will be selling homes versus business properties.

Therefore, here are the steps to selling residential real estate:

Find a Brokerage. Land a position at a real estate brokerage firm, discuss your commissions, and start finding potential clients.
Study the Market. Research the residential real estate market. Note that it is often more prone to fluctuations than the commercial market. Look out for trends, pricing changes, and new marketing opportunities.
Lay Out a Marketing Strategy. It’s time to find clients. Seek out potential buyers or sellers by laying out and implementing a holistic marketing strategy. Check out this section on How to Get Real Estate Leads.
Network with Your Peers. Go to networking events in order to bump elbows with other successful agents and even potential clients. These relationships can have tons of benefits in the long-run.
Market Your Properties. Set a competitive asking price, schedule showings, host open houses, follow up with leads, launch internet ads, and get your listings in front of more potential buyers.

Never Stop Learning. Brush up on your skills by taking continuing education classes, gaining more certifications, and learning new ways to market yourself.

Can a Residential Real Estate Agent Sell Commercial Property?

Yes. A real estate agent can sell any type of property, either commercial or residential.

However, there is a lot of on-the-job experience that helps an agent be more skilled in selling commercial properties vs residential properties. Therefore, many clients prefer to hire an agent who specializes in one or the other.

The real question is, What knowledge do you have to have in order to handle a certain type of transaction?

While your pre-licensing education handled the basics, there may be a quite a few specifics you’ll need to learn in order to most effectively sell a commercial or residential property. That’s why we recommend gaining some on-the-ground experience and working with a mentor who can want you through specializing in one or the other.

Commercial vs Residential: How to Choose

Remember that the key difference between residential and commercial real estate is in the type of property you will be selling. However, there are also a few lifestyle differences that may skew your decision one way or the other.

For instance, you may be drawn to the appeal of making higher commissions (and thus, a higher income). In which case, commercial real estate may be for you.

On the other hand, maybe you like the idea of a more casual atmosphere, with more flexibility and diversity. Then, you may want to focus on residential real estate.

The good news is you can start with the same real estate license and then decide to specialize later on. And, you can always change your mind. No need to get locked in now – Feel free to weigh your options and choose the right fit for you.

Summary

You’re about to launch your career in real estate. The question is, do you go Commercial or Residential? Making this choice can seem a bit intimidating, but fortunately you have loads of time to decide between the two.

The differences in income, hours, and training usually skew agents one way or another. But you can always decide to try one out for size and change your mind later on. We recommend choosing the area you are most passionate about, as this will lead to a more fulfilling and sustainable career.

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