I sometimes sense an underlying suspicion that some people think Realtors make too high of a commission.
I also happen to know that MOST people don't know just how much an agent actually takes home.
This is a " sticky" subject... and somewhat tabu to discuss, but I have never been known to be shy!
I actually think it is a very important subject to educate the public on.
Disclaimer#1 : there are NO SET standardized commission's charged. Brokerages and agents vary their fees, and they sometimes negotiable.
Disclaimer #2: Agency's are each run differently, and broker/agents splits are confidential and vary widely.
In Washington, you cannot make money as a real estate agent or Realtor unless you are under a Broker. I don't know if this applies nationwide, but I believe it does.
For this reason, an agent either pays a monthly desk and/or transaction fees- or the commission paid to the brokerage is split by the brokerage and the agent in some manner.
With that being said, I will use a math for dummies explanation of how much an agent would average in a make believe transaction that is fairly representative of what might occur. (100K )
THIS IS JUST AN EXAMPLE, BASED ON PROBABLE FEE'S:
SALES PRICE: 100,000
6% Commissions: 6,000
3% for listing brokerage 3,000
3% for selling brokerage 3,000
How does this 3,000$ per side break down?
A) Some kind of /broker agent split let's say 75%/ 25% = Realtor's pay of 2,250$
B) Then Realtor pays taxes on this of somewhere around 20% or more: now he has 1,850$
C) He has to pay some offices fees for postage, marketing, and other monthly expense of say 200$
This is 1650$ left as spendable income. (That is usually very hard earned money...if he has done his job correctly.)
D) The average agent puts 25% of his spendable income BACK INTO HIS BUSINESS as there are a myriad of expenses: Errors and Ommissions Insurance, phone bill , technology, marketing, auto, postage, assistants, and continuing education ... just to name a few.
The moral of the story is that of the 6%, the individual agents do not make a killing. I think since we offer a service to the general public they have the right to know how we get paid, and where it goes.
This is just a hypothetical scenario, but pretty average. COMMISSIONS VARY AND ARE NOT STANDARDIZED, AGAIN THIS IS JUST AN EXAMPLE.
BethAnn Long ~ Spokane Realtor- Coldwell Banker Tomlinson South Inc.
509-362-4607
...there's no place like your home!
Hmmm. Which I could argue that we do.....
How would you feel leaving the waitress 6% yet alone 3%? We work cheap in reality.
The numbers make sense and I totally do NOT think we get paid too much... but yet, I've never sold a million dollar home collecting $30k on one transaction.
Lately, I think most would agree, we seldom earn enough. With the challenges of today's market, a dedicated agent who can sell your home in a timely manner at a good price should be worth their weight in gold.
John, has it right maybe I should waitress but I don't always do good taking orders due to an independent streak.
Great post, many consumers do not understand or know how much out of pocket expense we are REALTORS have to pay to be in business, nor they do realize how much we actually take home.
Most also do not realize that we do not get the benefits like health insurance, retirement, life insurance, etc. As REALTOR we have to have very good financial planning- especially when it comes to retirement.
A part of my listing presentation is to show how the commission pie gets cut. I never have the client say that I get too big a piece of that pie and I charge more than 95% of the folks in my market.
Great post. I can not make a profit ooperating a real estate business with homes less than $300,000. I have tried models in the past and I can not make them profitable. Moreover, I need to have an average of $500,000 or I will have to shut down my operations. I am sure there is a means to do it with less overhead than I have, but that is not my game. It does shock people when I tell them that I cannot afford to work their listing based on our model. The general public has no clue as to the overhead involved in running a profitable real estate operation. Thus, if I get a $200k listing, it will be referred out as I literally make more money on a 25% referral than if I were to take the listing myself. Actually, I would lose money if I took it myself.
At a closing yesterday, the seller's lawyer commented as he handed over the check for my office that the realtors are the ones really making the big money. I would venture that his time on the deal probably amounted to no more than 2 hours as his paralegal did most of the work for maybe $10 per hour, whicl he probably charged the seller $1,000 for his work. I estimate I spent about 80 hours with this buyer for which I will probably make $18 per hour, not including expenses.
I think that the miscpnception needs to be addressed, and that since homes are peoples largest assets, it cannot be compared to a mechanic. Also, I think this is a good discussion so thank you for the comments everyone! :)!!
BethAnn, I think sharing information is empowering and is a great tool for overcoming misunderstandings.
BethAnn, I think sharing information is empowering and is a great tool for overcoming misunderstandings.