So You Think Real Estate Agents Make Too Much Money?

Many people are under the impression that all Real Estate Agents are rich.  Let’s look at this realistically.  While it is true that there are some top performers in the industry, the vast majority of Real Estate agents are barely scratching out a living.  Many are forced to work part-time in another job just so that they can cover their fees.  Many of these agents are discouraged by fees which are outrageously high.

 Suppose a house, listed at $300,000.00, sells for $292,000 at a 5% commission rate, or $14,600.00.  It’s easy to look at that total amount and say that the agent has made an exorbitant commission.  But the first thing you must remember is that this amount is split between the listing agent and the selling agent.  Occasionally, the listing agent is also the selling agent, but often this is not the case.

 In general, the commission in this case would be only $7300.00, or half the total commission amount.  This amount does not go directly to the agent, but to the brokerage firm, which the agent represents.  Before paying a commission to the agent, the brokerage firm will first deduct its percentage, then it will deduct franchise fees and transaction fees.  Out of what is left, the agent must pay permit fees, membership fees, obligatory medical insurance, obligatory responsibility insurance and advertising fees, all of which are in the hundreds of dollars.

 Then, because he is self-employed, the agent also has to consider other necessary aspects of his real estate career, and deduct these amounts as well: the cost of gas, car maintenance, legal forms related to real estate, business cards, signs, promotions, open houses, photocopies, printing costs, fax costs, Internet costs, web site maintenance, cell phone, ongoing training, research, accounting fees, office supplies, and all the other expenses that go with being self-employed, and he is left with about $2400.00 net.   It is really true that an agent only earns about 20% of his total commission amount.

 So why would agents choose a career in Real Estate?  Here is what some of the agents in our office have to say: They love the freedom of working for themselves.  They are fully committed to customer service.  They love the human contact, and feel privileged to work in an industry where every transaction means another satisfied customer.  Nothing is more rewarding to them than being able to match a buyer to his or her dream home.  Most agents understand that their career choice means keeping long hours, being on call 24 hours a day, 7 days a week, and that often, this means having to sacrifice valuable family time.  However, they also know that their career choice constantly challenges them to grow and to learn.  Finally, all of our agents agree that every satisfied customer makes everything worthwhile.

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