I know what everyone thinks of the average Real Estate Agent:
I assure you, this is not necessarily accurate. I want to enlighten you as to what exactly your commission is paying for. Based on a normal commission of 5%, I hear that the average house sale in Brantford is $250,000
$250,000 x 5% = $12,500.
Automatically half of this goes to the agent who SOLD your home. No- That’s not YOUR agent. Your agent says “I will give 2.5% of my commission to any other agent who can bring a buyer for my client’s home.” Your agent dangles the carrot as a lure to help sell your home quickly, and offers money as a reward.
Current Earnings: $6,250
Your agent is being charged by their brokerage. In Brantford, this can be from 5% to 40%. Let’s take an average 20%. That’s $1250- Gone.
Current Earnings: $5000
Now that the broker is paid, the company wants to get paid for using their name. Whichever Real Estate company you work for not only gets paid monthly, they get paid from every transaction. I’ve seen anywhere from 5% of every transaction (total, before your broker gets paid) to a flat rate of $100. Let’s do an average of $200.
Current Earnings: $4800
Next, your agent is paying in advance for Newspaper ADS, Promotion material for your home, ect. The longer your home is on the market, the more expensive your home is, the more advertising is required. This can cost anywhere from $200 to $1000. Let’s say $500 to meet in the middle.
Current Earnings: $4300
Let’s calculate some of the hours that an agent will put into your property “behind the scenes”
- Listing Presentation- before you even sign with them- 1 hour prep
- Paper work upon signing- To the board, to the office, to the MLS.ca, taking photos- 4 hours
- Open House- Average of 2 per listing- 5 hours
- Open house prep- Flyer creation, printing- 2 hour
- Newpaper ADS, kijiji ADS, open house ADS, ect- 3 hours
- Amending paperwork (price reductions, changes to the home)- 2 hours
- Showing the home- 2 hours
- Time spend in communication with clients (in person, on phone, email, ect) -5 hours
- Offers: Presenting, negotiating, amending, ensuring completion of conditions, filing proper forms when conditions are met, waived, or removed- 5 hours
- Incidentals- All the petty little things like putting up signs (For Sale, Open House, Sold), talking to other agents, setting up showings, agent tours, door knocking, ect. -6 hours
35 hours of work at about $20 an hour= $700
Current Earnings: $3600
There is a large amount of operating cost involved as well that a portion of each sale is set aside to cover all of these. To give you an idea- Monthly there is a fee to our board, as well as our company (as low as $180 per month, as high as $1500 per month depending on company, and brokerage- Let’s say about $400 per month operating cost is normal $4800 per year) Membership dues, insurance ($1500 per year). I will add in an additional $1500 for items we need professionally, but are also used for our personal life: cars (insurance, payments, wear and tear) cell phones, home office expenses.
Gas for my car: I put in $100 per week x 52 weeks= $5200. Let’s say $3000 of this is work related.
. Basic operating costs per year is $10,800.
If I have 1 closing per month (12 per year) Logically that cost would be covered from my commissions. $10800 / 12 clients = $900 per client.
Current Earnings: $2700
Now- Sometimes, things happen, and a listing expires, the house doesn’t sell. It’s not the best situation, but it happens. An agent can have maybe 3 of these per year. All that time and money spent on the listing, unfortunately has to get thrown up into the overhead cost of operating my business. $500 for Advertising, and about $700 in time spent is $1200 wasted per expired listing. $3600 per year dispersed amongst the 12 closings is about $300.
Current Earnings: $2400.
Remember, Agents are paying daycare, medical bills, putting money into RSP’s and what not because we don’t have an employer. We have to be diligent about these things because we want to retire one day, too. Let’s take off about 20% of that to pay for these things. $480 should do it.
Current Earnings: $1920
So there you have it. It took me 60 days to sell your home; I earned $1920- That’s $240 per week. It’s all about the love of the game!
Now imagine using a discount brokerage? Your agent isn't going to work for free, so the only thing left to sacrifice is all the advertising, and time that an agent would put into your home. You have been warned!