Hug a Realtor® Day
They don’t make as much as you think.
Palm Coast, FL – April 21, 2011 – Realtors® do not earn as much as people think they do. With few exceptions, real estate brokers and sales associates are paid only when a transaction closes.
That transaction usually begins with a listing agreement. A sales associate may solicit the agreement, but the listing contract is between the seller and the listing broker. The commission percentage is negotiable, but the most typical rate is 6% of the selling price. Most brokers agree to share the selling commission with cooperating brokers. If a selling agent from another realty company brings a buyer to the table, the listing broker usually pays half of the commission to the selling broker. That split is determined by the listing agreement.
Most real estate agents are not employed by their broker. They operate as independent contractors under the broker’s direction. The independent contractor agreement between each agent and their broker specifies how the commission is split between the two.
For example, a house sold for $150,000 listed at 6% commission would generate $9,000 commission dollars. Under the typical co-broker agreement, the listing broker and the selling broker would each receive $4,500 at closing. Each broker splits their share with the agent based on their independent contractor agreement. Assume the agents each negotiated a 60:40 split. They would receive 60% of their broker’s commission. So each broker ends up with $1,800 and each agent with $2,700.
What does all this mean in real dollars? Obviously some real estate practitioners are more successful than others. I spoke with one the other day who earned well into 6 figures last year. But that is the exception, not the norm.
1,438 homes were sold through MLS in Flagler County in 2010 for a total $235,480,753; generating $14,128,850 in commissions (at 6%). That’s $18,838 for each of the roughly 750 Flagler County Realtors®.
But Realtors sell more than houses. What about condominiums and lots? The 263 condominiums through MLS in 2010 generated $61,344,219 in sales which generated about $3,680,653 in commissions; enough for $4,907 per realtor. The 298 lots sold for a total of $14,679,953 generated another $880,797 commission dollars; or $1,174 per Realtor. I made assumptions to keep the math simple so I could make a point.
Flagler County’s Realtors shared roughly $18,690,300 commission dollars from 2010 property sales. That’s about $24,900 of revenue per realtor; that’s revenue, not profit. Like any business, Realtors have expenses; advertising, insurance, MLS and association fees, continuing education, transportation, entertainment, taxes, supplies, computers, telephone, and more.
Of course many real estate practitioners don’t work full time. But those that do end up spending a lot of time and effort working with clients knowing that much of that time will be spent without any reward. Meanwhile the expenses keep coming. I proclaim this "Hug a Realtor Day."
Note: This article also appeared in today’s Palm Coast Observer.
Support of Toby’s "Hug A Realtor day&
Toby
How true is this!
Generally people have no clue as to the sheer amount of work and expense we personal invest into each and every transaction. Many transactions fail to close for various reasons, many out of our control but we still have our expenses!
Customer service comes first every time, but net earnings for us Realtors is far from the perception out there!
It is a tough industry and has to be worked hard and full time just to cover fixed overheads, some of which you have noted in your article. Vehicle & Gas expenses are crazy which is why it is so important to prepare and pre-qualify buyers before just jumping into the car for a ‘day Trip’ looking at home; those times are gone!
This is a serious business and needs to be treated with respect for both the clients and agents alike. We are professionals here to work with buyers & sellers and no different to a clients doctor, attorney or other professional providing a service, and we too have families to feed.
Thanks for nominating today as "Hug a Realtor day" I support this and your continued efforts with http://www.gotoby.com which is awesome!
Thanks
Chris
http://www.ChrisGodkin.remax.com
ChrisGodkin@remax.net
407-361-0501
Orlando, FL
Leakage
Great breakdown and good information,
the numbers I believe do not reflect payments to cooperative Brokers from other areas who bring buyers to the market or list from outside flagler county. examples national firms like Sperry Van ness, CBRE, cushman and Wakefield,as well as Daytona firms, all who have listings of significance in Palm coast area. The hugs are well deserved in this market.
Hug A Realtor
WOW you hit it on the head. Realtors don’t get paid on a sale except through their broker. And then the realtor also has to share the commission with the listing broker, who pays the listing agent. Gee to bad you didn’t realize this in the article you wrote on me. Who got the other half of my so called fraudulent deals? I know, do you? And why didn’t you mention all 18 of them? And you didn’t mention that realtors are transaction realtors and all we do is bring a deal together, we don’t do financing, we don’t do credit reports, we don’t do appraisals. We also don’t check on what they do with the homes after they are bought. All transactions are arms length. So where is my HUG?
commission split
Sorry Toby, I don’t think most realtors are on a 60/40 split. Especially in the good times, it was closer to 90/10, if not higher for the best producers.
If most realtors right now are only getting a 60/40 split because the broker is feeling the pinch too, then it is time for me to put my broker license to use and set up a shop with a better split to the realtors.
Maybe you should conduct a poll of local realtors. What was their split in 2003-2006? What is their split now? Is their split on a sliding scale as production increases during the year?
Also, many realtors are not active at all. So lumping the commission sales and then dividing by the total commission number is going to skew the results.
I don’t doubt that some realtors work hard, and some don’t. Some are fantastic at what they do, and some not so much I am sure this is reflected in all professions – mine included.