WOW! My RE Agent Made a TON of Money on My Deal – Did They Real Make as Much as YOU Think?

I love meeting new people and hearing what they do for a career.  It also amazes me when talking with people & I tell them that I work in Real Estate, the first thing out of their mouths is WOW you make a lot of money! Truth is, as a real estate consultant, each agent is considered an independent contractor.  But what does this really mean to their financial status. 

Let’s first take a look at some of the benefits employees receive from their employer:

  • Health benefits
  • paid sick days
  • 401k options & matches
  • sabbaticals
  • profit sharing
  • equipment needed to get your job done
  • a place to do your job
  • paid vacation time off
  • and sometimes more

That can add up to a lot of money saved annually for each person.  But did you realize that real estate agents are contract employees and are not eligible for these benefits from their broker?

When you meet with an agent to list your home, it is like a song and dance that is done.  The seller wants to hear what that agent is going to do to get the sellers home SOLD.  What most sellers really care about is “WHAT IS THE COMMISSION CHARGE”?  As they hear 6% and sometimes more, right away they think this person is crazy! That leads straight to the next line, “WILL YOU SELL MY HOME FOR LESS COMMISSION”?

This always makes me laugh.  Here is how I explain it to people I am working with.  First I ask them WHY they think I should reduce my commission; to which they replay so-and-so will do it for 4% (or whatever number they want their home listed for).  To this I do a little laugh and reply with, “SO MR. SELLER, WHEN YOU GO INTO WORK ON MONDAY AND YOUR BOSS COMES TO YOU, PRAISES YOUR WORK & YOUR EMPLOYEE ABILITIES, THEN ASKES YOU TO “NOT” TAKE YOUR PAYCHECK THIS WEEK OR FOR THE NEXT HOWEVER MANY WEEKS, YOU ARE GIONG TO AGREE TO THIS, RIGHT”? Then I sit quietly as they think about this statement.  Since this is what the seller just asked me  to do, why shouldn’t I be able to ask him to do the same.  After a few moments of silence I start to explain the following.

As an independent contractor, guess what I get for doing my job? NOTHING.  Yep, you heard me NOTHING.  But this is how I have to split that 6% up that we are talking about.  Of that 6%, I need to pay the buyer’s agent anywhere’s from 2.5%-3% and sometimes this can go as high as 3.15%.  I then also need to pay my broker a percentage of my share and this is determined on a personal negotiation with each broker/agent relation, this typically can go from 1-20%.  Now here is the great part, Uncle Sam surely wants his part of my check and I need to be sure to plan for that myself as my broker does not and is not responsible for getting these monies to them.  To be sure I am fully accounted for on a federal/state level; I should plan to take at a minimum 35% from my check.

Still sound like a real estate agent makes TONS of money?

Now let’s get to the cost of me just doing my job on a daily basis.  These are expenses I need to account for to do my job:

  • an office or place in my home to do my job
  • a phone
  • a cell phone
  • fax machine
  • copier
  • scanner
  • paper & ink
  • internet connection

That’s just a start; now let’s look at some more:

  • 15 credits of continuing education needs to be done each year to keep my license
  • I need to carry Errors & Omissions insurance
  • MLS fees to access the database
  • quarterly lockbox fees
  • annual association dues
  • panel yard signs, open house signs, riders and any others I may need to promote your home
  • quality camera to take photos of your home
  • medical/dental/vision insurance
  • web site(s)
  • ads in papers if an agent so chooses
  • a life insurance/401k option
  • and there can be so much more other agents pay for.

Still sounding like a real estate agent gets paid so much to do their job?

As the seller still thinks they are going to get me to concede to their way of thinking, they will toss out at me, well so-and-so will do it for a lesser commission.  Yep, you surely are correct on that.  However, what kind of service are you going to get from this agent? Are they going to put a sign in your yard, provide you with color brochures, update photos on a regular basis, or have a quality name that backs this agent?  We all know the saying; you get what you pay for.

So the next time you are planning to list your home, think about this, the average salary a real estate agent makes after expenses, taxes and fees is typically $12,000-mid $20,000.00.  Still sound like a real estate agent is making a lot of money?

THE SPIRITS TO MOVE is here to provide you with knowledgeable information.

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