Throughout my first year of real estate I got a lot of comments from family and friends about the mass quantities of money I’d be making. Comments about it being a high paying job with steady income. This all coming from people who have never been in the industry. The longer I was in the business, the more I realized that most of the general population has a misconception about how agents actually make their money.
I think I speak for all agents when I say that we wish sitting at our desk, working on the computer and answering the phone earned us a paycheck, but that’s just not reality. The reality is that we can spend long hours every single day, eyes glued to the computer researching homes for potential buyers, or determining values for sellers without earning a dime. We can spend countless days showing hundreds of homes to a buyer, for their situation to change later and end up not buying anything. This also doesn’t bring home the bacon. This career is like many in the way that we spend time with clients and customers, answer phones and do computer work. But it differs in the way that we don’t get paid by the hour. We don’t get paid by the showing, listing or any other task we may complete as part of the process. The commission we get works the same as any other commission based job you may think of, for example a car salesman. We don’t taste the cheddar until we leave the closing table.
Now that you know the when of how we get paid, lets clarify the how much. Again based on what I’ve heard from those outside of the industry,there is a general assumption that we make bank on every sale. Yes, some sales do produce a nice paycheck, but I’m sure it’s not what you think. While I can’t discuss exact percentages of our company or others due to state law, I’ll give some random numbers for the sake of example. Let’s say just for the ease of math, that a house sells for $100,000. If the commission on this imaginary house is 6%, that would make the commission $6,000. you may look at that number and say “wow that’s a huge chunk of change in your pocket!” To that I would say, Whoah there buddy, slow your roll! This equation isn’t over yet. Just like there are two sides to every pancake, coin and story, there are two sides to every real estate transaction. First you have the listing side. This is the agent/company that puts the home up for sale. The one whose sign you see in the yard. On the other side of this syrup covered breakfast pastry is the selling side. This is the agent that represents the buyer and actually gets the house sold. So when we’re looking at both sides, one would assume that both agents/companies would need to get paid right? That’s exactly right. So let’s break this down. If we take that $6,000 commission and split it between the two agents, that’s $3,000 each. That’s still a great paycheck right? Well, yes, if that’s what we actually got. There’s one more step to this equation. While agents are independent contractors, we still have to work under the umbrella of a Real Estate Broker. The Broker is responsible for all the heavy stuff in the real estate world. He/She’s the one that takes the flack if the agent screws up. There’s a lot more to it than that, but just trust me when I say it takes a special person to do that job and put their license on the line for other human beings and their collection of flaws. What I’m trying to say here is, the Broker/Company has to get paid as well.
So first we split the $6,000 commission between the two agents, the listing agent and the selling agent. That’s $3,000 each. Then that $3,000 gets split on each side. Each company has a different split ratio, but for the sake of example we are going to say that this split is a 50% share. So both the seller side and the buyer side would have to split their $3,000 50/50 with their Broker/Company. That leaves each agent with $1,500. And remember, since we are independent contractors we have to take our our own taxes, so this $1,500 is the BEFORE tax amount. So on a $100,000 home sale, each agent after all the splits and taxes (in this example only) would make roughly $1,200. Whether this is a “good paycheck” or not is going to be based on how much time and effort you had to put in on either side before the sale finally closed. So sometimes the “pay per hour” can be pretty low. A house can sell within weeks of being on the market, but it can also take 6 months to a year. Then once an offer is accepted , you still have to wait 30-45 days to get to the closing table because of inspections, appraisal etc. From the buyer side perspective, you can show a buyer many many houses over the course of several months before finding something that meets all their needs. So needless to say, getting paid is not as speedy of a process as some may think.
Let me wrap up by saying this. We don’t do this job to get rich. Don’t get me wrong, if you put in the time and work it takes to be successful, you can make a really decent living being an agent. Know that it is a LOT of work, a LOT of time, and a LOT of patience. But again I say we don’t do this to get rich. We aren’t just chasing the dollar. For me this career is a way to serve people. I have a passion for helping people and for seeing and celebrating the special moments in life. I love all my client’s as though they were family and care for them like lifelong friends. Yes it’s wonderful to do something you love and get paid for it. The money is nice and necessary for life. But even in those once in a while situations where a seller decides to take their house off the market, or I show a buyer 50+ houses and they end up deciding not to buy, leaving me with a whole lot of work and no pay to show for it………I still feel just as satisfied as if I would have walked away with a big chunk of change. Why? Because I care about you. YOU are my priority, and doing what is best for you is ALWAYS my goal. So no matter how our time together ends, sale or no sale, purchase or no purchase, if you walk away from my service to you feeling important, valued and knowing I gave my all to your unique situation…..Well, there’s no better pay than that.
Inside the Agent mind 