So you what to be a Realtor. OK, that's great..welcome aboard. You will need to know a few things first before you get started on your journey. There are so many aspects of the real estate industry it's hard to choose a starting point. My dad would say "if you had to pretend to knew where to start, where would that be?' Using this thought process I would say start with..."setting your expectations".
Suzzie Sellnothing: Hey Joe, I just got my real estate license.
Joe Everyone: Wow..your gonna be RICH!
This is not far from reality in the sense that the majority opinion of Realtors is that we make tons of money. This is the first "expectation" you need to set. Let me break down a common paycheck for a Realtor.
If the sell price is $500,000.
If the commission is 3%.
$500,000 x 3% = $15,000.
Wow, not a bad days work...right. This is the number everybody focuses on. However, this is the gross commission and you will get nothing close to this.
Here's the break down
$500,000 - Sale Price
x3% - Commission
=$15,000 - Gross Commission (this is what everyone thinks we make)
-8% - Franchise fee (century 21) - Right to use the name
=$13,800 -50% - Broker/Office split - (Office, phone, fax, manager, resources, etc.)
=$6,900 -$300 - Errors and Omission Insurance (in case you lie)
-$25 - Office bill
=$6,575 - is what your actual check will look like.
That's less than 43% of the gross and you still haven't covered all your expenses like...
Licensing per year - Federal ($200) & State ($200)
Mandatory Associations - MLS ($400)
Special Lock box key ($200)
Stamps - Consider mailing only 500 pieces per month at 44cents a pop ($2,640yr)
Health Insurance - If you die or get sick the money stops.
Car Payment - ($400 month) This will be higher because you are expected to drive a nicer than average car. Cell Phone - A must ($150 month)
Computer and other tools ($1000yr)
Internet Ads (free)
Newspaper Ads ($600mo) this is what a paper with a once a week, 20,000 circulation, 4x6 ad costs.
401k - ($200mo)
Just these ad up to $20,840 per year or an average of $1700 per month. Now the average agent sells roughly 6 homes a year or 1 every other month. If you sell a $500,000 home every other month you will make an adjusted $1,587 per month. When using a 40-hr work week you will make $9.91 per hour.
I hope that the difference between what people think we make and what we really make doesn't scare you out of our industry. I only point out this huge difference to set your expectations and hopefully convince you not to cut your commission because it's really not that much.
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