Public perception is that real estate agents make a very good income. Some people think agents make too much money for what they do, but is it true? Is it really that easy? Everyone strives to be paid well, and be appreciated for their efforts. A real estate career can be very rewarding and profitable, but like anything else it requires a good amount of work and commitment. Maybe you are considering a career in real estate, or maybe you're a seller hoping your agent will lower their fee. Either way, this article will give you a better understanding of the expenses that a real estate agent has.
Many people do not realize that real estate agents are self employed independent contractors. Agents do not receive weekly paychecks as a regular employee would. There are no paid vacation days. They also do not receive the benefits of health and dental insurance, nor a pension or 401.
Not all companies are the same, but this will give you a general idea on what usually happens. The costs of doing business can easily cut in to any profit the agent may receive. In Rochester, NY generally a home owner will pay a 6% commission to sell their home. By law commissions are negotiable so this amount can be different, but for discussion purposes, let's say the amount is 6%. The listing brokerage receives 3%. The other 3% will generally go to the buyer's broker. The agents themselves receive approximately 50% of that amount. In the end, each agent generally receives 1 ½ % of the total commission. Out of that amount, the agent will need to pay for expenses incurred to complete the sale. These fees range depending on the agent, and the company they work for.
Below is a list of expenses an agent may have. In many cases, a good real estate agent who invests in their business to serve their clients better will have higher expenses. I personally have invested a good amount in modern technology to provide top notch service more efficiently.
1. Board/MLS dues 11. Desktop computer or laptop
2. Errors & Omissions Insurance 12. Quality camera
3. Franchise fee for each transaction 13. Continuing education classes/courses/designation fees
4. Business cards/name tags 14. License fee
5. Direct Mailings (postcards,etc.)-Postage 15. Office supplies-ink, paper, etc.
6. Professionally made brochures/flyers 16. Fax, scanner, printer, copier
7. Print Advertising (newspaper, magazine ads) 17. Business clothes
8. Cell phone with data plan for client email 18. Closing gifts.
9. GPS for car 19. Lockboxes, electronic key, flashlight(s)
10. Internet; Web site domain and hosting 20. Gas, gas, did I mention gas?
21. Signs: Yard, open house, and name
22. Car expenses
Then there are those pesky self employment taxes that need to be paid. Feel free to comment, or add anything I may have missed.
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