Most Chicago Realtors Starving In This Market

By
Real Estate Broker/Owner with Lucid Realty, Inc. 471.004524

As I pointed out in a recent post, 1,000 realtors left the real estate business in Chicago last year. I can attest to how poorly most real estate agents are doing in this market because I periodically look up the sales statistics for agents that I know and most of the time their numbers are pretty low. So, finally, just the other day I decided to try to quantify realtor performance in the Chicago real estate market. I pulled data on the last 12 month's closings by realtor in the entire area covered by our MLS system, which is a huge area covering all the surrounding suburbs. I then ranked the real estate agents by the dollar value of their closings.Distribution Of Realtor Earnings In Chicago AreaThe bottom line is that of the almost 25,000 real estate agents with recorded residential sales in the last 12 months only 3,189 agents exceeded $3 MM in sales. If we make the simplifying assumption that those agents earned 50% (their split) of a 3% commission on average then close to 22,000 agents earned less than $45,000 last year - and that is before expenses. At the national level median expenses for realtors were $5,810 in 2008. When you factor in that this is not a cheap area to live in you can see that these agents are struggling. Furthermore, as you might expect, a minority of the agents closed most of the deals.Now this analysis comes with a whole bunch of caveats:

  • I emphasized above that this focuses on agents that had recorded sales. If an agent never closed a deal in the last 12 months then they are excluded from this analysis because I have no way to know who they are. But I suspect there are quite a few who did nothing in the last 12 months.
  • Assuming that these agents earned 50% of 3% on average is a very big assumption. Many agents earn quite a bit more than 50% but on the other hand the commissions might be a bit less than 3% - e.g. typical cooperating commissions are 2.5% but could be as low as 2%.
  • Many of the agents that are included in this analysis might actually make most of their income from commercial real estate and maybe they just did one or two residential deals in the last year.
  • Many of the included agents might be part timers
  • There may be quite a few agents that are excluded because they have no recorded sales in this time period but they might actually be quite profitably employed as members of a celebrity realtor's team, where the celebrity realtor takes all the credit for their business (this is a common practice).
  • There may be a few agents that are included above who are members of a celebrity realtor's team but one or two transactions appear under their name for one reason or another.
  • As you start to get into the really high numbers - even as low as $16 MM - you start to run into the celebrity realtors who have teams working for them, some of which do a lot of developer work. So it's not like the #1 realtor did $171 MM of closings all by himself.

Nevertheless, I believe that this data is directionally correct as it is consistent with data provided by the National Association of Realtors. In their 2009 member profile they show that on a national basis 62% of realtors had gross income of under $50,000 in 2008, with a median gross income of $36,700. After taxes and expenses those numbers drop to 64% earning under $35,000, with a median net income of $23,200. And those numbers are all for 2008. You can bet that 2009's numbers are going to be a bit worse.

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Rainer
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Gordon Lane - selling homes in Sacramento and Yolo Counties
Virtual Realty Group - Sacramento, CA

This doesn't surprise me and I suspect it's the same in every market. There are many, many people in this business who don't approach it like a business. A lot of part timers, a lot of moms who are doing it because they can work while their kids are in school, a lot of agents who do 1 or 2 deals a years with a close friend or family member. (Not to put down moms with their kids in school - some will become superstars.)

During the height of the bubble things might have been different but I suspect that most of the time the graph you presented would be appropriate - a few people doing really well, moderate number of people doing moderately well - a whole bunch of people not really in the business. And massive turnover, lots of people entering the business and leaving after a year or two.

I'm new so it remains to be seen where on the graph I end up, but I see other new agents doing one open house a week while I'm doing 3-5 open houses per week and I wonder where their head is at.

 

Mar 01, 2010 12:33 AM #1
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Fred Griffin Real Estate - Tallahassee, FL
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Sep 04, 2016 01:06 PM #2
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Rainmaker
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Gary Lucido

Chicago's Full Service Discount Real Estate Broker
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