I'm going to share some info that most of the general public simply do not know or haven't thought about...the costs of doing business. Over the course of my nine years in the business, luckily a large percentage of my clients. after working with me, didn't have the misconception that I earn a large commission for simply showing a few homes or putting a for sale sign up. They saw the time and effort that each transaction took. What even these clients don't know and most of the general public don't know is the behind the scene costs of running a real estate business. Realtors do not get to keep all the commission. The pie gets split up into many slices:
-Split with the company (new agents may split up to 50%)
-Marketing, promotion cost to find clients
-Gas to preview homes and drive buyers around (without payment if buyer doesn't buy)
-Annual fee to a real estate trade association (mandatory legal requirement)
-Annual fee to company that provides real esate lock box and key
-Upfront cost of marketing a listing. Seller does not front the money for this cost. If home does not sell for any reason, agent is out this money.
-Real estate signs (open house, for sale, name rider)
-Legally required on-going classes to maintain license
-Peridic licensing fee to the state
-Business devices-phone, fax, car
-Office supplies
-Industry training classes (short sale training, training to use a specific software or hardware to stay current)
-Client gifts
-Subscription to services that makes servicing clients more efficient and provide a high quality of service
-Error and omission insurance
-Legal fees
-car maintenance
I learned early on that agents assume a lot of risk upfront for we only get paid when clients reach their goal of buying or selling a home. This risk has an intangible premium. The seemingly large commission check that we get balances out the transactions that we do not get paid for (ie when buyer decides not to buy after looking for many months).
I hope this helps to dissolve the misconception agents make a killing. To do real estate right, to really service clients properly, it takes a considerable amount of financial investment.
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