Not a REALTOR®? Never been a REALTOR®? You won't understand! That's right, unless you are currently working as a REALTOR® or have been one in a prior life it is very possible that you will not understand the difference in the gross compensation and the net compensation received by those of us working as REALTORS®.
You know about one number...what we supposedly earn from a transaction where we represent one or both parties. It sounds exorbitant to some, perfectly acceptable to others.
What many do not learn about (and this goes for those that are thinking of becoming real estate agents because they think we make so much money) is the expense side of the equation.
Expenses??? Yes, indeed. Gas is merely one. No matter whether the price is $1.50 a gallon or $4.50 a gallon, when you have buyers in the car the distance from one house to another is the same mileage no matter the cost to get there.
Classes are usually not free. They come with a price tag. Even for those that do only the minimum continuing education classes there is a fee and most of us do not settle for the minimum. Is it preferable to have an agent that works hard to keep up with changes within the industry? That takes hard cold cash. We do not want to perform our jobs minimally. I know I do not.
There's another little item called E&O Insurance. That stands for Errors and Omissions Insurance. Every single time we perform a real estate function we put ourselves at risk of making an error or omission. Even if we never have had a complaint and have been in the business for 20+ years, paying all that time, we will continue to pay as long as we are REALTORS®.
Is there a cost to being a REALTOR® instead of being a real estate agent? Oh yes, and it is not cheap. For instance, I pay dues to the Fredericksburg Area Association of REALTORS®. I pay dues to the Virginia Association of REALTORS®, and I pay dues to the National Association of REALTORS®. This is not a one time expense. It is every year, year after year.
Our multiple listing service is indispensable. Would you even consider working with a REALTOR® that did not belong to the multiple listing service in your area? I doubt it very much. Is that a freebie for us? No! We pay and we pay plenty for this tool.
Do we need computers at home, Internet connections, fax machines, printer/copiers? Again the answer is yes. Do we need cell phones, decent well running vehicles, and a digital camera. Of course we do. Does our company provide all of these items (or even some of them) for us? No!
Do we need a presence on the Internet? Without a doubt! How else are buyers going to find us? We are told that 85% or so begin, and possibly end, their search for a REALTOR® there. If we are to survive that is where we need to be.
Do we need to be on the Internet in order to sell our listings? I really believe so. After all how many sellers are interested in listing their property with an agent that doesn't advertise on the most used source to attract buyers?
Is a portion of our social security paid for by our company? No! We pay the full amount ourselves. Every penny of it.
We do not receive sick pay, health insurance, vacation time, personal days, dental insurance, or any of the other benefits that many employed folks receive and do not want to lose.
If we have a dry spell, and in this market there are many agents that are coming up dry, there is no recourse to unemployment compensation.
This is not meant to be a litany of REALTOR® woes. It is to merely shed a little light on the truth. We receive the compensation that we do because it costs to do this job. If there is not sufficient compensation who will do it?
Do some receive more compensation than others? Of course and that is true in almost every single field. Are there some years we receive better compensation than other times? Also true.
This post is only to discuss some of the expenses we incur. It does not cover everything and absolutely nothing about the time commitment we must make in order to have some degree of "success".
We survive the lean times hoping for (and working hard towards) the more prosperous times. Most of us do it because we love it and there are many, many pluses.
I will tell you about them in a future post.