Support your Local Starving Realtor

By
Real Estate Agent with High Lakes Realty and Property Management

So, you think your local Realtor® is making piles and piles of money?  Depending on the market and that broker's actual sphere of influence, he or she just might be doing just that.  More than likely however, that agent and/or broker is making far less than you might suspect.  The Real Estate business is a tough field in which to operate over the long haul, where the Darwinian notion of "survival of the fittest" is most definitely the name of the game.  Unlike what many might believe, Real Estate for the vast majority of professionals is often a world of short periods of feast, followed by brutally long episodes of famine, with no mercy for the weak.

The vast majority of Real Estate professionals are not paid a salary and live purely on commissions generated by sales represented by that agent.  This means that a Realtor is paid nothing until a transaction closes.  For every day in, and every day out, for every phone call made, every fax or email sent, every hour of research spent compiling information, every mile driven with both real clients and those who just want to kick tires, your local agent is paid nothing until the deal has closed escrow. 

Oh and by the way, once that transaction has closed, commissions generated are split up five ways from Sunday to boot.  Yikes!  That theoretical six percent commission generated by the sale of any given property is split typically between the both the buyer and seller's respective agencies and brokerages 50/50, THEN the broker only gets a percentage of that agency's 50% by in most cases, half again between the actual agent and his/her office.  In other words, the six percent that was paid by a seller originally becomes typically only 1.5% paid to the agent procuring the sale in the end.  All that work, all that time, all those endless late nights, for just a pinch of the proceeds at the end. 

Now that your agent has gotten their money, there's still taxes to be held out, desk fees possibly due to his broker just for the privilege of doing business in that facility, advertising fees for all of his listings, fees paid to the National Association of Realtors, the Oregon Association of Realtors, fees paid for the little gizmo that opens up lock-boxes, gasoline, car insurance, health insurance, signage (For Sale or otherwise,) business cards, flyers, and on and on.  In the end, that sliver of the commission pie is stretched beyond imagination, far beyond the imagination of that agent before they got into the business that is, for sure. 

Although its true that a small percentage of Real Estate pros survive to a point in time where they're enjoying the fruits of a loyal following of customers who send them business regularly with their own deals in addition to the referrals of all their family and friends.  That success came however, at the expense of years of hard fought struggle just getting by while worrying if the mortgage on their own house was going to get paid.

Real Estate is not for everyone.  In Oregon especially, just getting a license requires months of intensive and expensive study, a difficult state and national exam process, constant continuing education requirements for renewal, and perhaps more than anything else, courage to even take the leap in the first place.

Real Estate is indeed not for everyone but, for many of us it is a career that is extremely rewarding.  Realtors enjoy an opportunity to work with wonderful people, our associates and competitors, our buyers and sellers.  Long and fast friendships are often developed along the way and we can enjoy a real sense of satisfaction when a transaction closes and the buyer's and seller's goals are both achieved in a win-win situation that, in the final analysis, isn't always about money.

Fred Jaeger is a licensed Oregon Real Estate Broker and e-PRO Certified Realtor® associated with Gilchrist Real Estate Company in La Pine.  He can be reached directly at 541 598-5449 or fred@gilchristrealestate.com . 

Comments (39)

Eric Kodner
Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN
Wayzata Lakes Realty: Twin Cities, Madeline Island
Oops!  That last comment was by me..not logged in..I think it's past my bedtime!
Sep 18, 2007 06:25 PM
Donna Oehler
Realty Executives Platinum - Palmdale, CA
A.V. Foreclosure Specialist
I now try to make it a point when I meet a client that they realize how a real estate agent gets paid - we do not get paid to be tour guides -and we do not get paid if your aunt in another city write the offer after we spent 3 days and $60 in gas showing you homes only to have her write the offer on a home she has never seen nor intends to be at any of the inspections for!
Sep 18, 2007 06:32 PM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

There are many starving Realtors indeed.  The market isn't what it once was. Many supplement their incomes with other jobs during the lean periods. It is true the general public has no idea where the commission goes.

Gone are days of the new cadillacs for many professionals.  You are right, if you are new to the business, it will not be all sunshine and roses for a while at least. However, that doesn't mean you can not do it. You just have to work a little harder at it.

 

Sep 19, 2007 12:17 AM
Jessica Horton Jessica Horton Realty
Jessica Horton - Jessica Horton & Associates - Griffin, GA
Jessica Horton: I'm not #1... You Are!
Realtors could help change this perception by doing away with advertising "Million Dollar Producer" and "Multi-Million Dollar Producer".  The public thinks that is what you make per year.  They don't understand how easy it is to sell a million dollars worth of property and still make barely enough to get by.  Selling a million dollars worth of real estate doesn't even come close to paying my overhead much less turning a profit. 

The ego's and the power and approbation lusts have to end before the public will even feel the slightest bit of sorrow or pitty for the state of the industry right now. 

Sep 19, 2007 12:33 AM
Christina Bennani-Persechini
Keller Williams Realty Boston North West - Lexington, MA
Realtor - The House For You
The public really doesn't know how much risk we take, if they did they might understand why it's not a good business decision to take an overpriced listing that won't sell. Great article!
Sep 19, 2007 01:32 AM
Sandi Bauman
Chico Homes Real Estate - Chico, CA
Chico CA Realtor
Fred-  very insightful post...  a topic that is all to commonly misunderstood by the public.  It's too bad that there is such a large misconception of how things really work!
Sep 19, 2007 05:26 AM
Scott Cowan
RE/MAX Professionals - Olympia, WA

Fred- Very good post on a topic that we debate daily around here. The costs of doing business as a real estate agent are high that is for certain. The flexibility of being a real estate agent is high too. For me the later is the reason that I am in the business. I don't make enough money yet. (thanks to my wonderful wife who keeps our household going) I will in time generate an income that will allow my family to enjoy a lifestyle that we want. Nothing crazy mind you...just a comfortable and flexible lifestyle. Now, How can I convey that to my clients? Perhaps I should stop showing up in the Benz <KIDDING, no Benz in this family>

Best,

Scott 

Sep 19, 2007 05:34 AM
Matt Heaton
Timu Corp - CEO, ActiveRain - Co-founder - Bothell, WA
Great post, most of the agents I know don't make insane amounts of money, particularly when you factor in how much work they do.  Often the ones that do make the tons of money are in that position because of many years of hard work building up their referral base.  Basically they are reaping the reward for the investment they made.
Sep 19, 2007 05:41 AM
Dianne Barody
Century 21 AmeriSouth Realty - Pensacola, FL
Pensacola Florida Real Estate
Fred, thanks for posting and for getting the word out about how Realtors earned their living.  It was a most needed Post.
Sep 19, 2007 07:09 AM
New Jersey Real Estate James Boyer Morris, Essex & Union County NJ Realtor
RE/MAX Properties Unlimited, Real Estate - Morristown, NJ
There are plenty of Realtors who possibly could qualify for food stamps.
Sep 19, 2007 07:36 AM
Portland Oregon Real Estate | Alecia Barnes - Broker
Portland, OR
Fred- A great post indeed. I think consumers need to know that this business is a lot more than sitting at home waiting for the cell phone to ring, just so we can take home the whopping huge paychecks. It is a legitimate business, with expenses. Well said!
Sep 19, 2007 07:37 AM
Colorado Springs Real Estate
Colorado Springs, CO

Fred,

Once people see the hud1 they think that all that money is yours. All that money is yours and all you did is drive them around. Great Post.

Sep 19, 2007 07:46 AM
"JT" Prevatte
Former Agent - Fayetteville, NC
LOL....I am thinking a bumper sticker idea.....
Sep 19, 2007 09:02 AM
Bob Wilson
Access San Diego - San Diego, CA

"the six percent that was paid by a seller originally becomes typically only 1.5% paid to the agent procuring the sale in the end. "

If you are on a 50% split, you are either working for the wrong company or should spend more time prospecting and less time on AR. 

If you are a seller who is told by an agent that the agent will only get 1.5% of a 6% commission, then thank the agent for their time and move on. The agent is either a)lying, b)new or c)doing very little, if any, business. As a seller in this market, you can't afford the agent who makes this statement.

Sep 20, 2007 01:22 AM
Anonymous
Mike Hunter

When I first started I had a saying: "NEVER BEFORE HAVE SO MANY DRIVEN SO FAR FOR SO LITTLE"

 

Sep 20, 2007 05:00 AM
#34
Fred Jaeger
High Lakes Realty and Property Management - La Pine, OR
Real Estate Connection - Central Oregon

In resoponse to Bob Wilson's post...

"

if you are on a 50% split, you are either working for the wrong company or should spend more time prospecting and less time on AR. "

The author of this BLOG would like to point out that the 50/50 commision split example was intended to illustrate a worst-case scenario typically experienced by new agents.  The point of this story was not to nit-pick about what commision spits are possible, rather than to point out that Real Estate Agents receive far less compensation in the end than most would realize who are outside of the business.

As far as Mr. Wilson's implication that this BLOG's author should perhaps spend less time on AR in order to generate more business, I am happy to say that in contrast to what is apparently Mr. Wilson's experience being negative, my exposure to AR has done nothing but bring me welcome additional exposure and the corresponding benefits that migh be expected there-of.   Peace.. fj

Sep 20, 2007 07:16 AM
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Average real estate salesperson is supposed to be around 30k. But with this market is probably less than half that now. Real Estate Agents that make less than 40K should receive some kind of assistance - At least that's what I think. Great post.

Sep 20, 2007 01:39 PM
Anonymous
johnny poison

REALTORS IN ILLINOIS HAVE FEASTED ON THE BOOMING FAST GROWING ECONOMY FOR OVER 2 DECADES. WITH THE AVERAGE HOME SELLING AT $247,000 THATS OVER $40,000 FOR A REALTOR TO SIT ON HIS/HER BUTT LIST YOUR HOME AND STOP IN FOR FREE DONUTS AND COFFEE AT ALL THE OPEN HOUSES. ITS GOING TO GET WORSE SO IF YOU HAVE NOT SAVED OR YOU TRIED TO OUT DO THE JONES FOR THE LAST 20 YEARS THEN STARVE!!!!!! HA, HA, HA......

 

JP.

Oct 20, 2008 02:01 AM
#38
Fred Jaeger
High Lakes Realty and Property Management - La Pine, OR
Real Estate Connection - Central Oregon

I'm not sure where Mr. Poison gets $40,000 from a $247,000 transaction.  Actual take home for the average Realtor on that sale would be more along the lines of 4 to 5 thousand.  That's before all his expenses, fees, taxes, signage, advertising and failed deals that preceeded that transaction.

Also..  THERES NO NEED TO SHOUT IN ALL CAPS!!

Ah.. I feel better now.

Oct 20, 2008 04:36 AM
Anonymous
Anonymous

I can only assume JP was stupid enough to list his home and pay a 15% commission. He should change his name to Johhny Stupid.

Oct 20, 2008 07:58 AM
#40