Real Estate commissions vs a weekly paycheck

By
Real Estate Agent with sales representative : Keller Williams Experience Realty

 

The weekly paycheque or the commission check, which is better?

 
 
Realtor's are overpaid for what we do. I am reminded of this often. One of the things that enticed me as it does many others to the business was those fat commission cheques I heard about. 


Let's take a look at how money flows in the business of Real Estate compared to most businesses where employees receive a pay cheque at the end of each week. That pay cheque most receive as a salaried or by-the-hour employee is their portion of profits generated after all of the expenses incurred in generating that profit have been looked after. 

When a Realtor receives a commission cheque, many of those same expenses and a few other industry related expenses are incurred as well, but unlike your cheque which is yours to do with as you wish by the time it reaches your hands, the Realtor still has all of these expenses to pay from his or her cheque. 


Consider the following: 
The Real Estate industry across Canada is represented by around 100,000 licensed Realtors. In addition to Realtors, there are well over one million people in Canada who earn their livelihoods off of those very same Realtor commission cheques. Administration, management, Brokers, teachers, trainers, coaches and various other staff are paid from those Realtor commissions. 


Our Canadian Real Estate Association, each Provincial Real Estate Association, the Real Estate Council, the MLS (Realtor.ca) and each of the hundreds of local Real Estate Boards, their utility costs, taxes, staff plus the cost and upkeep of the bricks and mortar they work within is paid for out of the Real Estate commission fee that you negotiate with a Realtor to have them represent your Real Estate sales and purchases.piece of the pie

Every Real Estate office you see as you drive around, in any town or city, every Real Estate advertisement you have ever suffered through, from the bus bench on up to that 30 second spot during the Superbowl is paid for from those real estate agent commissions. 


Consider as well that a Realtor is essentially managing and paying for a business within a business, complete with its own lists of hard and soft costs. Real Estate advertising is a multi billion dollar industry in Canada from newspapers and magazines, radio and TV to bill boards, mail outs, promotional trinkets and online marketing, all of it paid for by Realtors from their Real Estate commission cheques.

Yes those cheques can look generous and tempting at the beginning of the line as compared with the salaried employee cheque received by the time it gets through the line, and yes, they can feel good in the hand for the few minutes one gets to hold them. 


Of the people who enter the business this year, more than two thirds will leave the business to go back to working for a weekly cheque. Others will stick with it and a few as in any profession will shine.
Posted by

 Mike Montague

  

Barrie Power of Sale Listings

Barrie home values

 

 
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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Jeanne Dufort 01/27/2014 10:50 PM
  2. Jill Winchel 01/28/2014 01:11 AM
  3. Winston Heverly 04/23/2014 11:01 PM
  4. Praful Thakkar 09/08/2016 07:00 AM
Topic:
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Tags:
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Rainmaker
1,502,098
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

One of the causes of agent failure that I've seen is the inability to understand that commission checks are different from wages - beginning with failure to "withhold" from themselves for income tax.

I've seen owner/brokers who poured every dollar into more marketing while forgetting that they'd have a power bill, and agents who spent every dollar while leaving nothing for marketing.

Being an agent is being a small business - and that's far different from being an employee.

Jan 28, 2014 06:48 AM #81
Rainer
12,288
Kirk Knight
Alain Pinel Realtors - Alameda, CA

I make a practice when I see problems to suggest solutions.

problem: The General Public doesn't have a clue.

 

OK, fellow REALTORS, let's educate them face to face! You have no one to blame but yourself if you don't take 5 minutes to inform - not scold - all your clients. If someone can afford to buy a home they're smart enough to understand basic business practices. They'll appreciate your candor and your hard work on their behalf. If they don't you deserve better clients.

My Keynote presentation for buyers explains how I am compensated, what my NET is, and the various actions I perform on their behalf and expenses I will assume. 

I do the same with listing presentations.

Let's check back at the end of the year and see how many people we've taught.

Jan 28, 2014 07:01 AM #82
Ambassador
662,214
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

I've seen these number play out in different ways for decades. Bottom line any type of straight commission selling is very entreprenurial to say the least. I was amazed to find out that there were only 100,000 RE agents in Canada, however.

Jan 28, 2014 08:33 AM #83
Rainer
14,713
Heather Bowman
Complete Realty, LLC - Flint, MI
Heather Bowman, Michigan Realtor

Well said!!

Jan 28, 2014 09:07 AM #84
Rainmaker
352,367
Gary & Melynda Wolter (CRS) 480-269-1164
Revelation Real Estate - Mesa, AZ
Relentless, Reliable, Premier Personal Service

Most of the smart informed public understand its the brokerages that make too much cash...think about it...they make nothing. They provide offices we dont need and have a few salaried employees to answer phones in which very few potential clients call into. Alas, this is the free enterprise system.

Jan 28, 2014 09:33 AM #85
Rainer
133,134
Deleted Account
Fort Myers, FL

Interesting and great post!  It makes a great point.  I like this scenario with the 6 one dollar bills.  I would say, we actually take home about 40-50% of our commission checks, if we are lucky.  People just don't realize the amount we have in expenses for ourselves, as well as advertising their home, which is not cheap by any means.

Jan 28, 2014 09:42 AM #86
Rainer
61,739
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Mike when the real estate market was booming, a lot of people got into the business because they thought that we made lot of EASY money.  When the market changed, they got out of the business and got a regular JOB.

Jan 28, 2014 01:38 PM #87
Rainmaker
65,593
Donna Bacher
PureRealty Brokerage - Hamilton, ON
Broker

Great post Mike! The real estate sector in so important to Canada-we're a huge driving force in the economy and so many people don't understand that the only people feeding this huge industry are us front line salespeople. Many Canadians don't understand how much lobbying we do on there behalf as well!

Jan 28, 2014 03:19 PM #88
Rainmaker
390,893
Marnie Matarese
DWELL REAL ESTATE - Sarasota, FL
Showing you the best of Sarasota!

Although I am in the States, the big box company did not appeal to me and I work for a small firm that allows generous commissions.  Just don't need all the bells and whistles that are needed to keep the big ones running.

Jan 28, 2014 09:05 PM #89
Rainmaker
493,362
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

I have a chart in my listing packet that explains how the comission check is divided up.  Most sellers think we make 'too much money'.

Jan 29, 2014 12:14 AM #90
Rainmaker
571,590
Fred Sed
Fred Sed Group ~ Your Premier Southern California Realtors - Irvine, CA
Your Orange County Realtor, Why? Because Fred Sed

Great post Mike! Most people don't realize that the gross is not the same as the net. While we may gross a lot from each transaction, the net is only a fraction of what the seller actually pays us for.

Jan 29, 2014 02:53 AM #91
Rainer
14,822
RCP Real Estate
RCP Real Estate LLC - San Tan Valley, AZ
Your Arizona Real Estate Agent

I hope I am overpaid. I have no problem with that. Honestly its all the backend stuff no one sees that, like everyone else said, make us not overpaid.

Mar 10, 2014 04:15 AM #92
Rainmaker
21,138
Cindy Graesser
Keller Williams - Temecula, CA
CG Premier Realty Group. "We'll Get you Moving!"

I agree...people have NO idea how hard we actually work and sometimes for months and months for 1 pay check!

Mar 10, 2014 09:47 AM #93
Rainmaker
1,931,486
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Live a mile and a half from the border and like to study the market differences. But the behind the scenes, all the steps taken to get to the closing for the passing of the keys, check with your name on it split a few ways. That is the stuff dealing with people and properties, banks, etc that looks easy. Until you try it.

Mar 21, 2014 12:39 AM #94
Rainer
107,890
Patti De Young
RE/MAX Professionals - Tacoma, WA

Yes I agree most buyers and sellers think we make way more than we really do. It's a great idea to tell them how the commission is divided up.

 

Mar 21, 2014 02:52 AM #95
Rainmaker
432,091
Anne Hensel
South Beaches Real Estate Professionals - Saint Petersburg, FL
Realtor - Broker - St. Pete Beach, Treasure Island

How true! Thanks for the great post!  Too bad that most think it is easy...  Like they say if it was easy everyone would do it!!!!

Mar 21, 2014 08:19 AM #96
Rainmaker
1,056,166
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

I would love to be overpaid! Many transactions take hundreds of hours of work.  I am currently working on a transaction that has taken over 1000 hours!  The public does not understand that for every hour we are with a client, it takes hours behind the scenes. This work is not cut out for the person who thinks being a Realtor is showing a few houses.  I love that the profession is multi faceted!

Apr 26, 2014 02:33 PM #97
Rainmaker
1,056,166
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

This is a great description of our diminutive piece of the commission pie!

Apr 27, 2014 03:32 PM #98
Rainmaker
1,316,865
Jeff Jensen
The Federal Savings Bank/Lending in 50 states - Greenwich, CT

There certainly are a lot of cost centers related to real estate.

Apr 30, 2014 07:48 AM #99
Rainmaker
375,520
John F Muscarella
RIVER FARM PROPERTIES, LLC - Venice, FL
Broker/Owner, Venice, FL, Florida's Suncoast

Yeah, well written and solid points for all to consider.  ANd you did not even mention how often the stress of not getyting a commission check will cause even more issues for some.

May 06, 2014 08:15 PM #100
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