These 10 Expenses Are Why Realtors Don’t Make The Kind Of Money You Think They Do

People often think when I tell them I am a Realtor that the money is rolling in and I do little work. The fact is that the opposite is usually true. Real estate IS NOT an easy business despite what many think, and the money, well, it can be relatively good, it's not just rolling in.



Much of the general public is oblivious to all the costs associated with being a real estate agent. They mistakenly believe we all drive Benz’s and are grossly overpaid. Nothing could be further from the truth. Carrying a real estate license comes with great expense, and we have to charge our clients accordingly to cover the costs of doing business.

According to Payscale.com, the median yearly salary for real estate agents is $44,488. Most agents don’t even sell five homes per year. With that in mind, there’s a myriad of monthly costs that must be covered, whether we sell a home that month or not.

To demonstrate that it’s not all fancy cars and mansions in the lives of agents, I’ve listed 10 things real estate agents blow their commission checks on which the public has no idea about.

1. Lockboxes:
These little guys, who hang on your door when your home is for sale, are not cheap. Think about it, these are boxes that are destruction proof and operate by satellite. Not to even mention the expensive supra key that you have to buy and have a subscription to, in order to unlock the boxes. Agents who have 10+ listings have thousands of dollars in lockboxes alone.

2. Signs:
An agent can’t sell a home without a sign. Signs aren’t free. Much like lockboxes, when an agent has dozens of signs, they have lots of money invested. The design and shipping alone is hundreds of dollars. Agents use yard signs, open house signs, location signs, sold signs, pending signs, and in the HOA controlled neighborhoods, designer signs. It adds up very quickly.

3. NAR Dues:
The National Association of REALTORS® (NAR) is America’s largest trade association, representing over 1 million members involved in residential and commercial real estate. Not all real estate agents opt to join NAR and become REALTORS®, but the vast majority do. And guess what—NAR wants its money every month. And they don’t take IOUs.

4. MLS Dues:
On top of belonging to NAR, you have to pay monthly to have access to the MLS. The MLS is the source that lists all the homes for sale. Trulia and Zillow don’t have near as much data as the MLS. The MLS charges a hefty monthly fee to list and sell the agents’ homes. It’s very much a necessary tool in the agent toolbox.

5. Marketing Materials:
The agent’s main job is to market. They market properties and themselves. Between websites, business cards, flyers, and belonging to sites like Zillow and Trulia, the average agent will spend almost $1,000/month on marketing materials. Some spend $10,000+ in marketing each month. It’s not cheap to spread the word about a multi hundred thousand dollar asset for sale.

6. Advertising:
Paid ads aren’t cheap. Whether it’s on Facebook, a billboard, or the baby seat in a shopping cart, ads cost a lot of money. They’re the lifeblood of a good agent. That’s how they sell your home—by advertising it.

7. Website Hosting:
If you’re going to sell real estate in this digital age, you need a website. You’ve got to have a place for your prospects and clients to come and search for homes. That website has to feed into the MLS (another fee to do that), and the website has to be responsive. The average custom website costs $5,000 and comes with a monthly charge of $200. You starting to see the pattern here?

8. Open Houses:
You may think that we just sit in your home using up your free wifi, but that’s not the case. Depending on the agent, there’s food involved as well as balloons, signs, ads, and staging—all designed to make the place look and feel like a million bucks. I’ve even paid to have someone mow the yard and trim the bushes before an open house. I didn’t have time to wait on the owner to take action.

9. Closing Gifts:
In most markets its customary (but not necessary) for agents to give a gift to the clients after doing business with them. What most don’t know is that they usually send one to the title company and the loan officer as well. When everyone puts in hard work, the agent wants to reward them so they continue to do so. You may view it as frivolous, but you can never be too nice to title companies and banks. When you need a favor, gifts go a long way.

10. Office Space (often included in an agent’s commission split—read more here)
Most people think that agents have a job with an office. They don’t realize that the broker charges for the office space and the furniture that occupies it. Just know this: Nothing is free in the real estate game. Not even a place to do your work. Agents are nickled and dimed to death. And as you know, commercial office space isn’t cheap.

So next time you’re thinking about hiring an agent, and you think their fees are a little high, think of this list (which is just a fraction of what’s really paid for). They’re all things to facilitate properties getting moved faster and for higher dollar amounts.

It’s not easy, cheap or always fun being a real estate agent, but the smile we see on our clients’ faces when they buy a new home or profit from selling their old one, makes it 100% worth it.


Source: LighterSide of Real Estate, Ryan Stewman
http://lightersideofrealestate.com/real-estate-life/agent-life/10-expenses-realtors-dont-make-kind-money-think

Let’s Get Crystal Clear On How Real Estate Agents Are Paid

So you’re thinking about buying or selling a house? Odds are good that the first thing you did was contact a real estate agent to help you out. According to the 2013 Profile of Home Buyers and Sellers published by the National Association of Realtors, 88% of buyers purchased their home through a real estate agent or broker.

So how exactly do real estate agents get paid?

SHORT ANSWER:

Real estate agents work for real estate brokerages, and they earn money via commissions when they assist buyers and sellers buy or sell homes.

Now let’s dispel a false assumption right off the bat…

REAL ESTATE MYTH – Agents must be rolling in the cheddar. Word on the street is that some of them make 6% or even 7% commission on every house they sell! Not exactly… Most agents are not living the lavish lifestyle you may assume they are. The income is much more modest than you might expect. Real estate agents have a median income of $40,990 with the top performers making more.




LONG ANSWER:

First, let’s go over some terminology.

When brokerages hire real estate agents they typically set them up on what is known as a commission split. This means that when a commission is paid to a real estate brokerage, it’s split between the brokerage and the real estate agent. Some common commission splits are 50/50, 60/40, 70/30 & 80/20. This will vary from brokerage to brokerage and even from agent to agent. There may be a brokerage with 5 real estate agents who all have different commission splits.

Generally speaking, in any given real estate transaction there will be between 1 and 4 real estate agents or brokerages involved in the transaction — all of whom expect to be paid.

Listing agent – This is the person who meets with a homeowner who is interested in selling their home. This person works for a real estate brokerage. This person is then hired by the sellers to sell their home. The sellers signed a contract which explained the amount of money they were going to pay this listing agent’s brokerage to sell their home. This contract is known as a listing agreement.

Listing brokerage – All real estate agents work for real estate brokerages. Every real estate brokerage has a licensed real estate broker who is in charge of the real estate agents working at that brokerage. Every real estate agent you meet will work for a brokerage like one of those mentioned. The brokerage that employs the listing agent is the listing brokerage.

Buyer’s agent – This is the real estate agent who meets a person who wants to buy a home. This agent will show a potential home buyer homes that are listed either by themselves or other listing agents.

Buyer’s brokerage – The brokerage for whom the buyer’s agent works.

It is important to note that these roles can be different in each transaction. A real estate agent can be a buyer’s agent, or a listing agent depending on the deal. A real estate agent can even be both the buyer’s and seller’s agent.

Let’s go over some different scenarios to illustrate how each of these agents and their brokerages get paid.

Scenario A

A buyer wants to buy a home. She meets a real estate agent named Brian. Brian works for The Holton Wise Property Group. Brian is on a 60/40 commission split with The Holton Wise Property Group. Brian takes his buyer to a home that is listed by Carla. Carla works for Century 21. Carla is on a 50/50 commission split with Century 21 and has been hired by the owners of a home on 123 Main Street in Cleveland, Ohio. The price this home has been listed at is $249,900.00 The sellers have agreed to pay the brokerage Carla works for 6% of whatever she can sell the house for.

Brian and his buyer put in an offer on 123 Main Street for $225,000.00 That offer is accepted by Carla’s sellers. Carla’s brokerage is going to get paid 6% of the sales price by the sellers, but why did Brian take his buyer to Carla’s home on 123 Main Street? Who is going to pay Brian and The Holton Wise Property Group?

Answer: Carla and her brokerage.

When Carla was hired by the sellers of 123 Main Street she entered their home into something called the multiple listing service (MLS). This is a website that real estate agents and brokerages use to help their clients buy and sell homes search for homes. When Carla put 123 Main Street on the MLS she offered all other real estate brokerages a share or split of the commission she gets from the sellers of 123 Main Street if they were able get their buyers to buy the house. In this situation Carla and her brokerage offered Brian and his brokerage 50% of the commission for the sale of 123 Main Street.

So let’s see how this whole thing played out.

The house sold for $225,000.00 The sellers agreed to pay a commission of 6% to Carla’s brokerage. That amount is $13,500.00.

Carla’s brokerage agreed to pay 50% of the commission to Brian and his brokerage. Carla is on a 50/50 split with her brokerage and Brian is on a 60/40 split with his.

Here is the breakdown of the commissions earned by all who were involved.

• Total commission paid by the sellers $13,500.00
• Total commission paid by the buyers $0.00
• Carla’s commission $3,375.00
• Carla’s brokerage commission $3,375.00
• Brian’s commission $4,050.00
• Brian’s brokerage commission $2,700.00

Scenario B

As I stated before these roles can change by the deal. There is not always that many people involved in the scenario.

Let’s assume Brian’s buyer did not like Carla’s house. Instead, Brian’s buyer liked a house that Brian had listed himself. This house was also listed for $249,000. The sellers signed a listing agreement with Brian that paid him a commission of 6% of the sales price. Brian’s buyer put in an offer of $225,000.00 that was accepted by the sellers.

Here is the breakdown of the commissions earned by all who were involved.

• Total commission paid by the sellers $13,500.00
• Total commission paid by the buyers $0.00
• Brian’s commission $8,100.00 (60% of the total)
• Brian’s brokerage commission $5,400.00 (40% of the total)

Source: LighterSide of Real Estate, 

http://lightersideofrealestate.com/real-estate-life/how-real-estate-agents-are-paid

What Does a REALTOR® Do To Earn Their Commission?

Happy Monday and Happy New Year everyone! 2016 will be an exciting year for the Silicon Valley and an exciting year for real estate in general. 

Anyhow, I work hard and so do many of my fellow Realtors, but there are those who think we Realtors don't do much and don't appreciate what we do. I found a great graphic that pretty much sums up what us agents do during the course of typical transaction.


Source: The Lighter Side Of Real Estate, Andrew Fortune
http://lightersideofrealestate.com/community/cafe/what-does-a-realtor-do-to-earn-their-commission