Do real estate agents make the Big Bucks?
Guaranteed salaries are rare in the residential real estate business. Most real estate agents work for a commission, they are paid when the sale goes through. If a deal falls apart, the agent makes nothing for his or her efforts and often looses money.
In a conventional home sale, the seller pays the commission. It is negotiable, but is usually in the range of five to seven percent of the sale price. The seller's broker typically shares the commission on a 50-50 basis with any other broker who finds a buyer for the property. There is often another commission-splitting arrangement, which occurs between the brokers involved, and the agents who work for them. It is often these agents who work directly with the buyers and sellers to consummate the transaction.
For example, let's say you're selling a house for $200,000 and you have agreed to pay your listing agent/brokerage six percent of the sale price as compensation for completing the sale. The commission in this case is $12,000. If another agent/brokerage is working with the buyer for your house (which typically happens), that broker will receive $6,000 at closing, leaving $6,000 for your agent and his or her employing broker. Now your agent that you are working with will need to give his or her broker a share of the $6,000. The average share given to the employing broker is between 50% and 20% usually this split is negotiated between the employing broker and agent based on a total sales volume generated by that agent. The average share given to a broker for overhead costs such as the cost of running the office and advertising properties is approximately 35%, so for example the remain $6,000 will need to be split again and the agent would now receive $3,900. Now if an agent works for a national franchise real estate office, the franchisee will take on average 6% to 8% of the agent’s commission leaving the agent with $3,588. The remaining $3,588 is gross income; self-employment taxes, social security, State and Federal tax will need to be paid. Agents are also responsible for medical insurance and establishing their own retirement plans. If the average agent could sell one home per month they could gross almost $40,000 per year. Sounds easy just sell one home per month, however it is very difficult because of the competitive nature of real estate. The amount of homes sold vs. the number of active real estate agents. For example in Lake Havasu City there are currently 762 active real estate agents and this year approximately 2,375 homes sold if you divide that by the number of agents that leaves 3 home sales per agent in the city for the entire year.
Date: Thursday, June, 28th 2007 @ 11:58:29 PM Views: 186
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