The real estate market is flooded with new agents. According to a report released by the National Associations of Realtors a few days ago 23.2% of the members have joined within the last two years. This rapid influx of new agents has contributed to declining incomes for Realtors over several years.
As agents most of us have heard comments after a closing about the Big Bucks we earn. From a consumers viewpoint they see the sales price of a home and assume the agent is walking away with a hefty commission check. Many do not understand how quickly that big check gets broken into small pieces.
Here is an explanation to illustrate how that stack of cash is disbursed. Starting with the full 100% commission check it gets chopped in half with a portion going to the buyer's and seller's agency.
Back in the office we submit the check to the broker for processing and within a few days we received our cut. Most agents start at a 50% split and this gradually increases as production goes higher. According to NAR ( National Association of Realtors ) the median earnings for sales agents in 2006 was $47,700.
Not exactly the Big Bucks! Furthermore most are self-employed small business owners. That means plenty of expenses need to be paid before indulging ourselves with food & drink.
Without going into great detail we have about $1500 worth of fixed expenses to maintain our licence, mls access and a few other basics. In addition to that we have variable expenses for advertising, postage, web sites and so on that typically runs between 10-15% of gross earnings.
From past statistics I estimate the majority of agents that survive in this business do about a dozen transactions a year. Since we are self-employed we also have to pay double social security, provide our own medical insurance and save for retirement. Although the Real Estate Business has the potential for huge incomes the reality is most agents are earning a middle class living.
Real Estate is a great business, but it is not easy money. Anyone considering a career should be prepared to spend some cash up front and reinvest most earnings during the early years to grow their buinsess.