The Running Realtor: Real Estate - The Lure of Easy Money

A blend of ramblings about Real Estate & Running around New Haven County and the Connecticut Shoreline

Real Estate - The Lure of Easy Money


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. 

Comment balloon 41 commentsNo Longer Active • May 16 2007 09:35AM


Dan, can we get real estate schools to go over this reality?  Please?  I would have loved to have heard it.  Many more need to hear it.
Posted by Sarah Cooper (Real Estate Shows) about 13 years ago

They (schools)don't go over it...this is my first year and i will probably do about 10 transactions (im part time).

 Dan, your right on...all realtors need to be told in school the reality!

Posted by Dave Sulvetta, Realtor (Dave Sulvetta, ReMax Connection, Gloucester County Realtor) about 13 years ago
Oh, and let us not forget the new transaction fee's that are being added on to cost to close.  And Franchise fees!  Most Brokers are not covering the cost of anything anymore, everyone is not on the 100% expense plan even if they are not on the higher commision plans. I find it interesting that most bonus are above the 10 transactions mark.  People need to hear the turn over statistics more, and the statistics comparing number of licensed agents to sales, you'd find the average was about 3 when I got in the business, I'm not sure there is anything to average anymore.
Posted by Vicky Carlton, Comey & Shepherd, Auctioneer - Greater Cincinnati about 13 years ago
can you say top ramen - I ate a lot of it when I frst started out and it is starting to look like ramen again
Posted by Thesa Chambers, Principal Broker - Licensed in Oregon (Fred Real Estate Group) about 13 years ago

It certainly isn't easy money...But, it does get much easier as you stay in the business longer :)


Posted by Scott Gormley (Oak Valley Mortgage-California Home Loans and Refinancing) about 13 years ago

 Dan, thanks for writing this.  There's a notion out there that the bucks flow freely for a realtor.  A long as a person is prepared and willing to make the sacrifices, the flow will eventually be postive =)  Mine looks like this right about now.  ha ha ha

I had to laugh really hard at Thesa's comment.  At 8 for a dollar, ramen noodles are a struggling realtor's best friend!

Congratulations on your feature.  Out the door, no less.  Woooo hoooo!

Posted by Maggie Dokic | Miami, FL | 888.883.8509 X101, GREEN, CDPE, SFR, Pinecrest | Palmetto Bay | (eXp Realty LLC) about 13 years ago

Sarah... The schools don't what to scare off business but they could offer some guidance in the final classes so graduates would have a better understanding of what it takes to succeed.

Dave...Sounds like you are on the path to success, I also had double digit transactions my first year.

Vicky...Fees do seem to be increasing and more and more are being shifted to agents.  The average of three transactions may hold true, in Guilford there are 220 licenced agents and 368 closed sales in 2006 according to the MLS.....  Equals 3.35 transaction sides per agent.

Thesa... These are lean times... may have to toss more burgers than steaks on the grill.

Scott... True, money tends to grow over time.

Posted by No Longer Active (Real Estate) about 13 years ago

Maggie... Glad to year you're ship is coming in.  Guess I haven't struggled enough, never been on the ramen noodle diet....

Posted by No Longer Active (Real Estate) about 13 years ago
Like any business, there is a certain critical mass that needs to be achieved.  You also need to keep costs low. You need to really work the numbers and optimize  what kind of business and how much business you really need.  You need to look at every cost and decide if that is the best way to do something.  Is giving up 50% of your commission worth the value you get in return?  There are many new models to choose from. Is spending 10% on advertising getting you anything?  Doing things like most other agents will probably get you the average earnings of $47,000.  The opportunity to make so much more is there but it takes planning and a vision. 
Posted by Tim Maitski, Truth, Excellence and a Good Deal (Atlanta Communities Real Estate Brokerage) about 13 years ago
Ahh...ramen noodles.  I've been there.  I'm moving up in the world, though, and eating hot dogs again. 
Posted by Abe Loper (Nobility Partners, LLC) about 13 years ago

This is very informative information... I guess looking in from the outside you would think of big commission checks for realtor's..

Posted by J.R. Quarles, The Mortgage Innovator (Mortgage Executives LLC) about 13 years ago

  <------- that's me laughing at Abe's hot dog comment.  Thanks for the really big laughs! 

Dan, at 2 cents, that's some wimpy ship!  Probably sink-sized, not even big enough for the bathtub.  =)

Posted by Maggie Dokic | Miami, FL | 888.883.8509 X101, GREEN, CDPE, SFR, Pinecrest | Palmetto Bay | (eXp Realty LLC) about 13 years ago
Dan, I think your right anything less than 12 transactions a year and survival is not possible. Unless your retired or with double income.
Posted by Danny Smith (DISCOVER TEXAS HOMES) about 13 years ago
Dan-I like what you did with the money in your post....kept getting a smaller denomination.  I hope my accountant knows that I am supposed to be paying "double social security" because I sure didn't know that!  There was a large turnover of agents here in Hawaii between 2006-2007 as the market changed and they did not renew their license but at the same time, more new agents with the allure of the "big, easy money" came on board to take their place.  You can earn a very nice living if you are motivated and successful and get away from a company that takes too much of you commission (I did that at the beginning of the year and it was the smartest decision I have ever made).  Aloha!
Posted by 1SG (Ret.) David Kucic, President and Owner (Hawaii Military Realty, Inc.) about 13 years ago
Dan, this sounds like you are in the wrong business, to many people with their hands in your pocket, can I interest you in a position as a Loan Officer :)
Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 13 years ago
Same thing happened here, although some people figured out the real money was in having a real estate school. I counted 5 new ones that opened between 2005 and 2006. Some are of those are now closed. -Charles
Posted by Jacqulyn Richey, Las Vegas Real Estate (Prominent Realty Group) about 13 years ago
Great Post Dan! Our local paper's website had an article yesterday had an article about the cost of housing, and a reader left a comment saying "$500k Home = $30,000 for an agent just to list their home". The everyday consumer doesn't realize how commissions work, and assume that the agent will take home the 30k.
Posted by Allison Werner (To Be Announced) about 13 years ago


Many agents wont survive in this market, unless they produce.

Posted by Suzanne Sands, Somerset MA Real Estate (Pavao Real Estate) about 13 years ago


What a great post. I wish I read it then. When I started to study for my state test, I had no clue how this whole commission breakdown works, nor did I know that once you join National Association of Realtors, you have to continue on with the membership fees... Can you believe it?! :-)If I knew  then what I know now...

And it is true nobody at the "school" tells you what it really takes to make the "BIG BUCKS" in the world of real estate... Far more than just a real estate license...

Posted by Anna Lukyanova (Century 21 Sundance Realty) about 13 years ago
So true, that this information is hard to get until it's too late for the most part.  One of the first thing we discuss with new agents is precisely how expensive this business is, to make it and succeed and eat until you get the wheels turning.  I have discovered that many folks don't believe us, they can find 'a better way' and they're out of the business inside of 18 months.  Charles made a good point though-the real estate schools certainly made out like bandits.
Posted by Leigh Brown, CEO, Dream Maker - Charlotte, NC (Leigh Brown & Associates, RE/MAX Executive) about 13 years ago

The notion that there's easy money in real estate is perpetuated by people in the business.  Almost every week I see on T.V. or somewhere in print, some agent bragging about how they made X amount of dollars and didn't have to work that hard to do it.  It makes me cringe every time. 

Never is there an explanation about how the commission check is split up and that the take-home pay to the agent is significantly less after the agent pays business expenses, taxes, health insurance and funds their retirement account.  Never is there a discussion about the financial and legal liability the agent assumes when they take on a client.

This is a great business, but it's not easy and it's not easy money!


Posted by Michelle Ewing, Riverside, CA (Trademark Realtors) about 13 years ago


The reality can be harsh to new agents when they realize what it takes to be truly successful in real estate. Or in mortgages, like us. To get established takes a lot of time and effort. There are no easy ways to get anywhere near the top.

Posted by Esko Kiuru about 13 years ago
Unfortunately, that "Big Bucks" consumer perception seems to be shared by newcomers to the industry. It sounds like new agents get a "double dose" of reality when they start paying NAR fees, local association fees, MLS fees and discover commision splits...
Posted by Sharon Brehm (Gloria Nilson & Co. Real Estate) about 13 years ago

Tim...  I am well versed in controlling cost and running a business, this was written more as an informational piece because so many new agents seem to be clueless as to what it takes to succeed.  As far as newer business models I have not crunched all the numbers but monthly desk fees in addition to all the usual expenses look pretty steep.

Abe... I was gonna say Hot Dog instead of burgers.. but that seemed a little to lean... :-)

J.R... Doesn't the mortgage business work in a similar way?  Company gets a hunk of your chunk.

Maggie... Who are you fooling.... those pennies add up!  Gives me an idea for a post.

Danny... We also have enough of those never retiring agents around here taking up space.

David & Tonya... You accountant wouldn't miss it, technically its Self Employment Tax of 15.3%

George... Thought your business worked the same way but I never investigated mortgages.

Jacqulyn... The have been churning out the newbies, the crowd should start to thin out.

Allison... That is why I posted this, so many consumers are misinformed.

Suzanne... Just yesterday I realized we lost another one in our office, non-producers are dropping.

Anna... They have the membership monopoly.  Our local board dues nearly doubled this year.

Leigh... 18 months seems to be the lifespan, I found an old rostera few months ago while cleaning my office and of the 42 agents listed then only 12 remain the same now.

Michelle... Agreed! This is a great business but not the easy one people perceive.

Esko... Too often I hear new agents saying that got into real estate because then needed the money.  Never discourage them but I can tell with that comment that they will probably fail.

Sharon... Think they get hit the hardest the first year. Board dues is higher plus they need all the little things that accumulate over the years.

Posted by No Longer Active (Real Estate) about 13 years ago
I notice that $100 ended up being only $20. That's a good illustration, and one that we should be showing the public as well as new agents. It's just not right that they focus strictly on the commission, and don't consider all of the expenses involved.
Posted by John Novak, Henderson, Las Vegas and Summerlin Real Estate (Keller Williams Realty The Marketplace) about 13 years ago
Suriving in real estate certainly is costly!  There is not much left at the end of the day.  I think there are a lot of people who have a 2d job and do real estate part-time.  There are certainly problems with that approach.  With the market slowing down, however, many have had to take on additional work to make ends meet -- I don't think 60 minutes looked into that aspect of real estate -
Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 13 years ago

Hi Dan...Yes, the real estate schools should be explaining that we don't simply drive down the street and have people throw money at us.  It's hard work, and too often people get in it for the wrong reasons.  My wife is a real estate manager and when she interviews new recruits, she always asks them why they want to consider a career in real estate.  When they answer that they really like people and houses she replies, "We'll cure you of that very quickly!".


Posted by Jay Burnham, The Coldwell Banker Guy (Coldwell Banker) about 13 years ago
Don't forget the relocation company fees also.
Posted by Peggy Devoney about 13 years ago
Thanks for a worthwhile post!
Posted by Wayne and Lynda Gomillion (Real Living Hagan Realtors | Pinehurst ~ Southern Pines, NC) about 13 years ago
What you've posted is SSSSOOOOOO TRUE!  I didn't come into this business blind to the costs.  I just didn't figure I would have to fight and struggle so hard to try and make a deal.   I could probably easily earn more money than I have in the past two years if I just work at WalMart.  I like the diversity of being a Realtor.  I enjoy helping people and providing solutions.  I like being able to set my schedule.  And many, many more things. 
Posted by Cynthia Sloop (Community Association Manager) about 13 years ago

John... Glad you noticed that $100 bill gets reduced down to a Twenty. My subliminal message!

Joan... I didn't catch the 60 Minutes show but have noticed agents disappearing into part-time jobs.

Jay... You must be driving the wrong vehicle. Try a Pick-Up so they can toss the cash in back.. LOL

Peggy... That extra 40% off the top is tough but it business you may not have had.

Ethan... I wanted to open eyes not frighten people with mountains of expenses.

Wayne & Lynda... Glad you enjoyed it.

Cynthia... You are most likely right,  I have never tracked my hours but have been curious about the real hourly wage.

Posted by No Longer Active (Real Estate) about 13 years ago
I think this doesn need to be explained in classes or at least upfront before people start the classes. It would be nice to know what you are getting into before you have already spent money on the classes!
Posted by Christy Powers, Pooler, Savannah Real Estate Agent (Keller Williams Coastal Area Partners) about 13 years ago
This would be a great post for all of those new agents to read prior to taking the licensure classes.  Of course, it will never happen.  Great job!
Posted by Diane Bell, Hilton Head Real Estate, Bluffton (Charter 1 Real Estate, Hilton Head, Bluffton, SC) about 13 years ago
I for one don't mind the drop in real estate sales.  It should thin out the ranks of real estate agents and mortgage brokers to a more manageable, more professional pool.  I don't want any one specific person to quit.  But it's obvious we have too many.
Posted by Chris Lengquist, Kansas City Real Estate Investing (Ad Astra Realty) about 13 years ago
Thanks for a great post. It's amazing the misconception the typical consumer buys into, believing that we're raking it in. Don't get me wrong, I'm earning a good living, but I don't pocket 6-8K on each transaction, which is what many people believe. You did a nice breakdown of expenses, and don't forget the self-employment taxes. Uncle Sam kicks our butts!
Posted by Ryan Hukill - Edmond, Realtor, Team Lead (ShowMeOKC Real Estate Pros of KW Elite) about 13 years ago

Christy... The schools are in business to make money so they cannot scare off the student before they join.

Diane... Same as above, but they should offer a little information towards the end of the class.

Chris... Been waiting for more of a drop off myself.  Need to weed out at least 30%

Ryan... Good Ole' Uncle Sam... Regardless of how we do he always has plenty of cash to waste.

Posted by No Longer Active (Real Estate) about 13 years ago


As a runner you know all about pacing. Between the lines in your post, I read about how important it is for the real estate practitioner to do just that. ...Like Leigh who wrote, " One of the first things we discuss with new agents is precisely how expensive this business is..." I introduce my new brokers to the concept of putting tax dollars aside before even paying themselves.

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) about 13 years ago
Dan-Thanks!  That is exactly what he told me.....Self Employment Tax.  Running......I wouldnt start my day any other way.  Do you enjoy an IPOD strapped on your arm during your runs?  I spent many years in the military always running and "calling cadence" but now since I retired, I must have music or I cant run!  Aloha.
Posted by 1SG (Ret.) David Kucic, President and Owner (Hawaii Military Realty, Inc.) about 13 years ago

janeAnne... I have a conservative pace...  Did your new buddy Flat Matt arrive? 

David... I have always run with music.  I have the little clip on Ipod so a cell phone is strapped to my arm.

Posted by No Longer Active (Real Estate) about 13 years ago
Dan--I think there are two kinds of agents out there...The ones in it for the Big Bucks and the ones in it to help People. Hopefully a slower market will wash out some of those who are in real estate for the wrong reasons.
Posted by Teri Eckholm, REALTOR Serving Mpls/St Paul North & East Metro (Boardman Realty) about 13 years ago
Dan - I am noticing that a lot of these posts you like were written on the 22nd or had a last comment on the 22nd - could mean tomorrow will be a great day for you
Posted by Thesa Chambers, Principal Broker - Licensed in Oregon (Fred Real Estate Group) over 12 years ago

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