The reality of a Real Estate agents commissions by Steve Eveleth 4/14/2014

                          The Reality of a Real Estate agents commissions breakdown

Often times buyers and sellers are under the Grand illusion Real Estate agents are  overpaid. Before that perception is validated let’s take a look at the reality and details. Each brokerage is independently owned. A Real Estate agent either works for a broker or works as a broker for themselves. An agent that works for a broker is considered an “independent contractor” for the broker. An agent that works for a broker receives a “percentage” of the commission. There are several different ways an agent and broker may have the commission split between them set up. Typically, on average, the splits are something like broker 20%, the agent 80%. There are also the following agents fees associated with each transaction that typically include the following:

Brokerage transaction fee (range anywhere from $250 to $750)

Company royalty fee (typically a few percent until a cap is reached)

E & O insurance (typically about $1,500 per year)

Transaction coordinator fee (typically about $300 to $500)

MLS fees Realtor association fees (about $1,200 per year)

 Aside from the above costs per transaction, each agent is also 100% responsible for their marketing costs that may include printing, business cards, website, virtual tour videos, flyers, mailers and various other types of marketing. When a Realtor markets your home they are 100% responsible for other costs as well like signs, sign posts,  open houses, brokers tours   (which include food that could range from some simple cookies and drinks to an elaborate catered events or BBQs)

Now that some of the hard costs are mentioned above let’s talk about the agents time. Marketing your home or mapping out and checking availability if you’re  a buyer setting up properties to show, entering into MLS, taking pictures, videos, meeting potential buyers, sellers, other agents at the property, staging, interviewing, preparing comps, ordering materials, open houses and brokers tours , gas to and from the property, the list goes on. And we haven’t even got to being in contract yet which opens up intense negotiations, property inspections, title & escrow and getting the buyer or seller to a smooth close and keep everyone happy during the process.

It’s safe to say a good agent can have anywhere from 40 to 100 hrs into a transaction plus the hard costs mentioned above AND WAIT we forgot about Uncle Sam, taxes, health insurance for ourselves and family’s yes that’s right we pay all that stuff to! A Real Estate agents paycheck can be looked at like a contractor’s paycheck owning their own business; it’s not always cracked up to be what it looks like at the end of the day.  It’s also typical at the end of the day for an agent to net about 20% to 30% on the back end when it’s all said and done at the end of the day.

Sure you can find a  “discount brokerage” and can always find an agent out there willing to “do it for a little less” but consider the saying “you get what you pay for” and keep into consideration when an agent is willing to work for a discount, that discount will be made up somewhere in the transition and when it comes to navigating what is for most, their biggest financial transaction of their life, are you willing to settle for the Wal-Mart of Real Estate?