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Archive for January 15th, 2010

How a Realtor Gets Paid — The Nuts and Bolts

Categories: Sellers, The Real Estate Process-How Does this work?
Posted on January 15th, 2010

man holding moneyI had a conversation today with someone who is NOT thinking of buying or selling. At some point, we talked about the commission a realtor gets paid and he said “Give me a break! My realtor spent all of 3 hours with me combined in our entire transaction and got a HUGE paycheck”! This perception of the fact that we realtors are all driving around in our Mercedes Benz’s throwing dollar bills out the window deserves a little attention.

Most realtors charge between 6 and 7% commission. The listing realtor (the one whose sign is in your yard) and the selling agent (the one who represents the buyer) each get half (3% each). The average real estate transaction is about $200K which at 6% commission is $12,000 or $6,000 for each realtor.

Out of the $6,000, the realtor must pay the broker a “split”. In most agencies, the realtor gets around 70% and the broker gets 30% which in this scenario $4,200 for the realtor and $1,800 for the broker.

Out of that $4,200, the realtor pays ALL of their own marketing expenses. This includes all ads, photography for our listings (we use and pay for professional photography), postcards, postage for postcards, online advertising (including realtor.com, trulia.com, zillow.com, etc…) and dues including membership in the MLS (multiple listing service) & NEFAR (NorthEast Florida Association of Realtors).

Realtors spend many, many hours on the phone talking with homeowners, prospective buyers and other realtors. They hold open houses, place signs out for open houses (and then pick them back up), attend showings, follow up with showings, call realtors to get feedback, negotiate contracts (once at the beginning of a deal and often a second time after inspections), coordinate the transaction with the closing or title company, the mortgage company, attend inspections, go to closing, buy closing gifts, prospect for new business, develop budgets and marketing strategies, place ads in local publications, etc… The list goes on and on.

Realtors are also condsidered independent contractors which means that we pay both employer and employee taxes AND we pay for our own health insurance. Perhaps even more important than all of the expenses is the fact that a realtor only gets paid if someone buys (or sells). We show lots of houses to people that never buy and not every listing we take sells.

The average realtor is involved in 6-8 transactions per year. So, the next time you think you’re realtor is overpaid, ask how much he/she made last year. I bet you’ll be surprised.  Hopefully you can see that with all that’s involved, most realtors are not getting rich. Just like in any profession (superstar athletes, surgeons, businessmen, actors, etc…) there are a few MEGA producers that do make a lot of money — but they’ve served their time of lost holidays, weekends and evenings on their way to the top. wq-money-woman

A final point to consider is that when you bought your house, you didn’t pay ANY commission at all — the seller paid it. So, if you’re getting ready to sell and dreading the thought of paying a commission, try to remember all the times that you got the services of a realtor for free!

There seems to be the perception out there that realtors don’t do much and get paid a lot. I hope after reading this that you’ll see things a little differently.  If you’re interested, I copied an article from the internet on the subject — click here to read it.

Thanks for reading — if you’d like more information about houses for sale in Jacksonville (or thinking or selling yours) in the Avondale, Ortega or Riverside neighborhoods of Jacksonville, I’d love to share my local area knowledge with you!

Written by Allison Steilberg // Discussion: Please leave a comment.

Allison Steilberg

Realtor®
Berkshire Hathaway HomeServices Florida Network Realty 3627 St. Johns Avenue Jacksonville, FL 32205 904-252-5181 (Allison)