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Commission: How It Breaks Down... |
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Most homeowners think of commission as a dirty word. And it can be... but not for the reasons you're thinking... Here's how commission works: Most REALTORs®, in Glynn County, are Independent Contractors. As such, they work for themselves, but by law, must be affiliated with a Brokerage Company, who holds their license and gets a cut of their earnings in exchange for services they provide, such as office space, company advertisement, use of office equipment, Errors & Omission Insurance, etc. Some Brokers decline the cut of the agent's commission but require a monthly usage fee for office space which can add up to a hefty sum.
Take a look at how commission really works and ask yourself if YOU would take on this job for this kind of pay... Agent Brown with XYZ Realty lists a home for $210,000 and agrees upon a 6% commission with his seller. Agent Brown places this listing on the MLS and offers any agent 50% of this agreed upon commission to any agent who can help sell this property. In the meantime, he places advertisements for this property on his web-site, in the local paper, a monthly home magazine and also in the local real estate cable channel, as well as holds Open Houses, does a mass postal mailing and shows the property at least a dozen times.
So XYZ pays Agent Brown $3,600. Out of this $3,600, Agent Brown is responsible for this own Federal and State Income taxes and FICA withholdings. His CPA recommends that he set aside at least 30% out of each of his earnings towards taxes. He is now looking at $2,520 after taxes. Agent Brown then must deduct any marketing expenses he incurred to get true net earnings on this transaction. Real Estate Agents must pay for marketing expenses of homes out of their own pocket so anything he does to market the property is money he must re-coup if he wants an accurate accounting of his earnings. If he spent $800 over 6 weeks in marketing this property in the form of advertising in different media such as newspaper, magazines, television and internet as well as gas, printing costs, postage, open house catering etc... his net is now $1,720. The amount netted can be less for properties that have been marketed heavily over a long period of time and can often reduce the net earnings to $0 or below if not careful. So while the general assumption of most people would be that Agent Brown sold the home for $200,000, he made $12,000 (or 6%). Those with a little more knowledge on the details would then assume he made $6,000 (or 3%). In truth, he grossed $3,600 - 1.8% of the sale price and netted even less, $1,720 or .8% of the sales price after taxes and expenses. If the home were on the market for 6 weeks and it took another 4 weeks until closing, during those ten weeks and if Agent Brown were to calculate how many hours he spent on activities related to that property, i.e. phone calls, creating & mailing fliers, sending & responding to e-mails, updating his website, holding open houses, showing the property, presenting offers, negotiating offers, assisting with closing details, attending closing et al, he may discover that he spent over 150 hours on this transaction.
Commission - it can be a dirty word... for Agent Brown. But Agent Brown, like the rest of us, enjoys what he does and puts everything into perspective and continues onto his next transaction, earning a living helping people buy and sell real estate. |
The Agent is responsible for all other expenses, including computers, printers, PDA´s,
Agent Green with ABC Properties represents a Buyer. Her buyer offers 
At 150 hours, he netted only $11.46 per hour on this transaction, less than what some retail sales associates earn, only Agent Brown isn't simply selling a some article of clothing or a ratchet set, he is coordinating the sale of one of the largest investments in a person's life.