Fat Commissions, Starving Agents - Posted by Frank Chin
Posted by Frank Chin on February 20, 2002 at 08:21:46:
Hi Steve R:
You asked a very good question, and I often wondered about the paradox of the apparent high commssions and the legions of starving agents out there.
Let me explain.
While you mentioned property values in your area is 249K, 2 family houses in NYC runs 500K, and in San Franciso that I visited in June last year, asking prices for some homes were 899K to 999K. So is someone getting a fat 60K commission???
Yet, when I ask some agents who has “member of $1,000,000 club” on their cards what it means, they mentioned that they sold one million dollars worth of property. Usually its split four ways, between buyer an seller broker, then broker and agent. So a one million dollar agent earns 15K a year.
But it gets more interesting.
A friend of mine who retired to Florida got a RE license and became a $1,000,000 agent. He told me he made 25K before expenses as some sales are only split two ways. But after gas, phone bills, advertising he paid for himself, he made less than 20K. Its OK for him as he’s collecting two pensions.
But he says only more than half of the office DID NOT MAKE the $1,000,000 club. So, most don’t even make 20K/year. In fact, I was renting a house recently, and I spent several hours with a local agent in a open house, and she mentioned the same thing to me. Most agents are lucky if they make 30K to 40K a year, in the high price New York area. Many poor performers don’t even make that.
I thought it was pretty funny that she mentioned that she’s been in RE sales for over 10 years, and couldn’t quite figure out how to make money in RE.
When I look around my area, and I see a dozen Realty offices with a half mile radius of my home. Whenever I walk inside, I see the average agency employs a good 10 agents, based on bulletin boards on who’s “in” and who’s “out”. Then there’s hundreds of realtors in the county, checking the phone book.
But I don’t see several hundred houses for sale at a given time to support all these brokers and agents. Its more like several dozen.
So I think all the monies going to mostly the brokers, MLS fees, franchise fees (Century 21, Coldwell Banker, Prudential) ,and rents for all these hundreds of offices throughout the county. Far too many.
Its a very inefficient system if you ask me.