How Much Real Estate Agents Get Paid

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How Much
Real Estate Agents Get Paid

Wondering about how much real estate agents get paid when signing a listing agreement with a 6 or 7% commission attached?

I have. Looking at paying $20,000, an amount it seems I have to pay to sell me house, yeah I wondered. What is the deal with real estate commissions?

If I hire a real estate agent with multiple properties for sale and mine is the least expensive, are they going to ghost me when I need help but the other client – worth a $35,000 commission – needs them too?

This blog is about real estate commissions, both the structure and the incentives that that typical commission structure drives.

I caution you. Rather than getting wrapped up in what’s right or wrong with this system, see as neutral. How a current system works. Neither good nor bad. That way you can negotiate more effectively and create expectations for you and your family that can be met.

Incentives driven by the structure

Money and incentives.  If you really think about it, the people lean toward that which provide the best opportunity, especially when it comes to money.  Why do some sales people switch which of their company’s products they are selling?  It has to do with the products that pay the most commission.  It is the same in the real estate commission structure and becomes larger issue in relocation.

Following the money is how personal interests and incentives are seen.  That old quote “For wherever your treasure is, there your heart will also be”.  And when it comes to relocation, more times than you would like to believe, …

the agent’s service to the relocation client wains because of the money. 
Really,the lack there of.

Real estate agents establish a fiduciary relationship with their clients through contracts(buyers representation agreement or listing contract). This is a contractual obligation to put their client’s interests before their own. When it comes to money though are we humans able to do this?

Money pays our bills – housing, fuel, food, clothing and for our fun.  And it is no different for real estate agents.

In 2019, the average gross income for real estate agent was $42,501 a year according to Salary.com.  AND if the agent is lucky enough to be in the 90th percentile of all agents they earn $64,585. This is not the lifestyle of the rich and famous for almost every real estate agent you will hire. This means that your real estate agent is going to have to hustle to find as many clients as possible…at all times

Chances are you and your family is not the only client.

Money Drives Attention

If a real estate agent can’t make a car payment or the kids needs braces this month, they will focus their attention on the clients and transactions that have the highest commission and have the highest chance of closing. 

“Well I am not going to hire those struggling real estate agents.”  However, knowing an agent’s finances is not part of the interview process.  You will not know, no matter how shiny their Mercedes Benz is.

This is why I spend so much time last week on using the interview process to evaluate what the agent is going to do for you and putting it in writing. That formal agreement will help the focus to stay on your home as much as possible. Finding the Right Real Estate Agent

Understanding how the money moves help you understand when and how your real estate agent may be distracted even in the middle of managing your contract to buy or sell.

Commissions: Where does the money come from?

Most real estate agents are paid, on both sides of a deal, according to the listing agreement at the time of closing. The listing agreements is a contract between sellers and a real estate brokerage they have chosen. 


Note The listing agreement is not a contract between the real estate agent and the sellers.  It is a contract between the sellers and the agent’s supervising broker/brokerage.  The real estate agent is just that, only an agent of the brokerage they are associated with. 

Also, though many of us assume the “standard commission is X%” for our area, know that all commission are negotiable, per federal law.  The excuse that “all brokerages in Santa Fe charge 6%” is potentially price fixing and therefore illegal.  If you want to negotiate, negotiate!  The commission to sell your home doesn’t have to be what everyone says it should be. 

Buyers, you also have the ability to negotiate, so feel free.


The commission will typically be expressed in terms of a percentage.  For example 6% or 7% of the final sales price of a home.  So for a final sales price of $350,000, the commission would be $21,000, assuming a 6% commission. 

Let’s continue with the $21,000 commission example to demonstrate where the money goes.

Commissions: How is it split?

As a seller you might be thinking that’s a lot of money to pay to sell my house!  However, that $21,000 is about to get carved up, multiple times.

The first split is between brokers.  Typically that $21,000 will be divided in half with $10,500 going to the seller agent’s broker and $10,500 going to the buyer agent’s broker.

The second split between the brokers and the agents.  The contract determines how much the your real estate agent actually grosses out of this transaction.  These agreements can be anything from a per transaction payment (say a flat $350 per transaction) to a 50/50 split of that commission coming to the broker after closing.

Now consider that real estate agents are typically contract workers.  They are 1099 broker contractors and not employees.  They do not receive any company benefits healthcare/retirement/etc.). Many times the brokers will charge the agents to be part of their brokerage, between a few hundred dollars a year to thousands of dollars a year. 

Expenses continue. Real estate agents will have to pay for their own health insurance, professional associates, MLS access and those fancy key fobs that get them into all the houses.  Other expenses will also include business equipment, supplies, transportation, phones, internet etc..  When it comes down to it, independent real estate agents, these solo entrepreneurs with hopefully realize 50% gross profit.

This is a huge discrepancy.  And unless you know an agent, you don’t know.

In our example the agent commission from this transaction could be as much as $10,150 to as little as $5,250.  Net income before taxes then, could be as little as $2,625 for up to 100 hours of work in 6 to 8 weeks.  Full time real estate agent averaging 8-12 home transactions per year could be grossing only $31,000 a year depending on their average home sale price.

Add the Relocation Management Company

Now, let’s say you hire the agent referred to you by the employer’s relocation management company(RMC).  These agents are busy and have lots of experience. Perhaps 24 homes a year or more.  This is due to the “hot leads” provided to them by the RMC.

These RMC real estate agents will receive all of these hot leads and in exchange pay between 30 to 50% of their commission.  On top of that many brokers take their split off the whole commission rather than what’s left.  This is a double negative for the agents.

So in our same example of a $10,500 commission, at 40% the RMC would receive $4,200.  The agents would then pay their broker, at a 70/30, $3,150.  The agent would then receive $3,150 before expenses and taxes.  Even if they managed a 60% profit margin, this agent only receives $1,890 for at least 100 hours of work.

As to the relocating family this is important to know!

By having to focus on multiple clients at the same time dilutes the attention they can give to you and your home sale or purchase.  And if a million dollar home client comes, who do YOU think is getting the most attention.

Just information

As relocating families, we do not have time to chase down some one’s finances or manage how people think.  We need to find agents of character who have the ability to overcome this type of human nature. 

We need to come to a formal agreement with our chosen real estate agent as to:

  • How often and what they will communicate
  • When they will be available
  • How they will track dates and documents
  • How they will manage our real estate contract from execution to close
  • Who is their back up when not available.
  • ETC.

This may be the way the system works but by knowing it we can prevent innate negative incentives from impacting our relocation.

Last week’s blog talks about how to hire talented, effective relocation real estate agents. https://relomoms.com/the-right-real-estate-agent/

Have conversations, contract expectations and follow up, follow up, follow up. This is a delegated process not an abdicated one.

Knowing how real estate agents are paid, helps all of us understand more about the industry and how it works as we make decisions about Our Relocations.

More This Week

Join Annette Walters on Thursday’s ReloMoms Podcast to expand the disscussion of how real estate agents get paid.  On iTunes and other podcast players.

Other information about real estate agents can be found online at www.ReloMoms.com

Your 3 Step Relocation Workbook is just a click away!
No matter which stage of relocation, the ReloMoms
3 Step Relocation Workbook is for you.

Looking to find more ReloMoms? Come see us on Facebook at ReloMoms and the ReloMoms Community.  We will have ongoing discussions and share information so that we can all Relocate Well!

#2 Relocation Challenge Emergency Plans

EMERGENCIES STRIKE!!!

Emergency strikes
(c) Cornelius20 | Dreamstime.com

 

Emergency plans are LOW on relocation priorities. With so many urgent decisions and activities, emergency planning doesn’t occur to any of us.

But then IT HAPPENS!

A bone breaks, weather gets “take cover” bad or security becomes an issue.

What to do?  With few connections and limited community knowledge, who to call is not top of mind.

NOTE: For those of you not from the United States, dialing 911 will give you access to an ambulance, fire truck or the police.

Emergencies unexpectedly happen both in your home and in your community.  They are unexpected, but at the same time many of these emergencies can be planned for.

We are taking inventory of emergency types and available resources.  These are important to know so that a go to plan is developed and known by the whole family.

EMERGENCY!!
Medical, Weather, Fire, Safety, Childcare

Emergencies occur in the home, the community or as a nation.  Let’s list a few obvious and not so obvious emergencies.

As Adults, most of us know how to generally navigate these events.

However, the lack of local information severely limits what we can do efficiently.  First we research and then we act.  This can cause risk to increase.

HOME AND COMMUNITY IMPACTS

Listing the emergencies that are specific to the new home and community is important.  Each place can create unique emergencies.

For example: Do you live in a single family home, townhouse, apartment building, mobile home, tiny home or high rise?  Though similar in function, they each come with their unique risks depending on the emergency.

With severe weather or Cat 3 or less tornado and staying in the home results may include:Please talk to your local law enforcement about the best options and work to be in a permanent structure for safety.

Moderate or severe emergencies require outside assistance.  Knowing where to go, who to contact and what to do will save a life or prevent future damage, to persons and/or property.

WHAT YOU NEED TO KNOW
Plan / Place / People / Practice

Plan

Rational decision are made outside of a crisis.  A plan allows you to choose a response according to your values and adapt only to circumstances.Emergency Plans Worksheet

Place

Emergency locations influence every aspect of your response both dwelling and community.  Realizing that each place creates it’s own set of challenges and advantages adjusts the plan and response.

People

Just because you may know what type of people to call does not mean you know them.

Practice

Finally, you must practice.  Practice to remember!  Make it a knee jerk reaction.

The National Safety Council recommends the following precautions

  • Make sure to have a family communication plan in place; all members of the family should review and practice the plan
  • Have all family members’ and other important phone numbers written down or memorized
  • Have an emergency kit in your car and at least three days of food and water at home
  • Be sure to store all important documents – birth certificates, insurance policies, etc. – in a fire-proof safe or safety deposit box
  • Assign one family member the responsibility of learning first aid and CPR
  • Know how to shut off utilities

These are all things we don’t think about during a move.

BE SAFE

Creating an Emergency Guide as a family is imperative to keeping everyone safe.  Start with the 4 questions from https://www.ready.gov/make-a-plan

  1. How will I receive emergency alerts and warnings?
  2. What is my Shelter plan?
  3. Where is my “evacuation” route?
  4. What is my family/household communication plan?

Creating an emergency plan is a multifaceted project which will evolve over time.  It is imperative to have a basic one in place upon arrival in your new city.

Finally, PRACTICE!!!  Make sure everyone knows the Plan the Place and the People…under the pressure of a crisis.

As you learn create your Family Emergency Plan remember to update your
Who To Call” Worksheet.

If you have any suggestions to help others please email me at Annette@ReloMoms.com.  Together we live great Relo Lives!!

Annette
A ReloMom currently in the wilds of Texas, working to encourage and inspire others while seeking another adventure.

RELOCATION: Discovering who YOU are!


“REALLY?  Who am I?  Seems like a vague question in the face of moving companies, realtors, new schools and house hunts.
I don’t have time for that.
What does “Who am I?“,  have to do with relocation?”

And I agree, it seems like a hippy ,frivolous time waster.  However,  knowing who you are, is essential to both relocation planning and execution.

“Every minute you spend planning,
saves 10 minutes of execution”
~ Brian Tracy ~

Knowing yourself is actually the path to creating and effective plan and efficient relocation.

The main reason you want to know as much as possible about yourself, is that during the first few months, you will answer more relocation generated questions than you have in the last 5 years.  It is exhausting, but defining who you are is like holding all the answers to a test.

WHAT ARE YOUR EMOTIONAL NEEDS?

Typically, pain brings front and center what we need.  I am so hungry I NEED to eat now.  I am so mad at ______, I NEED to tell him what jerk he is.  But what unmet emotional needs drive that pain.

Knowing your emotional needs affect how you make decisions.  By knowing you need to feed, you make decisions that lead to where you want to end up.

Our emotional needs drive every decision we make, good or bad.  The need to feed them leads us to strive for greatness, self-destruct or even become addicted.  Tony Robbins describes this in depth.

The 6 emotional needs” TED Talk by Tony Robbins, with over 20 Million views,  is one of the most insightful and easy to grasp presentations about why we do what we do.

I liked his quote, “We will do anything, positive or negative, to meet that emotional need.”

By listening to this TED Talk,  you will be able to identify your emotional needs,  and as a bonus, be able to identify these needs in others.

This exceptionally important when working with others.  During the relocation, there will be a team of people you are required to work with.  And even though, you are the client, time frames will be so tight that you will have to work with those presented to you.

By having the ability to see the emotional needs of others you will understand what you need to do or say to effectively communicate with those around you and ultimately minimize relocation frustration.

HOW DO YOU WORK WITH OTHERS?

To work with this new team even more effectively, take a moment to learn a little more about how you work with the world at large.

StrengthFinders 2.0 has one of the easiest assessments to take and understand out there.  It is an easy little book with 31 pages of instructions, 143 pages of theme information and a code.  This code gives you access to an only assessment which identifies your 5 core themes.

One of the best things about going through this simple process is that you begin to understand how many different variations there are even in your core family.  With 34 themes there are over 33 million different top 5 combinations possible.

For example, my top 5 themes are:
Strategic, Ideation, Futuristic, Positivity,  and Woo.

Of course my first thought was, “what is Woo?”

“Woo stands for winning over others.  You enjoy the challenge of meeting new people and getting them to like you.  Strangers are rarely intimidating to you.  On the contrary, strangers can be energizing….”  StrengthFinder 2.0 by Tom Rath Page 169.

It’s true.  I love to work a room, meet new people and learn more about them and this world.

StregthFinders 2.0 also gives examples of how WOOs work in the world; how WOOs sound in conversation, what makes WOOs stand out, and how WOOs work with others WOOs.

This assessment takes less than 20 minutes.  By taking it, I learned how to  craft messages that my creative son could hear.  I learned how to engage my analytical husbands when I needed something done.  Knowing more about who I am helped dramatically in times of unusual stress and frustration. .

LEARNING ABOUT YOU AND NAVIGATING RELOCATION

Navigating your relocation will require you to ask questions of yourself, finding resources and finding answers.  Look to books, podcasts, TED Talks, sermons, blogs and classes that speak truth.

It is the patience that comes with knowing who you are, that will be the most effective tool as you walk through ALL of the relocation surprises.

Please leave a comment below and add any resources you have found that will help other ReloMoms.

#ReloMoms, #Relocation, #MovingToaNewCity, #CorporateRelocation, #StrengthFinders2.0, #TonyRobbins, #The6EmotionalNeeds, #TEDTalk, #NavigateRelocation, #RelocatingWithKids, #WhoAmI, #BrianTracy, #RelocationSurprises