A Breakdown of the Real Estate Agent’s Pay
Read more articles on Real Estate.September 29, 2006
Posted by Penny Harmon
September 29, 2006
Posted by Penny Harmon
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Have you ever wondered why so many people use real estate agents to sell a home? Have you ever thought that the real estate agent is overpaid? If you have, you’re not alone. Many people believe that the real estate agent is extremely overpaid for what they do. The following will put you in line with how much real estate agents really get paid.
First of all, if you have a home that is listed for $220,000 and your agent is going to take a 7 percent commission on the sale, you may believe that he or she will walk away with a $15,400 commission if it sells at full-price. While this amount is what you will be paying, you need to realize that it is not the actual amount that he or she will be receiving.
The initial $15,400 is often split down the middle between the agent representing you, the seller, and the agent representing the buyer. Now this brings your agent down to $7, 700. He or she will bring this check back to the office they are affiliated with. Quite often, this money is then split with the agency, usually at an amount that is designated in their contract with the agency. For example, the real estate agent may be entitled to a 60 percent cut. This will now bring their cut down to $4,620.
Okay. You think that the $4,620 is still too much? Let’s break it down further. In order to list your home, the agent spent two to four hours of their time preparing the presentation for you. This includes driving to the local town office to do the research on their property and comparing it with other similar properties in your area. They then spent another two hours presenting their material to you and another hour doing the necessary paperwork with you. Total time spent so far-between 5 and 7 hours.
The agent then goes back to the office and spends time entering your listing into the Multiple Listing Service. They set up a plan to advertise, using pictures they took when you signed the paperwork. They design and print brochures to go out to potential clients and have invested another four hours in the sale of your home.
Next come the showings. Your agent drives out to show your property to interested parties. The number of showings to your home before it sells will average at about 10 and depending upon how far away your home is from the agent, they may invest another 10 to 15 or more hours in showing your home. Once they receive an offer on your home, they will, of course, bring it to you to go over and sign should you accept.
It does not end here for the agent however. The agent must then be available to let the buyers in for inspections and guide the sale along smoothly. They will work with your attorney and the buyer’s attorney on the closing and will help where needed to make sure your home sells without a hitch. This process can take another 4 or 5 hours total, if not more.
When the closing takes place, most often it is done within an hours time. Your real estate agent will be there through every step to make sure its smooth sailing. In this instance, your real estate agent has just spent about 30 hours or more in the sale of your home.
Okay. You now think that $154 an hour is still too much? Well, we haven’t subtracted for what they’ve provided yet. They printed out brochures for potential clients and used the Internet to determine your home’s value. They may have spent another $200 or more advertising your property in the local papers. They used several gallons of gasoline to drive back and forth to your showings. Subtract another $400 dollars from the $4,620 and you have $4,220. Divide this by their 30 hours and you get approximately $140 per hour.
This amount is not unreasonable as the real estate agent is educated. It is required for each real estate agent to take Continuing Education classes in order to stay on top of the current laws and yes, if the real estate agent happens to make even the tiniest of errors, they can be sued.
So, when someone tells you that the real estate agent is overpaid, you can now let them know that the real estate agent works hard for their money and is well-deserving of what they are paid. They are a professional and have invested both time and money into their training and like other professionals, should be paid their worth.
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Gee, I wish other educated professionals got paid that well per hour.
I would have been happy making half that per hour with my Masters Degree, plus continuing education.