How do agents get paid? Agents are independent contractors. In general, they are not eligible for retirement benefits, health plans or vacation pay from the company they work for or contract with. An agent negotiates their split with the company. This is the portion of the commission the agent gets to keep in each transaction. For many new agents, this is a 60/40 split. The agent gets 60%, the company gets 40%. Keep in mind, this is 40% to the company over and above the desk or technology fee, any E&O insurance, and all equipment an agent needs to successfully do this job. In addition, some companies require that agents pay a franchise fee, an escrow coordinator, or whatever other fees they choose to impose. Some of these fees may be passed along to the client. Some are paid by the agent. This is at the discretion of the agent.
As an agent’s production increases, the percentage of the split will change. Broker associates may start out with a higher percent as well (70/30). It can get to the point where the agent is getting 100% of the commission.
Out of the commission, the agent pays her taxes, her membership dues, her continuing education costs, marketing costs, telephone, auto expense, computer equipment and whatever other fees the company expects to get paid.
Let’s break it down further, if the average price of a home is $750,000, and the customary commission is 6%, then the commission would generally go as follows:
The 6% is split, 3% to the listing agent and 3% to the agent procuring the buyer. This would be $22,500. The company for either agent then takes its share, let’s say 30% of the commission, or $6,750. That reduces the agent share to $15,750.
Other costs and expenses, $1200 per year desk fee; $6000 per year mailers and marketing material, $1200 per year cell phone, $300 per year continuing education, $2400 per year office supplies (stationary, business cards, etc.), $2,400 advertising (on-line or newspaper), $700 per year wining and dining clients, and approximately $2,000 per year for E&O insurance. This totals about $16,000 per year.
So now, if you assume that an agent makes five sales at the average price, that would be a total of $78,700. Less costs of $16,000 equals $62,750. Less taxes at about 30%, or $18,825. This leaves the agent a total of $43,925 for a year’s worth of work. This doesn’t even consider if the agent needs a new computer, a new car or even tires for the car.
So who says you can get rich in the business? The manager/brokers and companies that agents work for. That’s who! And they want to leave things just the way they are.
Next: The Status Quo
© 2007 by Judy Kane
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