Many people have heard that 20% of the Realtors make all the money. This is like the glass of water that’s either 1/2 full or half empty. The 20% makes all the money because the 80% are in and out of the business before the year is up, having sold nothing. If they have sold a property, (usually to a family member or friend), the size of their first check, after all the splits is usually the laststraw. The misconception that Real Estate is easy, and anyone can do it, is the reason. Nothing could be further from the truth. Real Estate is extremely complicated, very difficult, and highly stressfull. For most of what we do, we receive no compensation. Our work week is Monday through Sunday, most holidays included, 8 AM to 9 PM. We only make money when the sale of a property closes… and then the money is split. A 5% brokerage fee is split between the Listing company, and the Company that brought the Buyer. Of the 2.5% each company received, it is split again between the Agent and his office. Beginning Agents have a 50/50 split, growing as they become more successful. Of the Agent’s split, he gives another 5-8%, (varying by Company), to Corporate. There are also dues to various organizations, fees for the usage of websites, (including the Multiple Listing Service), and other extraneous but necessary marketing tools, (even Voice Mail), Errors & Omissions Insurance, a large amount of gasoline, increased car insurance since we take Clients in our cars, Internet exposure and other tools, gadgets, mandatory Continuing Education Classes (12 credits every two years), printing, postage, etcetera. Every year there are new and increased dues and fees.
We are Independent Contractors, receiving no salary or benefits of any kind at all. We buy our own health insurance. Employees of a company receive a matching social security payment from their company, of which few people are aware. Independent Contractors do not receive this benefit, therefore, we pay double the amount to make up for the other half.
Clients are not handed to us, we have to find them ourselves, and recruit them before they decided to buy or sell. Once they have decided, they have often already chosen a Realtor. One way of finding potential Sellers is through personal marketing through contacts, websites, mailings, and technology networking, all at the Agent’s expense. Networking through friends, businesses, joining organizations, campaigns, church groups, etcetera, are all necessary means of business development, which are time consuming and another expense.
So what is the reason the 20% stay in the business? It is stimulating, part science, part art. It employs a combination of law, psychology, marketing, communications, problem solving, and intuition. We are inquisitive people by nature, need the freedom to make our own schedules, and need to be in and out of different places all day. We are proactive individuals, love all forms of communication, and care about people. To us, the market and dealing with the public is addictive.
I hope this information is useful to you. If you have any other questions, please feel free to contact me.