Expenses of a Real Estate Agent

By
Real Estate Agent with Hunt Real Estate- Columbus Division

Public perception is that real estate agents make a very good income.  Some people think agents make too much money for what they do, but is it true?  Is it really that easy?  Everyone strives to be paid well, and be appreciated for their efforts.  A real estate career can be very rewarding and profitable, but like anything else it requires a good amount of work and commitment.  Maybe you are considering a career in real estate, or maybe you're a seller hoping your agent will lower their fee.  Either way, this article will give you a better understanding of the expenses that a real estate agent has.

Lens 

Many people do not realize that real estate agents are self employed independent contractors.  Agents do not receive weekly paychecks as a regular employee would.  There are no paid vacation days.  They also do not receive the benefits of health and dental insurance, nor a pension or 401. 

Mobile Phone

Not all companies are the same, but this will give you a general idea on what usually happens.   The costs of doing business can easily cut in to any profit the agent may receive.  In Rochester, NY generally a home owner will pay a 6% commission to sell their home.  By law commissions are negotiable so this amount can be different, but for discussion purposes, let's say the amount is 6%.  The listing brokerage receives 3%.  The other 3% will generally go to the buyer's broker.  The agents themselves receive approximately 50% of that amount.  In the end, each agent generally receives 1 ½ % of the total commission.  Out of that amount, the agent will need to pay for expenses incurred to complete the sale.  These fees range depending on the agent, and the company they work for. 

LaptopGPS and Map

Below is a list of expenses an agent may have.  In many cases, a good real estate agent who invests in their business to serve their clients better will have higher expenses.  I personally have invested a good amount in modern technology to provide top notch service more efficiently.

1. Board/MLS dues                                       11. Desktop computer or laptop

2. Errors & Omissions Insurance                           12. Quality camera

3. Franchise fee for each transaction                13. Continuing education classes/courses/designation fees

4. Business cards/name tags                                         14. License fee

5. Direct Mailings (postcards,etc.)-Postage                 15. Office supplies-ink, paper, etc.

6. Professionally made brochures/flyers                    16. Fax, scanner, printer, copier

7. Print Advertising (newspaper, magazine ads)       17. Business clothes

8. Cell phone with data plan for client email            18. Closing gifts. 

9. GPS for car                                                             19. Lockboxes, electronic key, flashlight(s)

10. Internet; Web site domain and hosting                  20. Gas, gas, did I mention gas?

21.  Signs: Yard, open house, and name

22.  Car expenses                    

 Then there are those pesky self employment taxes that need to be paid.  Feel free to comment, or add anything I may have missed.

 

 

Pictures courtesy of www.publicdomainpictures.net

 

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Anonymous
dave

Hey Paul. You sound like a disgruntled business person. Were you involved in those high risk mortgages? Believe it or not, after reading your comments I would guess your age to be around 30 years old.

I don't know where you got your information, but it soumds like you did not look very far. The requirements for obtaining a Sales Associate License requires a High School education in most, if not all states. Insurance rates in all areas has gone through the roof. By the way, Paul, agents have to have quite a few more expenses than what you must be referencing, which is just the average yuppie.

I AM a sucsessful business man, that is getting into Real Estate sales. From the looks of your little note, Paul. I do not think you are or have ever been (stock brokers dont count)in business. At least not one that grosses more than fifteen grand a year. Grab a pad and take a note, junior! There are many,many businesses that require absolutely no overhead! They have a very big profit margin, and they have a growing client base. But..... If you want to do something legal.... there are some businesses that are more costly than others. Some have a potential of a greater reward, and those have very big expenses because the risk tends to be a little bigger. Real Estate sales falls in the latter category. There are services out there that are taking unfair advantage of this fact, and they need to be exposed! Paul!

Word to the wise! Research a subject before you rant! Don't just rely on conversations at football games.

August 13, 2010 12:12 PM
Anonymous
dave

Markus, I have a couple of questions for you. What commission should be charged when a piece of property sells for $1000.00? What commission should an agent charge when a $500,000 deal never finds a buyer? How about when an agent shows 25 houses to a couple that never buys?

One more. How much money in actual take home does the average Real Estate agent make? Here are some facts. Forget about what you have seen in money that you think is payment for service. In order to make $40,000 a year, an agent will have to sell 21 houses a year, and spend more than 50 hours a week chasing deals. Desk fees, office fees, insurance fees, broker fees, vehichle fees are just some of the things they will have to take care of on the journey to that 40 grand.

I feel ya Markus, but Real Estate is like every other occupation. It looks like gravy to the person that pays for the service. I hear it every day. My family Doctor charges $100 for an office call. I know where his money goes, and believe me, it aint even a fraction as pretty as it looks!   

August 13, 2010 12:42 PM
Anonymous
Sean Smith

I sell on via friends and refferals and I clear 150,000 a year no problem.

 

 

December 15, 2010 05:35 PM
Anonymous
anonymous

do agents have to split expenses with the broker if a person pays them for research and there is no transaction or commission involved?

December 27, 2010 05:41 PM
Anonymous
Kim Davis

Thank you for writing this article.  I have been considering being a Realtor for awhile now.  I did a google search for Realtor expenses, which brought me to your post.  I always assumed the broker covered the costs of signs and web sites and did not realize they took such a large % of commission.  This has been extremely helpful to open my eyes as to what I need to budget before starting.

January 03, 2012 03:12 PM
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Kristal Perrone

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