Commission; what Clients think vs. Reality: “What do you do with all that money?” “Wow, Realtors have it so Easy!” “Why should you get a commission when that’s all you do??” It never stops, so I’m going to break down the Commission split and pay out to help buyers and sellers understand exactly where money goes when a Real Estate agent collects a commission check..
I’ve been a Realtor for 18 years now, a local for 35 years, and before that I was self employed as a professional athlete. Independent Contractors are a classification of employees that people who work for themselves fall into..that’s a Realtor! Being self employed is a choice for many people, you have more freedom to work the hours you want, which generally means you work more hours than 40/week..even in a slow week. It also means there are NO safety nets. We pay for Health insurance, try to fund our retirement, and then there are the business expenses..when a seller pays a commission, or a buyer chooses to use a Realtor, instead of doing the work themselves, remember that the commission breaks down as follows..
- Broker split: The brokerage has an agreement with each of it’s agents to “split” each commission they get. The top split would be 10-15% of each sale goes to the Brokerage. The more average split would be Agent receives 75 – 80% and the Brokerage receives the balance.
- E & O Insurance: Errors & Omission Insurance is the insurance each agent must have. Most of us pay for it ourselves, or a portion of it. It costs approx. $2,500/year.
- Auto Expenses and Gas: All that time driving around with your Realtor, and the time to preview properties by the realtor before picking you up. Not paid for by the Brokers!
- Marketing Costs: This is a HUGE one. We pay for our own Signs, Lockboxes, Land signs if you sell land, Interior Brochures, Postcards, newspaper and magazine ads, Websites, sitting Open Houses, cell phones, computers.
We have these expenses even if we are not closing deals. The market fluctuates, and we have high times, then slower times. But the advertising and marketing costs continue. Realtors must keep their faces and properties in front of the public..closing commissions or not! Take a tour of this gorgeous new 6 acre property with custom home..