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Do you think your Realtor makes too much?

As a Realtor, for 16 years, I am used to people thinking the average Realtor is a millionaire, since they are in the "Million Dollar Club". As Paul Harvey would say . . . "And now, the rest of the story."

I know a lot of agents and agencies that increased their expenditures based on the brisk market we had and now, they are not covering their expenses. They were lulled into a false sense of security thinking that the last 2 - 3 years were the "new norm". As an industry, our Ada County Association of Realtors has been budgeting for a decline in agents for the past few years; however it has taken till last fall for that prediction to come true.

During one of our summer of 2007 Board of Director meetings, I pointed out that our regional multiple listing service had 5,977 members and they were also budgeting for a decrease in members in 2008, even though at that time, we hadn't seen evidence of it. Our position on the Board of Directors is to manage, forecast and budget, so we did. Today, our regional MLS is down to 5,299 members (of which roughly 4,000 are members of the Ada County Association of Realtors).

So what does that mean? Well, when you consider that as of today, the MLS shows that there are currently 3,944 active residential single family listings in Ada County. That is an average of only one listing per agent! There have been 439 houses close so far this year in Ada County. Since there might be a "listing agent" and a "selling agent", I multiplied by two for a total of 878 transactions. With an average sales price of $236,681, let's do the math to see how rich the Realtors are really getting. Since we are always being accused of exaggerating, lets assume that none of the agents/agencies discount their commissions and that hypothetically, they all got paid 3% on the selling and listing sides of the transactions. Therefore, hypothetically, $236,681 x 3%$7,100.43 commission x 878 commissions paid is $6,234,177.54 potential commission dollars paid in Ada County and it is only February 13th!

Oh wait, the 13th is supposed to be an unlucky number isn't it? Oh yeah, I forgot that the $6.2 million had to be split between the 4,000 Realtors so that would average out to $1,558.54 per agent so far this year. It gets worse because the agent has to work for a Designated Broker who takes their share off the top. Since most Realtors are independent contractors, they have to pay 15% self employment tax, not just have 7.5% deducted from their paycheck. We have to pay for advertising, cell phones, gas, continuing education classes, MLS dues, etc.

The Parado Principle implies that 80 percent is accomplished by only 20%. Agents that have repeat clients and established business and marketing plans dominate the industry to the point that one article stated in some markets that ratio has gone to 93/7! The Council of Residential Specialist (CRS) can show that their members close 3X the national average number of transactions.

If you look at all the residential single family homes closed in Ada County last year (6,861) and multiply by two again for the "listing" and "selling" sides, then divide by the 4,000 members of the Ada County Association of Realtors, you get only 3.43 transactions per agent for the entire year!

Based on the average sold price so far this year of $236,681, commissions are negotiable; however using the assumption from above, that might be a fee of $7,100.43 multiplied by last years averages would be $24,354 a year. The fact that those fees have not yet been split with their broker, their advertising accounts, their cell phone carriers, insurance agents, or the IRS, I guess that is why accountants refer to it as GROSS income.

I am truly grateful for my repeat clients, investors, builders, developers, and referral partners along with being proud of the team of affiliates that help me close typically 8-10X the local average number of sales per year.

I am glad I went to college so I could give up bartending, not the other way around! My clients think I put in long hours now, but at least I am not closing the bar at 2 AM any more with a bunch of drunks insisting they are sober.

Posted by Jim Paulson at 6/3/2008 5:58 PM

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Comments (22)

Re:Do you think your Realtor makes too much?

I saw your comment on the prvious blog.

When you refer a client to a lender to get "prequalified" do you refer them to more than one lender for a quote? I have been "steered" to lenders in more than one instance...been told that this person will take care of me...and have been quoted higher mortgage rates than I found on my own with my bank.

There is no substitute for shopping your own mortgage; I know you would agree with that. I just have a problem with any professional referring a person to "their lender".

Posted by Anonymous on 2/14/2008 6:10 AM

Re:Do you think your Realtor makes too much?

"I have been steered"

RE agents are used house agents...just like used car agents. They work for money and not you. They kick back each other, brokers, title companies ...name it. Do used car sales people make too much money....only if YOU PAY IT! Be wise/ negotiate and look at alternatives.

Posted by emdeplam on 2/14/2008 12:04 PM

Re:Do you think your Realtor makes too much?

Great question about choosing a lender and I thank you for it!

I take more of a consulting approach rather than a sales approach. In this case that translates to asking the client what they are looking for in a loan, then I use my experience to guide them to the lender that to my knowledge best offers that service. In other words, I help them invest their money as if it were my own.

In real estate school, they preach you should refer three people every time for every situation (loans, inspectors, title companies, etc); but while I agree that limits my liability, the limitations it puts by limiting my professional advice is worse than having my fanny exposed. For example, if you went to your financial advisor and asked them where to put your hard earned money, how confident would you be if they said, well you might want to buy CD's, stocks, or bonds and left it at that. If you had one that would offer stock advice, what if they said your choice: 1) IBM; 2) Micron; 3) Apple since they just wanted to limit their liability and not suggest one that may prove worse than the other? I suggest you go to the ones that back up their research and are not afraid to take a position and tell you WHY that position.

I agree that you should not be steered to a Realtor's own lender, since the Realtor should work with a team of Lenders. Just like as much as financially I would love to be everyone's Realtor, I am not qualified to sell certain types of real estate (even though my license allows it). Article 11 of the Realtor Code of Ethics states "Realtors shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client."

I am not sure if lenders are subject to the same type of rules of competence or not. However, ALWAYS feel free to ask everybody who is trying invest or help you spend your money WHY you should use their services instead of someone elses!

Years ago, I fired my stock broker at a large "reputable" brokerage because he wanted me to invest a certain way yet he wouldn't show me his portfolio to see if he took his own advice. I didn't care about the dollars he invested, I just wanted to see evidence of any indication he agreed with his own strategy!

No all lenders are created equal and not all lenders offer the same programs or have the same underwriting criteria. Some interpret guidelines different then others. Some of them can change their risk tolerance monthly and might approve a loan one month and disapprove the same type of loan the next.

If you give 10 different stock brokers $1 million to invest and make them invest based on what they know historically took effect in 2007 and letting them invest in the past (like a time machine) you would still end up with 10 different amounts in your account since each broker while they could have invested the same way in reality will not!

All this boils down to choosing the right team members and keep an open relationship letting them know you appreciate their advice; but that you will be the one making the payments and living in the home, so you want to do some additional research on your own. A true professional is never offended by a second opinion!

Posted by Jim Paulson on 2/14/2008 1:01 PM

Re:Do you think your Realtor makes too much?

If anyone can prove the statement that "emdeplam" made regading "They kick back each other, brokers, title companies, ... name it" then you should file a complaint with that Realtors' association citing paragraph two of Aricle 6 of the Realtor Code of Ethics. It states "When recommending real estate products or services (e.g., homeowner's insurance, warranty programs, mortgage financing, title insurance, etc.), Realtors shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the Realtor or Realtor's firm may receive as a direct result of such recommendations." That disclosure should throw up a red flag, not a stop sign, so just have them defend their actions.

The reason Realtor's referral fees are excluded is because it is similar to going to a doctor and having them recommend a specialist to your kidney transplant instead of having your general practitioner do it. As noted in Article 11 of the Code of Ethics which I quoted in this blog earlier, I SHOULD refer any real estate transactions that are outside my field of expertise to someone that is more capable of handling your needs! As much as I would love to make the real estate commission if Micron ever sells their complex in Boise, I would have to refer it to someone else since that is beyond my scope!

The fact that agent/agencies share their fees with another licensed Realtor is a professional courtesy and the fees generally are not marked up to the consumer to pay that fee. As a matter of fact, it is illegal for a Realtor to share their fees with anyone that is not a licensed Realtor however (unless they are a party to the transaction so I can rebate commissions to my buyer or seller); therefore, I can not "legally" pay a title company or lender for a lead.

Keep in mind though that not every person with an active real estate license is a member of the National Association of Realtors and unless they are a member in good standing, they can not use the term Realtor! All Realtors however, must agree to adhere to the Realtor Code of Ethics.

Posted by Jim Paulson on 2/14/2008 1:38 PM

Re:Do you think your Realtor makes too much?

Also, for clarification, not all real estate agents are strickly "used house agents" either. I have personally closed homes with over 50 separate builders in this valley in addition to hundreds of resale homes.

If you go to buy a "new" home, keep in mind who represents whom in the transaction. For example, if you buy from the "on-site" sales person who represents the builder, you will start with the exact same "sticker" price for the home. The asking price of model homes in this valley typically already factor in the selling agencies fees so you don't pay extra to have someone like me represent you and your best interest instead of the builders! Obviously, if your offer is not presented in the right context to the builder, they will not accept it whether that offer is made to them directly or via an outside Realtor. If you buy a home without an outside Realtor, most builders will not discount the price paid because their Realtor will have to do my part of the the transaction and if the appraiser sees the discounted price the builder would have just lowered their own comparables for future appraisals.

If you plan to shoot yourself in the foot, just remember, you don't have far to aim!

Posted by Jim Paulson on 2/14/2008 1:48 PM

Re:Do you think your Realtor makes too much?

It is very hard to prove the fraud in the industry but it is rampant...

read the brokers outpost blogs and they regularly complain about RE demanding cuts

Heres a title insurance example "The state's action follows a $24 million settlement earlier this week with Colorado insurance regulators and a title insurer accused of giving kickbacks to homebuilders, lenders and real estate agents under certain reinsurance agreements. "

From a prominent RE agents website...
"Could a Realtor that is in "partnership" with a Title company, please help me understand why it is ok to skirt around this law? More frequently I am finding large real estate companies (and the agents) "partnering" with settlement companies and doing so in a manner that technically gets them around the kickback laws.

One Real Estate company even uses the loophole as a recruiting technique:

"Mortgage and Title Income . We share income with our agents under a RESPA compliant platform. As the leader in this field we have developed the only legal way to offer you this additional income."
Yippee!!! Translation: "We are smart, cunning and sneaky enough to have figured out a loophole to get around the basic intent of the law... at least for now or until we get caught."

Another website lists the following reason for agents to join their Real Estate company:

"Does the company own affiliated businesses? Do the agents share in this?"

Posted by emdeplam on 2/14/2008 5:11 PM

Re:Do you think your Realtor makes too much?

FRAUD , kickbacks

LISTEN TO BROKERS and RE agents describe.....

Hi - I'm new to Active Rain and I really appreciate your post regarding kickbacks. I also happen to be a rookie Title Rep - (worked as a Junior Title Officer for 5 years prior to venturing into the sales side - scary time - but I'm game :) - anyway - My sales partner and I have encountered quite a few realtor offices who would not let us in unless we'd be willing to sponsor monthly staff meetings - to the tune of $1,200.00 per month. Additionally, we had one mortgage broker tell us that there's no way they will consider another title company because half of their holiday party and half of their annual trip to Del Mar is paid for by the title company they refer all of their business to. Granted, this should not have come as a surprise to me considering I'd heard rumors about these types of activities for years - yet actually having someone say it to my face totally shocked me. I understand that title reps have a bad rep out there - and it's something that my sales partner and I are desperately trying to change. We're friendly, helpful title professionals who sincerely want to act as resources for mortgage brokers and realtors - we want to help all of you succeed, especially in this challenging climate. We're extremely well versed in the technical issues of title and we totally understand what it takes to get a file closed and the urgency of every single closing, no matter who the client is.

...........................

Aaron,

Kick backs are rampant in this business. It's wrong, as you've pointed out it hurts the clients and our industry and your post is spot on.

Good mortgage brokers are worth their weight in gold and are very very very hard to find. I don't pay kickbacks, I don't take kickbacks and if you do a good job and keep your eyes focused on the client, none of it is necessary.

But you wouldn't believe the number of mortgage brokers that ask our Title company to give them kick backs or ask us to let them "close the file" and give them the processing fee. So it happens in the mortgage industry too!
....................................

I totally agree with the original post. It amazes me how often things like 'referral fees' or 'perks' are requested amongst business associates in the field, especially from myself, the title company.

Another thing I love is when a broker (mortgage or real estate) asks me to 'leave it off the HUD'. Are you kidding me? I work VERY hard and have been in this business for 9 years now, I am not risking my good name or reputation in order to make a couple dollars on a deal, it is just not worth it. I think that more ethics courses need to be required for all licensed associates in the business, it will never stop the 'back door dealing', but at least people will be more aware of the penalties and consequences of such actions.
................................

THere are lots more examples. The greed in this industry is unbelieveable! AND I WOULD LOVE TO FILE RESPA ETC IF I EVER CAUGHT EM

Posted by emdeplam on 2/14/2008 5:29 PM

Re:Do you think your Realtor makes too much?

I have absolutely no problem with a real estate company owning interest in title companies, mortgage companies, home warranty companies, etc. If I owned part of a company, you bet I would be in it for a profit. However, if that relationship exists, it MUST be disclosed! Then the consumer should know to to ask "What is in it for me the clients?". For example, my wife is a Senior Title Officer with Pioneer Title here in Boise. When my clients don't have a preference, I often refer the business to Pioneer and I fully disclose that even though my wife works there, she may not be involved in the process and that she, nor I, will not receive any compensation as a result of me closing there. Even though I don't legally have to disclose that, I would rather have it open and on the table. I have yet to have someone object to full disclosure and no one has ever asked to close anywhere else because my wife works there!

I don't think there is a single industry in this country that is immune from some corruption, insider trading, etc. You can always look and find cheaters in this world. Sometimes you don't have to look very far. Just like in the 2005 case in Colorado mentioned above, it may take time, but when people are willing to step up and fight for what is right and legal, the courts should uphold it. If you ask me, the easiest way to get a class action attorney to pay attention is to let them over hear you say "It's OK, I know we aren't supposed to do this, but every does it"!

I am so concerned that my clients have a positive relationship with me that in some cases, I have passed a "selling bonus" on my commission straight to my client since since I don't want them to think that bonus might have effected the way I negotiated for them! When I have done given the bonus back to my clients, the clients have always ended up referring new clients to me that in the long run has ended up making me a lot more money than just taking the bonus.

I learned years ago, it is much better to make your own income and pay for what you enjoy with your own friends, instead of feeling like an endentured servant to people trying to buy your loyalty with fake smiles and company expense accounts!

Posted by Jim Paulson on 2/14/2008 10:59 PM

Re:Do you think your Realtor makes too much?

Jim not trying to challenge your integrity, but when you wonder why trust is very low with the RE community it is built on a large history of poor practices that have largely gone unpunished. The fraud and greed went unchecked, and we are unfortunately likely to get a bunch of crap regulations in the future as a result. In my opinion NAR wasted too much money and time bribing lawmakers and not enough making their members and reputation more solid.

Posted by emdeplam on 2/15/2008 2:20 AM

Re:Do you think your Realtor makes too much?

I don't take it personal as I know I do my job right and that is why I (like a lot of Realtors) have a very loyal following. It goes back to my first post on this topic stating that there are a lot of agents that don't do much business; however those that do it well . . . do very well.

It all boils down to hiring the right agent that is qualified and excited to help you realize your dreams when buying or selling a home. Not just hiring someone with a license to do it. That would be like going to any doctor to perform your root canal. If you didn't realize the difference in doctors and inadvertantly hired a proctologist, you might end up with a bad taste in your mouth about doctors too.

Posted by Jim Paulson on 2/15/2008 9:29 AM

Re:Do you think your Realtor makes too much?

Good interview questions to chose an agent

--How long have you been representing buyers? What Real Estate designations do you have? Which ones are buyer-related?
--(IF they have an ABR designation) -- Do you have any additional training beyond just the ABR designation? If so - what?
--Do you have any credentials in research and analysis and information gathering? If so - what?
--Do you call yourself a "buyer's agent" only when you are working with a buyer? In other words - do you also list property for sale?
--What percentage of your transactions have been buyers versus listings? Can you please print out your buyer and seller statistics from the MLS so that I can view them?
--Will you guarantee me that you will not be representing any seller at any time while you are working for me?
--How many listings do you have at the moment? Is your priority servicing them?
--Will you be showing me your company's listings? If so - can you represent me 100% when doing so?
--Do you practice dual agency?
--What percentage of your personal business, and what percentage of your company's business is representing buyers vs sellers? What percent is sellers? Can you document that for me?
--Do you receive a larger in-house split from your broker when you sell an in-house listing?
--Do you have any agreements with sellers that might limit your ability to tell me everything you know about the seller and their reasons for selling?
--Do you actively search out "For Sale By Owner" properties for your clients? If so - can you show me all the FSBO databases that you use?
--Will you show me a FSBO that doesn't pay out a commission at all?
--How many buyers have you successfully represented in the last six months, and can I have the name and phone number of at least six of these buyers?
--Can you please print out all of your buyer-side transactions within the past year, and show me your statistics for "price-off"?
--What specific buyer agent training have you had in the last year, and what negotiation courses have you taken?
--Can you give me the six fiduciary duties you owe me if I hire you as my buyer's agent?
--Will you ask me to sign a buyer representation contract? Can I have the contract, so that I can compare it with other ones?
--Will you recommend other professionals to assist me? (Inspectors, Real Estate attorneys, lenders etc.)
--What criteria did you use when you selected them? Are any of these referrals "in-house"?
--Do you help your buyer client "shop" for the best loan rate and fees? If so - how?
--Will you ever become an intermediary? If so, explain.
--What clauses in an offer will you recommend to protect me as a buyer?
--Will you point us to places we can check for registered sex offenders, and refer us to places we can look up crime statistics?
--What kind of school related research do you provide to your clients?
--What areas do you cover?
--How many homes do you tour per week?
--How will you help me save money?
--Do you take Realtor bonuses or commissions over 3%?
--Do you get paid more when my purchase price goes up?
--Specifically, how will you protect my best interests, and why should I hire you rather than another agent?
--Will you point out all the negative aspects of each property as well as the positive aspects so I will be fully informed when making my decision? Can I have references from all your past buyer clients?
--Do you research comparable sales? If so - can you show me in writing, how you analyze "comps"?
--Can you show me an example of how you negotiate? Do you present your client's offer in-person?
--Do you proactively collect information about the sellers situation and motives? If so - how? What other information do you collect about the seller?
--Can you guarantee me 100% loyalty - 100% of the time, never working in-full or in-part for a seller?
--Will you put all of that in writing?

Posted by emdeplam on 2/15/2008 10:31 AM

Re:Do you think your Realtor makes too much?

These are some good questions but obvious slant toward buyer's agents only. The ABR designation "Accredited Buyer's Representative" is a good designation, however it is one that is earned with a minimum of only two classes and five closed transactions. I personally disagree with only using someone who represents buyers as a criteria, because that means they have no incentive to work for your repeat business when you choose to sell.

A few other questions should be:
1) What is your preferred method of communication (phone, fax, email);
2) What technology do you use that will benefit me as your client?
3) Why did you choose to work for your agency over all the other available options?
4) How many transactions have you been involved in within 20% of my price range?
5) How many transactions have you been involved in within 5 miles of where I am looking?
6) How many homes have you personally bought and sold (or does your agent still rent themself)?
7) How many of your closing close on schedule?
8) With over 4,000 agents to choose from in Ada County alone, why should I choose you?
9) Provide references for the three transactions which most closely resemble what I am looking for.
10) Do you offer any type of guarantee and if so is it in writing?

Posted by Jim Paulson on 2/19/2008 4:02 PM

Re:Do you think your Realtor makes too much?

Besides everything you said Jim, I think the BIGGEST misconception the general public has is just HOW MUCH of that HUGE commission we are making on a sale we actually walk away with. You briefly mentioned it. But I don't think a lot of people realize that we indeed are Self-Employed and that means we are running a small business and that means we have A LOT of 'small business owner' expenses and that we pay a large amount in even just commission splits to our brokerages, plus other membership dues and fees and insurance and our own health insurance and retirement plan and marketing and more. Not to mention self-employment TAXES! That time of year right now.....Now don't get me wrong, I'm not complaining here. I love being self-employed. I'm just saying that I think there is a general lack of knowledge about how much the cost of doing business is for us. I have a friend who just got a job as a private school principal. Private schools generally don't pay a ton. But, with the great insurance, other benefits, tax write offs, (not to mention a good portion of the summer off to vacation or find a seasonal job) etc. he gets when you look at the playing field equally, a Real Estate Agent who makes maybe just over three figures might not ACTUALLY make even as much as this guy when all is said and done. GROSS commissions may be more so it might seem like the Real Estate Agent makes more. But that's not the whole picture.

Posted by Kasey Boles on 2/21/2008 11:00 AM

Re:Do you think your Realtor makes too much?

I don't think there is a right answer to that question. The dramatic rise in home prices equates to a dramatic rise in what a Realtor makes per average house. That leads to an increase in people getting into the Real Estate profession. Of course, we have a serious downturn now, and it would probably be hard to find many Realtors who are making too much money.
As a "one time" developer, I am amazed at how little a brokerage does for a builder or selling homeowner. They take 20% to 40% of the listing commission and then say they "advertise"? I don't see it. They have put advertising off on the agents, who could handle that in the boom times, but now they simply don't have the money to do a lot of that.
So, I'm buying most of the advertising for my subdivision, and then my builder still pays the commissions to the brokerage, and really, for what? I can't buy that it is for "the name" on the sign out front.

Posted by idahoranch on 2/27/2008 10:53 PM

Re:Do you think your Realtor makes too much?

I must say that I agree with IdahoRanch's comments. In new construction, the rules have gotten so weird that even though I have been involved in marketing 7 separate developers, I don't even know what the "norm" is any more.

When I did my first development, I got paid to sell the dirt from the original seller, and lot fees from the developer if I help them market the end lots a year later. Then as the market heated up, agents started not taking commissions sometimes to help secure the development. Then, as the market went from hot to sizzling hot, the new norm was to not charge the developer since you tried to retain the marketing rights for the homes (which included the lot too). I never liked that model since it was impossible to realize who you actually worked for (serving multiple masters never did work well).

I still believe the best thing is to develop a written marketing plan for developments to show everyone where the money is going. A predefined marketing budget should be supplied. When a "marketing fee" is charged, it should also be spent on "marketing"!

Also, keep in mind that every real estate brokerage is set up a little different so make sure you understand what is expected of both the agent and their brokerage on your behalf. I know if my clients pay the advertising, I charge a much lesser fee.

At least one good thing that has come out of the market correction is that is much easier to different the agents and companies that are doing things right as opposed to just surviving well on a great market! I am glad to see competition for new (and old) subdivisions again instead of having the projects just go to a family member or a friend or to the person that sold the ground to start with!

Posted by Jim Paulson on 2/27/2008 11:23 PM

Re:Do you think your Realtor makes too much?

I am not a blogger but I couldn't let this one go. Who is Embdepalm? And what is it that you do Emdepalm? I am a retired doctor. I retired young. I did a lot of real estate and business investing and kind of acidity became a Real Estate Broker. I had a license so I could use the MLS myself. I won't tell you long story about how I became a broker. But here are the facts. Most Realtors fail. The ones that don't make far too little money for the work they do. They are on call ALL the time. People call at night, Sunday while they are at church, and when they are having their babies. The average agent makes less than $30K per year. They either spend lots of money advertising or farming clients, or they have a broker that gets clients for them. They spend hours preparing for clients and showing them endless numbers of homes. They are required to tell customers about agency by the State of Idaho and a lot of people let it go in one ear and out the other and think they are just trying to get them into a contract for the Realtors benefit. Then they have another agent write and offer and the poor Realtor that spend a hundred hours gets nothing.

Real Estate is a thankless occupation. So why do we do it? Because what I have described is only some customer clients. Others are appreciative and get it. They are loyal and they want their agent to make money. They become friends.

Most people tend to project what they are onto others. It makes me really wonder about your character Emdepalm.

Being a Realtor is a lot like being a doctor. You listen to people who have a need. You help them fulfill it. You get joy by bringing them happiness or helping them get well. Real Estate takes special people. They need to be patient, polite, forgiving, full of integrity so when they have insolent corrupt people who screw people in their lives and think everyone is out to screw them they can let it run off their back and go to the next customer/client who may end up appreciating them.

I agree that people are born sinners. We are corrupt by nature. But God changes the hearts of some and passes over others. Crooks and dishonest people who use and abuse others usually think everyone is like them. The truth is that the most satisfying stories Realtors will tell are about the poor and troubled who they have helped. Joy comes from serving and is far greater reward than money.

I think you need a serious self examination Edepalm. You need to consider what motivates you. You need to stop judging others automatically based on what YOU would do. Not all are like you. Some have come to love the Law of God and do not do out of selfish ambition or vain conceite, but do in humility consider others better than themsleves. Some do look not only to their own interests buy also to the interests of others. Some people do get their greatest joy from helping others rather than making the most money. Ironically, it is often (not always) these who prosper econimically too. But the financial success in the long run is a product of service. Those who live to gain selfishly from others usually are found out eventually.

Posted by Anonymous on 3/29/2008 10:49 AM

Re:Do you think your Realtor makes too much?

Its an interesting question and one worth discussing; however, I think the basic premise of your argument is flawed. To take the commissions from all Ada county transactions and divide them between all active real estate agents to prove how little real estate agents get paid is misleading. The idea that Real Estate agents make too much money comes from the individual experience that each home seller/ buyer has with their agent. Lets look at this from my point of view. I recently sold my home for $200K. The house was on the market for 1.5 months. I had a good agent; I have no complaints with his service. I would estimate that my agent spent about 25 hours working on selling my house:

2 hrs initial consultation
2 hrs gather information about the house
5 hrs create, print, and proof 25 1-page brochures
3 hrs arrange for sign, advertising, and mls listing
2 hrs consult with other agents who showed my home
11 hrs - miscellaneous

I think I am being generous with my estimate, but just to be safe, lets add another 10 hrs and call it 35 hours total. For that, he was paid $6000. Thats more than $171 an hour!! There is no other aspect of my life where I pay someone $171/hr. Not my doctor, dentist, plumber, mechanic, not even my lawyer. Not even close!

Now ask yourself if a real estate agent makes too much. My answer? Next time Im going FSBO.

Posted by Anonymous on 6/3/2008 12:32 PM

Re:Do you think your Realtor makes too much?

You forgot to mention that the relator has no risk. Don't try to include the advertising dollars because they would be spending that to promote themselves anyway. A realtor is a small business that must have an budget to promote themselves.

Posted by Anonymous on 6/3/2008 1:01 PM

Re:Do you think your Realtor makes too much?

First of all, Jim- you sound like one of the exceptional Realtors out there. Good for you! And thanks for your informative posts.
hey to Anonymous #1,2 and 3 immediately above. First to the good doctor: you make a good point, that our rewards ultimately are based on the value of the service we provide to others.
And to Anon #2 above- you're preaching to the choir, at least to me. Realtors can make thousands of dollars per hour, when they're selling. The fact is, all the "down time" or "non productive time" they have to trudge through really averages that way down. They may work all week to get to those few paying moments- and they just hope that it's worth it.
Now to Anon #3. You make the one point that makes my blood boil. The realtor essentially is risking their time, while the builder or the homeowner is risking their all- and the realtor fees typically are just as much $$ as the owner is hoping to "profit" on the sale themselves.
Now, a story. As much as I bristle at emdeplam sometimes, good old 'plam makes some good points as to interviewing prospective agents. We listed a house a couple years ago, with a "friend of a friend" realtor. He put a sign out front, took an hour or so to input the house info into the MLS computer system- very ineptly and inadequately, even incorrectly I might add- and then promptly disappeared. A few weeks went by, and I personally sold the house to an aquaintance- someone who hadn't even known the house was listed for sale on MLS. The realtor tried to "help with the transaction- and nearly drove everyone crazy, even jeopardizing the deal. Now the part of the story that makes me grimace and grind my teeth together. Mr. Disappeared Ineffective Realtor fully expected; nay, insisted- that he be given "his" full 6% commissions. You go sell a $500k house, and do the math. Yes, that's right kids, he demanded $30,000. For doing absolutely nothing of any value- simply because he listed it. I'm sure you can guess that properties I have sold since then include clauses to cover such situations. But I've seen that scenario play out many times, with friends, etc. Just really irks me that the d@^^ realtors always have their hands out on commission day, but are nowhere to be found when it's time to actually do any work.

Posted by Anonymous on 6/4/2008 7:07 PM

Re:Do you think your Realtor makes too much?

Great new discussion points! I will go do some research on how many hours it generally takes to sell a home of actual agent time. Based on the anonymous posting on June 3rd, if the agent makes $171 an hour, then I average 60 hours a week I should be making over $500K a year. What am I doing wrong?

Keep in mind that good attorneys make $200 - $250 an hour here in Boise, so if they did a good job, they shouldn't even appologize for the $171 an hour.

Keep in mind that is gross pay and not net pay. What about the time going to all the continuing eduction requirements, meetings, showing homes, filling their car up with gas at $4 an hour, buying clients lunch/dinner, overtime rates, the fact they have to pay their office a percent of the fees, etc.? I didn't see anything about meeting inspectors, dealing with mortgage and title people, closing, etc.

That is like objecting to paying $750 for a root canal at the dentist since it only took an hour. Would you rather take 5 hours for the same event so the cost per hour drops?

The comment that advertising costs don't count since advertising would be done anyway is absurd. Any good agent understands that target marketing is specifically targeting a product/service to the correct end consumer. My ads are very different to do "institutional ads" to promote myself or my company than for a 3 bedroom 2 bath 2000 sq. ft. house!

Also, many attorneys charge in 1/4 hour increment for their services, so with all the distractions on calls from other buyers, sellers, internet leads, etc., that 60 hours that I work might be billable out at 240 hours a week using the 1/4 hour increment billing method.

The hard thing for a good Realtor is differentiating themselves when so much of the work we do is behind the scenes!

Posted by Jim Paulson on 6/5/2008 9:07 AM

Re:Do you think your Realtor makes too much?

SO WHY ARE THERE SO MANY REALTORS?? They cry like teachers.

Posted by Anonymous on 6/7/2008 7:41 AM

Re:Do you think your Realtor makes too much?

There are lots of Realtors because unfortunately there isn't a large enough barrier to entry! When I became a Realtor 17 years ago, there were only 700 or so of us in Ada County, now there are nearly 4,000!

When the market was good, we added thousands of them in Ada County alone. The cost to maintain a license is also relatively low so people hand on to their license in hopes they can run across a buyer and seller on occaision. For example, it only costs about $175 a month (including renewal fees figured monthly instead of annually and semiannually).

Some Real Estate companies cater to part time agents since they can pay them lower commission splits and make more profit per transaction.

The main thing when you select your Realtor is to make sure they have the knowledge and experience that will truly add value to your transaction. That should be from their negotiation skills, new construction experience, specific knowledge in the type of real estate you are looking for, etc., not just a license holder! For example, I openly admit you should use one of my other agents to buy a ranch or a farm since I don't know that market. You should let me refer you to one of my commercial real estate agent partners if you need to sell an ongoing commercial business since I am not connected in those circles and do not personally add enough value to justify my commissions on those even though my "license" allows it.

Posted by Jim Paulson on 6/7/2008 6:34 PM

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