Guy, great question. As the saying goes you get what you pay for, and in this market the more you skimp the harder it is to sell the home. For many of us to put a lot of time, energy and money into our clients we are very successful. I'm sure your saying to yourself, wow that 's alot of money the agent wants" and how could it possibly cost anybody that much money to sell a home"!!!
I'd like to explain where all the money goes. Letâ€™s skip ahead to closing day. The title company subtracts $12,000 from the sellerâ€™s proceeds at sale. It goes to the sellerâ€™s Broker. Not the Realtor with whom the Seller dealt every day, but to the Realtorâ€™s â€œemployerâ€, the Broker.
Usually there are 2 brokerages involved in 1 deal, the Sellerâ€™s Broker and the Buyerâ€™s Broker. The Sellerâ€™s Broker splits the commission with the Buyerâ€™s Broker according to what was agreed between them in the MLS advertisement. In this case, the Sellerâ€™s Broker gets $6,000 and the Buyerâ€™s Broker gets $6,000.
Then the Brokers turn around and split that commission with their respective Realtor agents. Again, the way they split it up is determined by individual employment agreements between the Realtors and the Brokers. Sometimes the Realtor gets 80% of the commission and the Broker takes 20%. Sometimes the split is 70% â€“ 30%, 60% â€“ 40%, or even 50% -50%. In any case, that $12,000 was split into two 6â€™s. Now itâ€™s split again; letâ€™s say in this case itâ€™s split 70% â€“ 30% between Realtor and Broker.
The Broker gets 30% of $6,000, or $1,800. From that, the Broker pays for the cost of running an office, providing phones, computers, printers and toner. The Broker and realtor also pays for Errors and Omissions Insurance. Brokers have to pay the clerical staff who handle data entry, phone service, and general document and transaction management. The jobs here have to get done & paid for. Whether the Broker takes a split or a monthly fee, they pay the bills somehow off of the work their Realtor agents do.
What about the Realtors? In this scenario the Realtor in the example got 70% of 50% of the $12,000 it cost the seller to hire that Realtor. Seventy percent of half of $12,000 is $4,200. Already, the Realtor who did all the work of selling the house watched his â€œpaycheckâ€ get whittled down from $12,000 to $4,200! Out of that, the Realtor must pay for:
Federal Taxes â€“ Realtors are independent contractors and, unlike W-2 employees who only pay 6.25% of their gross wages to Social Security, Realtors pay about 12.50% of their income to the feds (we pay double whatever wage-earning employees do);
State & Local Taxes â€“ donâ€™t forget â€˜em!;
Liability Insurance in case a client gets hurt while theyâ€™re together;
Auto insurance at above-normal rates because Realtors drive a lot with other people in the car who arenâ€™t covered by their own auto or medical insurance;
Medical Insurance â€“ Realtors are independent contractors and donâ€™t get insurance through their employers;
Dental Insurance â€“ same as above;
Vision Insurnace â€“ again, same;
Disability Insurance â€“ same again;
Annual MLS dues;
License renewal fees (in metro Phoenix, we renew once every 4 years);
Annual lockbox access dues;
Individual lockboxes for use at listings;
The cost of attending various seminars to continue learning and growing as a Realtor;
Staging Supplies, if any ;
Website developer fees and monthly or annual maintenance fees;
The costs of buying and installing yard signs, sign riders, posts, and so forth to put at listings (and the cost of removing them all at the end);
Advertising costs including web, print, billboards, radio, TV, newspaper, supermarket checkout divider thingies and whatever else the Realtor threw into the ad mix;
The costs of maintaining a home office complete with color printer/fax/scanner/copier, computer with high-speed Internet access, data backup resources, hi-quality digital camera & supplies;
Maintaining a big car that holds lots of people;
Open house supplies like drinks & snacks, pre-open advertising and buying the actual open house signs;
Cost of printing just listed cards and brochures
Astronomical monthly cell phone bills â€“ because youâ€™ve gotta have unlimited data, text, web if youâ€™re going to compete in todayâ€™s mobile market
My point is that Realtors pay for all the above out of their own pockets and do it because doing so helps us service our clients effectively. On a final note, think of all the money we've spent and your home does not sell --we have no reimbursement!!- Bonita Areman, Burgdorff Realtors 973-568-0341 Accredited Buyers Rep