Friday, May 13, 2011

What do Realtors actually earn?

As all of you are undoubtedly aware, real estate agents make tons of money.  After all, they drive nice cars, dress well, and show up at all of the best events.  They make tens of thousands of dollars off of each sale.  How hard can it be to open the front door, show someone through a house, and write up an agreement?

That’s a common perception, but how accurate is it, really? Especially given today’s economic situation?

I decided to take a look at the number of Realtors who are playing in the Newport County “pond” and see how they are doing in this economic downturn.  You might think that everyone is crying in their beer (or rather, their Chablis) at the monthly Newport County Board of Realtors’ “Wine and Whine” event, where we meet at a local restaurant to socialize and swap stories.

But at the most recent event, there was a lot less “whining” than had become customary these past few years.  In fact, the realtors seemed downright cheerful!

We decided to take a quick look at all of the companies who have offices located in Newport County, and add up their agents to see what they might have earned in the last twelve months.

There are 570 realtors who have their offices located in Newport County.  In the last year, 826 transactions were recorded in the Multiple Listing Service for this location.  This might seem like a thin pie for agents trying to make a living selling property, but each transaction usually includes two Realtors: one to represent the Seller, and one for the Buyer.

If we divide each transaction into two sides, we end up with 1652 transaction sides in the last twelve months, which translates into just under three transaction sides per agent.  The total sales price of all the sold properties is $362,955,336.  These properties were listed at total of $396,644,439, so with some quick math, they ended up selling for 92% of what the owners were originally asking, on average.

And now, back to our agents! Each agent’s compensation is determined by a separate agreement with his or her company and can vary by that agent's production and other criteria, but to make the math simple, let’s take as a  for instance that they split the commission evenly with their office.  Commissions are set by the individual offices with their clients, therefore I can only project figures based on our office standards .  Using our office's rate as an example, the total sales for the last year would have created $19,832,222 worth of gross income to the agencies.  Our agent’s share of that would be $9,916,111 worth of net income, which, divided by 570 agents, amounts to $17,397 each on average.

The reality is that 500 agents participated in the Newport County Sales, so at least 70 agents didn’t have any sales in the County at all.  Of those agents that participated, the lowest earner (using the above hypothetical agent earnings formula) might have received around $461 from their sales in Newport County.  Only 130 agents or a little over a quarter of the 500 hypothetically broke the $17,397 average number stated above and only 36 or just over 6% of Newport County agents hypothetically made over $50,000 in the last 12 months.  The top earner might have made somewhere over $321,000 for the year, but the majority of agents who participated in a sale could have made less than $7,700 for their year’s worth of effort.

Is real estate brokerage the right profession for you?  I would say that it can be if you want to work long and hard to excel, but not if you want to be average.  It’s tough to get by if your job probably earns you under $8,000 a year, as it does for most local agents.  Be kind to your local Realtor; he or she works hard for what they earn.

1 comment:

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