Understanding Their Role and Earnings
Realtors love their job because they enjoy helping people find their dream homes. However, most of us actually don’t understand what realtors do and how they get paid. Lately, there’s been a lot of talk in the news about real estate agent commissions. Let us clear that up.
The Reality of a Full-Time Realtor’s Earnings
The average full-time realtor earned $31,900 last year, working 40+ hours a week. Realtors don’t earn an hourly wage or salary. They only get paid when they sell a home and the sale closes. Payment is made broker to broker, which means agents can work with clients for days, weeks, months, or even years without any guarantee of making a sale. It’s like going to work every day without knowing if you’ll receive a paycheck.
The Daily Grind
Technically, realtors wake up unemployed every day, continuously going on job interviews and facing rejection. They spend time away from their families, using their time, gas, and money for babysitters, often missing dinners and weekends.
They are essentially on call 24/7, always needing to be ready for any opportunity. When they close a deal, their commission is divided. Half goes to the other agent involved in the sale, and from the remaining half, a significant portion is used to cover various expenses.
The Hidden Costs
Realtors face a multitude of upfront expenses that need to be covered before they see any income, such as:
- Broker splits and fees
- Office rent and utilities
- MLS fees
- NAR fees
- Local association fees
- E&O business insurance
- Extended auto insurance
- Self-employment tax
- State licensing fees
- Advertising fees
- Showing service fees
- Website fees
- Assistant’s salaries
- Showing partners
- Transaction coordinators
- Yard signs
- Photographers and videographers
- Office supplies
- Business cards
- Property flyers
- Electronic lockboxes
- Continued real estate education
- Legal fees
- Gas
- Income taxes (25-30% set aside)
- Health insurance (if not provided by a spouse)
The Bottom Line
Realtors dedicate their lives to helping people find homes, facing many challenges and expenses along the way. Understanding their role and the financial realities they face helps us appreciate the hard work they put into making home buying and selling a smoother process for everyone.
