Please find my letter regarding competition and commission rates for the real estate industry attached.
October 21, 2005
I don't understand how anyone could think the real estate industry is not competitive enough and that commissions are too high. I suggest you walk a day in my shoes to understand how hard a Realtor works and the MANY expenses we have associated with selling a home. People think nothing of paying a 15% tip to someone to bring their food to the table - even if it's poor service. An attorney charges a 30% commission (and higher) to file on your behalf on a class action lawsuit. However, people believe 5 to 7% is too high to pay a professional to help them sell one of the largest investments they may ever have????
Let's also look at where that commission goes. Half goes to the listing agent, who has spent large sums of money to market the house, may have also paid to have it professionally photographed, pre-inspected, staged, cleaned, and who knows what else. The other half goes to the buyer's agent who may have spent up to 6 months hauling these people around and countless hours researching homes to view. Our time is worth something and we also have expenses related to showing buyers such as gas and meals. The Realtor then has to split their share of the commission with the brokerage firm they are affiliated with. The brokerage has their fair share of business expenses too. So I end up with around 1/4 of the overall commission - that's 1.5% on a 6% listing.
Most Realtors work 7 days a week. I've negotiated offers up until 11:00 p.m. at night. We work hard to represent the best interest of our clients. I understand that many people don't have a clue as to what a Realtor really does behind the scenes. I didn't appreciate how hard they work until I became one and I certainly didn't understand the expenses they have.
This is my second year in the business and I've done okay this year; however, 80% of my income has gone back into the business for advertising, marketing, carry-over start-up costs, continuing education, accounting, office supplies, etc. Ten percent went to the church and that leaves me a whopping 10% income that I still have to split with Uncle Sam. My GROSS income this year will be around $30,000.
Since most people don't understand what a Realtor does and why they are worth what they are paid, I have created a spreadsheet with what I do to either help you sell your home or help you find and buy a new home. I will be more than happy to share that with you if you are interested.
Were you aware there is an 80% dropout rate among new agents because it is so competitive!!!! Check the number of licensees.