Common mythology among non-real estate professionals often holds that
real estate agents and brokers earn really, really big bucks. According to
the misconception, they achieve this merely by sitting around one of their
comfortable townhouses off Dupont Circle. As TV soaps hum in the background,
they wheel and deal major real estate transactions over their phones,
occasionally hopping in their expensive cars to show homes to their
potential clients.
For every sale of a property, continues the folklore, these professionals
pocket commissions of three to six percent of the sale of the property -
often amounting to three to six percent slice off a $400,000 pie. or more.
Though this is undeniably true for some, nearer to the truth (for the
majority), says Edward Downs, an associate with Weichert Realtors, is the
fact that real estate agents are typically independent contractors who
affiliate with licensed brokers. This means that the realtor negotiates a
contractual relationship with the broker - a contract that specifies how
much of the real estate commission goes to the broker and how much is given
back to the realtor who generated it through their sales efforts. Says
Downs, "The bottom line is that while some top agents may pocket 90% of the
commission they earn, most agents are receiving only 60-70% of the cash they
bring in. And a relatively inexperienced agent can be getting as little as
44% of what they generate."
For example, according to a 1999 survey of the annual salaries of members
of the National Association of Realtors (How Do You Measure Up? by Robert
Freeman (1999, http://www.realtormag.com)
the salaries of full-time real estate practitioners "jumped 19 percent
between 1996 and 1998." That placed them at an average income of between
$46,600 to $55,300 per year. For all practitioners (full- and part-time),
income raised "an incredible 14 percent increase", bringing them to a
whopping $43,600.
Keep in mind, however, that the business of finding and selling homes is
very labor intensive. Not a simple nine-to-five job, Downs says that
realtors can typically spend hours reaching out to potential sellers. Among
other things, this is time spent helping a client decide whether or not to
sell their home and - if they do decide to sell - overseeing the many
preparations necessary to make it market-ready. Once a home is on the
market, the realtor is kept busy with any number of tasks - many of which
the client may be totally unaware. These include responding to phone calls
about the property, negotiating and placing advertising, and even overseeing
the placement of the "for sale" sign.
Upon receipt of an actual contract on the property, says Ed Downs, "the
agent will have to spend time reviewing it with the seller, assisting the
sellers to respond appropriately, making sure that all of the contingencies
contained in final contract are met and removed in a timely fashion, and
coordinating the pre-settlement activities between the title company, the
buyer's lender, the appraiser, the termite inspector. and any tradesmen
required to perform repairs." Unlike a person with that regular nine-to-five
job, the real house (there is no free labor to stuff those envelopes; there
is no free postage), malpractice insurance premiums (coverage is required,
at our own expense), MLS subscriber costs (it isn't the internet, it is a
private, closed system that contains highly detailed information about
properties, and sensitive information about Sellers), time invested in
keeping up with many different market segments (e.g.: condos in Dupont,
detached houses in Silver Spring, townhouses in Arlington), and time
invested in keeping up with legislative and regulatory changes in three
distinctly different legal jurisdictions (e.g.: DC, Maryland, Virginia)."
Both Julianne and Ed agree that a good realtor tries to go the extra mile
for a client at all times - regardless of whether the sale they're working
on goes through or not.
Of course, none of this is meant to imply that being in real estate is a
miserable profession that offers little more than long hours with average
pay. Most real estate professionals are fond of the jobs they do; after all,
they chose the field and some even stay init. "We wear many hats," says
Julianne, "Realtor, contractor, inspector, lender, attorney, accountant,
therapist and decorator."
Downs concurs. "Most of the buyers and sellers that I work with are
delightful, interesting people. I love the requirement that I wear many
hats, because my interests are so wide ranging. Plus. I get to learn all of
the time, since every transaction is different, and market conditions are
constantly changing. I think I'd just die if I had to punch in and out of a
nine-to-five job every day!"
- 30 -
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by Michael Walker
