Wednesday, June 19, 2013

Think Real Estate Agents Are Overpaid? Much of the Time, We Work for Free


[Published June 20, 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

Most professionals I know get paid for the work they perform. Some even charge for estimates, and others charge even when they fail at what they were hired to do.

Real estate is different. Most of the time we are giving our services away to customers with only a vague hope of a payday down the road.

Sometimes we invest a great deal of money marketing properties that never sell, only to have the seller list the home at a lower price with another agent who gets paid handsomely.  (Trainers advise agents to be the second listing agent on a property — let the first agent take the listing while it’s overpriced.)

I had about 30 closings last year, and I drove 15,000 miles. Do you think I drove 500 miles for each successful closing?  No, I drove maybe half those miles related to successful transactions and the rest for buyers and sellers who received my services for free without any compensation for my time and travel.

This is okay with me. I love real estate. When it produces a payday, I know that it makes up for the uncompensated efforts I expended.

Occasionally I have a buyer who has me take him to the exact house he wants to buy, and I handle the transaction — one showing, no driving around, one contract written, one inspection handled, one closing attended — and a $10,000 payday. The buyer, seeing how easy it was, might reasonably suggest a rebate of my commission. But what about those times I showed a buyer 100 different homes, wrote one or two unsuccessful contracts, only to have that buyer rent instead of buy — or the buyer goes to an open house and cuts me out of earning a commission.  (My fault — I didn’t get a signed buyer agency agreement.)

Recently, I was considering listing 5 acres of vacant land 30 miles up a canyon for $125,000, but the seller was so uncooperative that I ultimately declined the listing — but not before I had made three trips to the property and on one of those trips did $1,000 damage to my car’s underbody on his jagged culvert!

Such is the life of a real estate agent. We may seem overpaid when we are paid five-figure commissions on a given transaction, and you may think that’s unfair, but if we didn’t have those closings to make up for all the times we work for free — or spend without reimbursement — then it might be hard to justify going into this business.  As it is, the average member of the National Association of Realtors earns only $36,000 in gross commission income per year — and that's before subtracting car, phone, MLS, computer and other expenses.

7 comments:

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  6. Remember Jim: Its not one buyers responsibility to pay for another person who didn't buy. In fact tell the person who pays you the $10,000 commission that. I dare you. I'm sorry sir, the commission would have been $2,000, but unfortunately the previous five buyers gave me the run around for weeks, and sadly you'll have to cover those costs. Very liberal way of thinking.

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