It’s Easy to Believe Realtors Are Overpaid for What They Do, But Are They?

[Published Nov. 15, 2012, in the Denver Post and four Jefferson County weekly newspapers]

When you look at what a real estate agent can make on a single transaction — often over $10,000 — it’s easy to conclude that we’re a highly paid profession, perhaps even overpaid. 

According to the web site www.salary.com, however, the median income of real estate sales agents in the United States is $37,430. Recently the National Association of Realtors (NAR) released its annual membership profile, which showed that while those with 16 or more years in the business have a median income of $50,200, those with 2 or fewer years have a median income of $8,700 per year.  That’s before expenses, such as cell phone, car & gas, insurance, computer hardware & software, licensing fees and Realtor dues.  Average gross income for all members was $34,900 in 2011, or $15-18 per hour worked — again, before expenses.  It’s little wonder that only 43% of Realtors say real estate is their sole source of household income.

How can that be, when we can make so much money on a single transaction?

The answer is that there are so many of us. The illusion that we make a lot of money keeps drawing people into our profession.  It seems that everyone has a relative or friend who is licensed, and they are frequently drawn to hire that person to help them buy or sell a home. Many of these agents give up and quit the business after losing a bunch of money trying to make it.

In short, the vast majority of agents are just getting by.

For example, in one Lakewood ZIP code, there were 229 residential properties sold in the last 12 months. Can you guess how many different agents had those listings?  I counted 186.

You’re probably aware that we are paid only on success. Most of the time, agents work for free — and spend money doing it. Personally, 25% of my listings expire or are withdrawn without selling, despite the expenditure of significant money, not just time.  I researched several low– to high-producing agents’ statistics, and that’s pretty typical. One agent I studied had 42% of her listings expire without selling. That’s a lot of unpaid effort.

Unlike doctors and lawyers, we don’t have “billable hours.” Lawyers get paid when their clients lose (unless, like personal injury lawyers, they work on contingency), and doctors get paid whether or not their patients get better.  Real estate agents go about their business hoping but never knowing that there’s a paycheck for them somewhere down the road.  Much of the time, there isn’t.