I am worth my commission because my clients are paying for risk and experience

Broker Notebook

Occasionally I hear or read that real estate agents are overpaid. Sometimes we are accused of making too much money, and sometimes we are accused of charging too much and doing too little.

There is a mythology about being a real estate agent that the work is easy and that we get paid a lot of money. We sleep until noon and work in our jammies, and spend part of the day running errands, working out or walking the dog.

Money magnet image via Shutterstock.
Money magnet image via Shutterstock.

We drive really large, expensive, gas-guzzling cars, which are for most agents their single largest business expense. I should not say we. I drive a modest, fuel-efficient car.

Why do we charge so much, especially considering my modest car? How much is too much? Some buyers and sellers claim to pay a ridiculous amount of money for our services while all we do is install a for-sale sign and then go home and grab a beer, put up our feet and watch daytime soaps.

According to the 2013 NAR membership profile, the median gross income of Realtors in 2012 was $43,000, up from $34,900 in 2011.

Realtors with 16 or more years of experience had a median gross income of $57,300. Realtors with two years or less experience had a median gross income of $9,700, and according to Salary.com, the median expected income for a U.S. real estate agent is $38,027. That doesn’t seem like a lot of money to me.

I would never use these numbers to justify my exorbitant commission. Nor would I pull out that old pie chart that shows where that money goes and how it is split between listing and selling brokers before it trickles down to my checking account.

People who are overly concerned with how much money others make should be avoided. My clients are paying for risk and experience.

The people who pay my commission should be more concerned with how much they are paying and what they are getting for that money. People who are overly concerned with how much money others make should be avoided. My clients are paying for risk and experience.

The experience part is easily understood. The risk part is about being willing to work on a 100 percent commission and accept the fact that even though I provide all the services as outlined in the contract and actually sell the house, I may not get paid because it may not close and I get paid only after the sale closes. I am willing to take that risk and the risks of being an independent contractor.

As an independent contractor, I am responsible for my own health insurance and Social Security taxes. I have talked to many people who would just love to be self-employed but who stay in jobs they hate because they are so afraid of health insurance and taxes and risks.

When I have a closing or am busy, people me tell me how wonderful it is that I have work. If I had a traditional job, I don’t think anyone would be asking me if I made any money today, and no one would tell me how wonderful it is if I told them that I was really busy at work, and I am sure I would not be congratulated each time I brought home a paycheck. Yet people seem to understand that I wake up each morning unemployed and I have to do something about it each and every day.

Real estate commissions are negotiable, and no one has to hire me. If I am overpaid, it is because I am asking for too much and people are paying me too much.

It is hard to put a price on experience and on risk, but there are market forces at play, too, and I am not the only agent in town nor am I the least expensive. People will pay for experience. I do the best I can to explain my services so people understand what they are paying for.

There isn’t any point about going on and on about all the things I do and how sometimes it doesn’t work out, or about the nights and weekends and how I spend those wonderful spring evenings with my clients instead of with my friends. I don’t have any complaints, and I suspect I could probably get a regular job if I really wanted one.

I have no reason to be defensive or apologetic about how I make my living. I am not going to go on a rant either and write about how tough a day as a real estate agent can be, because all jobs have a downside. I am happy to explain my rates to the people who hire me, and no one has to hire me. It is very easy to get a real estate license in most states. Anyone can do it, and if they believe it is easy money they should do it.

Teresa Boardman is a broker in St. Paul, Minn., and founder of the St. Paul Real Estate blog.


Related Articles

Comments