WHY DO REALTORS GET PAID SO MUCH?
Realtors spend a lot of time justifying their paycheck. When we discuss marketing a home with our customers we often see looks of shock or bewilderment when we discuss our commission.
Realtors get paid a commission on every sale. The percentage of that commission varies based on the sales price of the home. A multi-million dollar home will offer a smaller sales commission percentage than an average price home.
The average sales commission is a total of 6 percent paid by the homeowner at closing. Six percent seems like a lot of money right?!?
Well let's break it down....
Let's pretend that 6% is a great big, huge, yummy cookie. The homeowner is asked to part with the whole cookie. But, who gets to eat that entire delicious delight? NO ONE..no one gets to eat the full cookie (6%).
In most successful sales and closings there are two real estate brokerage firms involved. The seller's agent and the buyer's agent. Sometimes the listing agent will also bring the buyer but usually there is another agent involved. Which means, right away the cookie is split in half.
Half a cookie is still pretty awesome though. However, realtors are independent contractors. They are not employees of a firm in the traditional sense. They do not earn a salary. They have no benefits, no health care, no IRA. They are responsible for filing and paying their own taxes every year. In fact, realtors pay their brokerage firm a portion of every commission check for the privilege of being affiliated with that firm. And in the state of Florida a realtor must be affiliated with a licensed, registered, active broker to do business.
So now the realtor must share their half cookie. On average a third of the half will go to the brokerage firm. Another third will go to taxes and health insurance etc. This leaves a third of the half cookie which must cover the realtor's living expenses and the realtor's cost of doing business. (The average real estate brokerage firm does not cover all of the costs of properly marketing a home. Realtors pay for photography, advertising, open house expenses etc.).
This means that for a $300,000 house the homeowner pays $18,000 in realtor fees at closing. However, their realtor may only receive a check for $3000 on that sale. So we aren't being greedy when we decline to lower our fee. We are looking after the homeowner's best interests and ours. If we lower our commission, we are also lowering the potential buyers agent's commission and reducing the budget that we can allocate to marketing that home. When our common goal is the most efficient and profitable sale of a property, reducing our commission is a disservice to all parties involved.
AND THAT'S THE WAY THE COOKIE CRUMBLES!