How do some realtors make money ?

Question

I'm not in the business so maybe this is a stupid question - how do some realtors make enough money to live on ? I can think of 4 kinds of realtors, and of these #1-3 make a living:

1) Those that do a lot of houses that are fairly expensive. The busy realtors in the affluent parts of town, in other words.
2) Those that do a bazillion low-end houses, including REO's, etc. They may do hundreds or thousands of houses in one year.
3) Those for whom it's a second job. They that got their license but never made a go of it, and never will. 
4) Leaving those who that sell "some" houses, in the middle price ranges. A few average priced houses a month. Where I live (east side of Indianapolis) houses are slow to sell, and $150,000 buys a lot of house.

I wondered because I was looking around at realtors and got a recommendation from the guy across the street. I think she'd be ok but wondered how someone with only 20 listings can make a living. The outfit she's with keeps slightly more than half the commission. So if she lists or sells a $125K house on a 7% commission (standard here), she gets about $2,000.

Account Closed · Answer

Making a good living as a Realtor is really quite simple.  First, you understansd that listing is where the money is .   You build up an inventory of about fifty good saleable listings. That takes about a year of harrd work.   If 20% of those listings sell every month, you should earn abot three thousand per transaction.  That is about $20,000 per month.  The hard part is learning to live on less than you make.

Heather Skowronsky · Answer

I'm actually a full time Realtor but I'm in the DC market so it's a bit different here.  Our average single family sales price is close to $500,000.  Most real estate companies out there aren't charging 50% commission splits.  70/30 is average where we are but there are still companies that have lower splits than that.  There are also tons of places you can get 100% of your commission for a monthly fee which tends to be about $500 per month or so.

It seems the cost of living is much lower where you are so if an agent is making $2000 per transaction and has a rather steady flow of transactions, maybe 5 a month, that's pretty good income if a home in your area only costs $150,000 - the mortgage on that isn't much.  It may not be the most lucrative career choice but I can see how the numbers could work.

Mark Ferguson · Answer

Many times those rainmakers get special deals. We pay a flat fee to our broker every year and keep 100% commissions.   It's all about time vs money.  Is it worth it to go through the headache of starting an office, staffing, being managing broker or hiring one and dealing with regulations?  Plus Reo agents risk losing clients because the bank's relationship is technically With the broker.

David Krulac · Answer

Mark  Ferguson

Or real estate agents who buy/lease big expensive car rather than buy real estate?

If an agent has 10+ assistants and they are the rainmaker at the agency office, why not just leave, take all your assistants with you, set up your own brokerage, and cut out the broker's take?  I never understood that one either.

Mark Ferguson · Answer

David Krulac, I am also very surprised at how few agents buy Real Estate as an investment.  It seems like most agents are more concerned with buying a fancy house for themselves than investing.  This coming from a agent.

I think many agents don't treat their work as a business, they treat it as a job.  An agent has to be prepared for slow times and little money coming in.  It is also difficult to keep prospecting and going after clients when you are very busy and have a lot of closings in escrow.  Many agents do great for a couple months then nothing and then great.

The key is to get a lot of listings and then bring in buyers agents on your team who can handle the buyer leads.  Hire plenty of assistants to help yourself and the buyers agents with paperwork, which most Realtors hate.  Invest all the money you make in rentals or start your own office.  Branch into flipping and other avenues of Real Estate and soon you will be a millionaire!  :)

David Krulac · Answer

Bill Rainsburger & Ned Carey

Ned is right on.  There are many agents but few make big money.  There are agents have have no listings and very few sales.  Some have spouses who provide the family income and so the agent commissions are not as vital.  Other agents have other sources of incomes like retirements, annuities, inheritance etc. so they are not dependent on the income either.  I've know re offices where there are one or two heavy hitters and they dominate the business in that office, often doing more business that all the other agents in that office combined.

There is a big drop out rate in the business also.  1981 when interest rates are 16% for mortgages, about 50% of the agents quit the business as they weren't making any money.  I bought a house from a broker who was selling his investment properties to keep the brokerage doors open.  How did that work out for him?  Within a couple of years he was out of business and didn't have any rentals either.

That brings up another point.  I am always amazed at how few agents and brokers buyer real estate.  there it is right in front of their nose and they get first look at any potential bargains, yet they don't buy any of them.  What cred does an agent who has never owned any investment real estate have trying to sell investment real estate to a client?

David Beard · Answer

Keller-Williams is growing the fastest, and most agents are on 70/30 or 80/20 with a $25k annual cap paid to broker.  So about $4mm of annual production (3% commission per side with some of them as double-enders) would get you to $100k of gross commission income.  Certainly doable, and I'd expect that perhaps 10% of full-time realtors are doing this number.

Michael B. · Answer

With any commission sales it approaches Glengarry Glen Ross rules:

First place:  Brand new Cadillac 
Second place: Set of steak knives
Third place:  You're Fired.

That keeps people hungry and selling.

Mark Ferguson · Answer

Ned Carey, I'd say it is more like the 95/5 rule with Realtors.  The average income for a Realtor is $38,000, but I know many agents who make hundreds of thousands a year.  There are many different income streams in Real Estate, just because someone is not selling a ton of listings, does not mean they aren't working with buyers, doing BPOs, flips, property management, etc.

Karen Margrave · Answer

Bill Walston First off a broker usually keeps 50% of commissions until an agent makes a certain amount of money, and then they move up to the next level. However; there are brokers that rent desk space and agents keep all of their commission.

Though there are a huge number of real estate agents in areas, there are very few that are good. Though I am a licensed agent, I basically use my license on our own deals. However; if someone I know is looking for property etc., then I'll work on their behalf. It infuriates me at the lack of professionalism, and total laziness I see on the part of too many agents. Their complete ignorance of the facts pertaining to the property is outrageous. (but I digress)

The point is, in most areas there are a few offices of really good agents, that dominate their market, and do very well.

How do some realtors make money ?

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