How Much Does A Real Estate Agent Make?

Lets do some simple math."?

If you have a $500,000 sale and the listing commission was 6% there is a gross commission paid of $30,000.

That of course gets split between the Buyer's Broker and the Seller's Broker. "?Usually that means $15,000 per side right?

Let's say the Agent's average split over the year with the Broker is 60%."? That would mean the agent would gross $9,000."? Yes, I know that is gross and not net but stick with me, there is a larger thought I want to share with you.

Industry averages indicate the average time spent with a Seller by a Listing Agent is 10 hours."? The average time spent with a Buyer by a Buyer's Agent is 15 hours.

Doing the math that might indicate that the Listing Agent is grossing"? $9,000/10 hours = $900 per hour."? Similarly the Buyer's Agent is grossing $9,000/15 hours = $600 per hour."? So far it sounds pretty good doesn't it?

Why are so many agents struggling?

The answer of course is that it's all about Customer Acquisition."? Take a wild guess about how many hours and how much money those same agents spend to acquire their customer?"? We will address that one in another Blog."? For now, stay with me a little longer.

The Mortgage Company -- On the same transaction, the Mortgage Company made about 2.5% of the loan amount."? 1% often times paid by the client and another 1.5% often paid by the investor the Mortgage Company sold the loan to.

Let's be conservative and assume on our $500,000 sale, the loan was 80% of the sales price or $400,000."? Using our figure of 2.5% that would indicate the Mortgage Company earnings would be a gross of about $10,000."?

What about the Mortgage Broker's customer acquisition costs?"? Pretty low compared to yours, because you gave them the client and the transaction."? RESPA does not allow the mortgage broker to compensate you for the referral."? You just want them to do a good job for you and your client."? Right?

Think about it."? Is there something wrong with your brain?

You spent all the money, time, effort, and suffered considerable brain damage to acquire the client and bring that client to a transaction and now you are going to give your client to a Mortgage Company who will gross $10,000 or more on your transaction."?

Why in the world would you do that?

Are you stupid or something?

There is a better way."? Stick around and you might learn something.