Perception is not always reality
By Nancy Russell Vice President Select GMAC Real Estate
It's Friday afternoon during one of the softest markets in recent memory. Compounding this is the fact that historically by the numbers November is the slowest month of the year in Real Estate. However, what draws a group of us back to the office is that October and November have been active. And that's in direct contrast to the constant barrage of negative news with regards to the Housing Market. As we sit around the conference room discussing marketing ideas, industry trends, Buyers and Sellers, it occurs to me what we Realtors rarely do is discuss how we get paid, i.e., our commissions and what is the cost of doing business. Therefore, I would like to clarify a few questions regarding Real Estate commissions.

Nancy Russell Vice President SELECT GMAC Real Estate www.nancyarussell.com

First, I would like to debunk the notion that Realtors make a ton of money and work parttime hours. For successful real estate agents nothing could be further from the truth and perception is not always reality. Yes, a few years ago the housing market was booming and, as a fellow agent told me, "It's like selling ice cream on a hot summer day at the Cape." Sorry, not exactly, and you would not be surprised to know that when the market turned that fellow agent was one of the first casualties.

As with most industries, it's easy to define success. For us Real Estate agents success is when you're at the closing table with a Buyer and Seller. It's that simple, a deal has been transacted and everyone walks away happy.

Now a look at the numbers. When you are told that real estate commission is 5%, 6%, etc. this means that the total commission is 5%, 6%, etc. This total commission is split between the seller's agent and their office and the buyer's agent and their office. For example, if a home sells for $400,000 the gross commission at 5% is $20,000. Both the seller's agent's office and the buyer's agent's office receive $10,000. The split that the agent receives is based upon the agreement that they have with their office. Realtors are independent contractors. In this example, say the agent is working on a 55% / 45% split. The agent's commission would be $5,500 and the office receives $4,500.

So an agent earns $5,500 on a home that sold for $400,000 and yes there are different commission rates and deals that agents work out with their offices. Continuing with the example, if the agent is working for a firm, then there is usually a 5% or more taken off the top for the franchise fee. Then you have office and agent expenses. These include health insurance, personal advertising, supplies, fees, dues, phone, gasoline, education, etc. A good number to work with is somewhere between 25% and 32%. The $5,500 is now down to around $3,900 or maybe even lower.

Here's the thing about a commission-only job. An agent only gets paid when the deal closes. So, if the deal does not close for whatever reason, the agent and office have spent valuable time and money and would receive nothing in return. And about that part-time notion: Real Estate agents are working all the time. If not actively working, they are always "on call." This means weekdays, nights, weekends, holidays - ALL OF THE TIME. If you are not working, you will not be able to make a living.

Finally, once an agent puts a deal together, the closing could be 30, 60, 90+ days away. During this time the agent is working with attorneys, finance people, appraisers, advertising people, vendors, home inspectors, etc. Agents are also involved with office meetings and commitments, education, designations, brokers and public open houses, advising clients, working on marketing plans, market analysis, etc. All this and there is no guarantee that the deal the agent put together will close. So we have spent time money on something that may never come to fruition.

So why do we do it? As I sit around the conference room listening to everyone enthusiastically discussing the Real Estate industry, marketing trends, Buyers and Sellers, etc., I realize that we all have one thing in common. And that is we all love our jobs and are passionate about what we do for a living.

MAKE THE RIGHT CHOICE - SELECT GMAC REAL ESTATE! "Whatever Nancy touches turns to SOLD." Call me at 508-753-2200 or by e-mail NRussell@SelectGMACReal- Estate.com. Visit my website for more information www. nancyarussell.com or stop by the office located at 45 S. Quinsigamond Avenue in Shrewsbury.