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Are All Real Estate Agents Rich And Overpaid?

There is a debate in the world about the usefulness, and alleged obscene amounts of money earned by some professions.

We are aware of the fact that real estate agents are not the most trus­ted pro­fes­sions in Australia.

The Australian Reader’s Digest produces an annual list of most trusted professions.Obscene amounts of money

Here is where Real Estate Agents ranked in 2011:

38. Celebrit­ies
39. Sex work­ers
40. Journ­al­ists
41. Taxi drivers
42. Real estate agents
43. Car sales­men
44. Politi­cians
45. Tele-marketers

I can see why the pub­lic has ranked us this way and I’m going to make it my mis­sion in this art­icle to expose the truth and show how rich we really are!

Are real estate agent overpaid?

The truth is that the aver­age real estate agent only makes a mod­est income of $47,457 p.a. See inde­pend­ent resource Pay Scale below;

Are real estate agent overpaid?

There is dif­fer­ence between a real estate agent and a real estate agency which fuels the myth of indi­vidual Real Estate Agents earn­ing big money for selling a home.

The indi­vidual agent would only earn a por­tion of the com­mis­sion for each sale with the bal­ance going to his / her agency.

It would be com­mon for an indi­vidual agent to earn 1/3 of the com­mis­sion for the sale and the bal­ance going to the agency he/she is work­ing under.

How many hours real estate agents actu­ally put in?

Just like any self-employed per­son you will need a pas­sion for what you do, a crazy work ethic and have some of the same insec­ur­it­ies as us real estate agents (no work — no pay).

On a reg­u­lar basis many of us work 12 hour days including Sundays.

We some­times work with cli­ents for 2 years or more before mak­ing any money out of the rela­tion­ship and some we may still be help­ing 3 years down the track without hav­ing done any business.

Risk VS Reward

How many trades people would do all the prep work and put everything in place to com­plete the job, hav­ing paid for everything needed to get the job to the start­ing line, only to have to wait per­haps weeks, months or years to real­ise any form of pay­ment, if at all? 

[Imported] WP Advertize it Free Strategy ad 10 July 2014 (Desktop #44800)

And what if, after all that work and out­lay, the whole thing goes pear-shaped and falls over due to some­thing that the real estate agent can’t control?

If a real estate agent clocked in and out each time they worked on a par­tic­u­lar prop­erty, kept a detailed list of asso­ci­ated expenses and then did the math from the final com­mis­sion paid over the time taken to earn it, the rate would work out to be close to the min­imum $/hour as defined by the powers that be, in the major­ity of cases.

I want you to ask your­self this: how many people would work with no retainer, no car allow­ance, and every week­end, some nights, sup­ply your own sta­tion­ery, busi­ness cards etc and you only get paid if you get the results.

Now that’s not to say that some sales don’t cal­cu­late differently

Those homes that are lis­ted and sold quickly after only a short rela­tion­ship are obvi­ously, far more prof­it­able from that view­point, how­ever, they are the excep­tion, rather than the rule.

Most people take around 6 — 18 months to sell their home from the moment they get the idea and start check­ing into it until the day the house settles.

So if you work it out, here is the mega com­mis­sion you think a real estate agent earns for a sale.

The com­mis­sion cut up

Let’s say an even $10K for the pur­pose of this exer­cise and we’ll use all the low­est com­mon vari­ables: $10K com­mis­sion for 6 months work (180 days),

Let’s say at 3 hours per day,The com­mis­sion cut up

3 days per week (just for argu­ments sake) = 216 hours = $46.30 / hour (approx).

From that, you need to take the Fran­chise Fee (if applic­able) @ 10% = $41.67 / hour and then take out the cut that the agency you work for gets — for an aver­age agent, that’s 50% = $20.84 / hour maybe a refer­ral fee.

At this stage we haven’t even taken the taxes, fuel, car, phone, train­ing and other over­heads out yet.

I don’t see many of us retir­ing to Hawaii any­time soon on those numbers.

The reason agents are paid so much is the risk, how many people would go to work 10–12 hours a day 6–7 days and pos­sibly not get paid?

Ser­i­ously think about who would go to work do their job, be on call, get dragged away from their fam­ily and then at end pos­sibly not get paid.

The aver­age agent earns $60-$80k per year work­ing hours that most would have their uni­ons shut down a work­place if they would forced to do, let alone at the risk of not get­ting paid.

Some agents not worth the money

A real estate agent will earn in dir­ect pro­por­tion to the amount of work they put into their job.

Yes, there are a large num­ber of agents who aren’t worth put­ting out if they were on fire; that’s why you need to inter­view a few before you decide who to work with.

The GoodSome agents not worth the money

Just like any­one that is good at their job they are in high demand.

  • They have meth­ods, know online/offline mar­ket­ing, sys­tems, and a track record of success.
  • You will see their mar­ket­ing and sign boards every­where on a reg­u­lar basis.

Yes, a lot of agents go for price reduc­tions as their only option to sell prop­erty — but not good agents, they know how to do the job prop­erly and they can;

a) Price the home cor­rectly in the first place with a clear proven strategy in mind and

b) Will find the real reason why the prop­erty isn’t selling (put all B.S. to the side); it’s not always because of the price.

I will agree, some agents have egos lar­ger than the known uni­verse; they need some inher­ent belief in their own abil­it­ies to be able to get up each day and be told to ‘rack off’ by the next 40 people they speak to and keep com­ing back for more.

The Aver­age

It’s the old 80/20 rule. 20% of the agents make 80% of the money.

A good real estate agent will con­tinue to learn and hone their skills over their career: oth­ers will plod along, last­ing maybe a year in a job they were never suited  to but were drawn to by the promise of unlim­ited earn­ing capa­city, total work/life free­dom and other shiny con­cepts that can’t be delivered without massive effort and con­stant hard work.

This is why we have a massive influx of Gen Y’s enter­ing the industry but they are lucky if they make it past the 12 month mark.

We also have one of the highest churn rates of new staff and broken dreams as an industry (there is always fresh meet for the grinder in the real estate industry).

  • These agents don’t have a clear plan, meth­ods, they have no idea about online/offline mar­ket­ing, lim­ited sys­tems, and struggle to show a track record of success.
  • You will not see their mar­ket­ing and sign boards on a reg­u­lar basis.

The bad

When you inter­view these agents they fold eas­ily when you quiz them about their nego­ti­ation abil­it­ies. Good agents spend a lot of time and money learn­ing nego­ti­ation

They will resort quickly to com­mis­sion cut­ting to get your prop­erty listing.

There is an old say­ing “Price Is Only An Issue In The Absence Of Value”

Good agents spend a lot of time and money learn­ing nego­ti­ation so if an agent can­not nego­ti­ate his/her fee what will they do with the price of you home? HHHmmm… I wonder…..

These agents are best char­ac­ter­ised by;

  • No clear method of nego­ti­ation and resort to com­mis­sion cut­ting to sign you up.
  • Lazy and want to belt the price to below the land value.
  • Don’t bother with decent sig­nage, then for­get to advert­ise the open house and won­der why no one turns up but use the excuse to say “your price is too high”.
  • Use of par­tic­u­larly bad pho­to­graphy thus tar­geted by buyer agents on the hunt for easy/cheap deals.

Real estate agents are worth it for most sellers.

A good agent earns his/her fee.

As for the top earners?

Yes there are a few who earn $500,000 a year, just as there are salespeople in other fields that earn that sort of money.

But for every $500K earner, I will show you another 500 salespeople who earn less than $60,000, par­tic­u­larly after deduct­ing their vehicleReal estate agents are worth it for most sellers. and phone costs.

Suc­cess­ful people earn good money, unsuc­cess­ful people do not.

That is how the free enter­prise sys­tem works, people!

As for people selling their own homes, remem­ber that the skill of a good Real estate agent is to get the buyer up in price, nego­ti­ate the deal.

The aver­age per­son does not have this skill and gets less for their home.

What some people must under­stand is that most people do not sell and buy a ter­rific amount of houses in their life­time. For the major­ity they may sell 1 or 2.

For the most part sellers are very emo­tional when selling and at times tem­por­ar­ily insane. There­fore you need an object­ive party hand­ling the negotiations.

The per­sonal sacrifices

The thing is… real estate agents can be as wealthy or as poor as any­one, but what people for­get is the amount of sac­ri­fice of per­sonal time and energy that goes into suc­cess­ful agents. The per­sonal sacrifices

To those of you who say they don’t deserve what they earn, I chal­lenge you — agents make the choice to either work their guts out to make the most they can, or they can cruise by and
do the bare minimum…therefore earn­ing the min­imum wage.

In today’s world where even the smal­lest com­mod­it­ies come with huge price tags, most people have to earn as much as they can to sup­port their fam­il­ies and life­styles, but oh boy does it come at a price.

Leav­ing before 8am and get­ting home at 9pm, kids school events missed, week­ends full of open homes and nego­ti­ation, and that bloody phone that can never be turned off!Real estate agent “work­ing like a dog”.

Real estate agent “work­ing like a dog”.

You say they’re always out at lunch?

Most likely it’s a meet­ing with a cli­ent, or a nego­ti­ation.

Swan into work whenever they want?

Well sure, they’re mostly out of the office on the road clos­ing deals, doing inspec­tions or vis­it­ing homes for apprais­als.

Real estate agents live and die by the work they do and abso­lutely deserve what they earn.

They give up a lot to achieve suc­cess, going from abso­lutely noth­ing to a thriv­ing career based on their own hard work and tenacity.

Look­ing rich is all part of good real estate agent marketing

Would you trust your most valu­able asset with an unsuc­cess­ful look­ing real estate agent?

At this stage you may be ask­ing your­self how come real estate agents own expens­ive cars, watches, and offices? As you prob­ably have already real­ised agents are all about per­sonal promotion.

Blake Gar­vey, action real estate agent good look­ing and on The Bachelor.Look­ing rich is all part of good real estate agent marketing

To even get an inter­view as an agent you have to already look the part (espe­cially for me as Gen Y with no exper­i­ence at the time). 

For me that meant I had to get a car loan and buy a late model car, nice suit, watch and cuff­links (all on credit card).

I know many real estate agents that don’t really care about what car they drive, such as Leon Giet­zmann a Seven Hills real estate agent but unfor­tu­nately we live in a mater­i­al­istic soci­ety.

He drove an old ford for many years but he real­ised he had to even­tu­ally buy a car that looked good.

Sellers make judg­ments whether we like it on not on such things, either it be sub­con­sciously or consciously.

Because we look suc­cess­ful, people have pre­con­ceived notions that we are liv­ing it up but in real­ity it’s all good mar­ket­ing.

I often ask the agents around the office “How was your week­end?”

The usual reply is “Aaaarrrr I was in the office for most of it”.

End of conversation.

Why do I need an agent to sell my home when tech­no­logy helps me do it so easily?

You may still be think­ing if someone WANTS to buy a house THEY WILL, and the Real Estate Agent him/herself will have abso­lutely noth­ing to do with that decision!

This is true to some extent but at what price?

If you think real estate agents are a dying breed and you think you can sell you own prop­erty for top dol­lar, I think you should, but just make sure;

  • you don’t hold back on the marketing,
  • have a sys­tem of nego­ti­ation to get the best offer,
  • flex­ible work hours for buyer meetings
  • and do your best not to get emotional.

Although there are many own­ers who have the abil­ity to sell their own homes, there are mil­lions of oth­ers who are pet­ri­fied at the very thought.

Here is one example that I have seen a few times:

The “Sale by Owner” vendor has had what he considers to be an excel­lent inspec­tion with Mr and Mrs Jones.They say “We will get back to you”.

They are mak­ing good buy­ing noises, or so he thinks.

They say “We will get back to you”.

Two days go by and not a word!

What does the private seller do?

Does he phone them?

The thought crosses his mind that if he does that, he might risk appear­ing as an anxious seller!

Does he even have their con­tact details? Does he start to doubt his assumed abil­ity to be able to spot a def­in­ite buy­ing sig­nal?

Hmmm! Maybe this is not as easy as I thought!

A good agent doesn’t have to worry about these things.

He is not embarrassed to phone Mr and Mrs Jones. That is his job!

A good agent is also a damn sight bet­ter in spot­ting buy­ing sig­nals than the aver­age home owner. Discussion with a real estate agent

If Mr and Mrs Jones had been mak­ing genu­ine buy­ing sig­nals the good agent would have had them back to his office nego­ti­at­ing and filling out an offer! That is the difference.

Sellers that get emo­tional dur­ing the selling and the nego­ti­ation pro­cess usu­ally make irre­vers­ible bad decisions (unknow­ingly), that cost them more than an agent would have.

I have seen it almost on a daily basis and I will admit I have made many of the bad decisions when I first star­ted.

This is why good agents spend thou­sands of dol­lars on coach­ing and train­ing of selling sys­tems.

This human ele­ment of selling a prop­erty is why real estate agents will always be needed.



Want more of this type of information?


Jhai Mitchell

About

Jhai is the Internet Marketing Business Development Manager for Elders Toongabbie and Kings Langley. He has been consistently quoted in the Sydney Morning Herald and Real Estate Business online. Visit his blog at www.realestatesevenhillsnews.com.au


'Are All Real Estate Agents Rich And Overpaid?' have 14 comments

  1. September 19, 2014 @ 8:42 am Sam

    Hit the nail on the head with this article. Well written.

    Reply

  2. September 19, 2014 @ 10:38 am Jeff Gregg

    The article was obviously biased and self serving. With lower commissions there would be fewer better agents and this perception of agents would change for the better. I have a friend who has worked in both full and discount commission agencies and is making far more sales and thus earnings now at the lower rate of commission.

    Reply

    • Michael Yardney

      September 19, 2014 @ 10:58 am Michael Yardney

      Thanks for your comment Jeff
      I see it differently – like every other profession / job /service there are good, bad and indifferent providers.
      In my eyes the cheapest agent is the one who gets you the highest price – and that is often the best performer who usually charges a higher commission

      Reply

  3. September 19, 2014 @ 1:10 pm Hari Yellina

    Good article. I have friends who are agents. They work so hard and earn very little. I know why now. You have nailed it.

    Thank you.

    Reply

  4. January 19, 2015 @ 6:16 am Jim

    “Look­ing rich is all part of good real estate agent marketing”
    How true, know agents who sell only a few houses a year but drive new BMW, Jaguar, Mercedes, don’t know where the money came from though, must have baked bean and instant noodle every night !

    Reply

  5. January 20, 2015 @ 4:52 pm Jeff

    The image of agents has been created by the agents themselves, not those who perceive them. There are properties that sell easily and those that take a lot of time and effort. Are they really worth the same commission? It’s around this issue and about what is a fair and reasonable that fees become hard to fathom. I agree with Michael that the agent that gets you the highest price is the cheapest but you simply cannot determine this at the outset, or even afterwards for that matter.

    Reply

    • Michael Yardney

      January 20, 2015 @ 5:14 pm Michael Yardney

      Jeff you make some good points
      Choosing a good agent is very, very hard as they’ve all be trained in how to do “listing presentations” to impress you and win your business
      Then, as you say, the proof is in their performance.

      So how do you choose an Agent? Recommendation form a satisfied client is a good start. That’s also why Vendors Advocates are springing up

      Reply

  6. January 22, 2015 @ 1:42 pm Jeff

    A couple of things here. How the commission is split between the salesperson and the agency is irrelevant to the vendor. It’s all just commission to them. If the salesperson is a skilled negotiator perhaps he should start with the deal he gets from his employer. Also, after reading Jais article, and please, I mean no disrespect, these are just my observations, what exactly is a fair commission. If the best agent is the one who gets the highest price (Michaels view), the idea that it’s a fee for a service doesn’t really apply. And how do you know at the outset who that might be, or even after for that matter. Lastly, I don’t think there are any straight forward answers to this. Maybe it just comes down to better communication and treating fees on each listing individually.

    Reply

  7. December 8, 2015 @ 2:41 pm Hannah

    Good, comprehensive article, Jhai.

    Real estate, like all industries, has agents with a large range of abilities, so I like that you focused on the average salaries and commissions, not just the highest ones (the 80/20 rule). There are so many things that agents deal with that most people don’t realise.

    Thanks for this article!

    Reply

  8. December 21, 2016 @ 8:16 am Morris

    Biased – what a joke – a property sells itself these days and that’s why the future of agents is fast declining – self sell products and could robot agents will do the selling – the owners just open them up. The industry is already a sausage machine – agencies and franchisees are making the money corporate over head is why it’s $10k poor agent – how about the screw the corporate overhead!

    Reply

    • Michael Yardney

      December 21, 2016 @ 9:30 am Michael Yardney

      Morris
      Selling property is easy- selling property for a top price is difficult

      Reply

  9. February 4, 2017 @ 2:10 am Ali

    Warren, how many properties do you think an agent needs to earn 6 figures a year?

    20,30,40? or even as little as 10? I have read different articles, all giving different perspectives. Some think to believe agents earn easy money, conversely articles like this make me believe otherwise.
    Thanks

    Reply

    • Michael Yardney

      February 4, 2017 @ 7:52 am Michael Yardney

      Ali
      Agents usually keep between 25% and 50% of the commission on the sale of a property – the balance goes to their office or the owner of the business.
      In the cut throat business of real estate agency some agents are substantially discounting their commissions to get listings – so they get a small percentage of a lower fee.
      However, as in every industry there are top performers and the rest. Real estate can be a rewarding career for those who are prepared to put a lot of hard work in – the problem the job is very disruptive to your personal life, with a lot of after hours and weekend work

      Reply


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