Saturday, November 14, 2009

Realtors Make a Ton of Money!

Yeah, not really. Or at least not usually. And the potential for making a bundle is accompanied by the risk of making zippo.

I've written before about the public's misconception that all Realtors make a ton of money for very little work. Our broker Jay Thompson, the Phoenix Real Estate Guy, wrote about Realtor income earlier this week.

I recently received an email about this topic and thought it would be interesting reading.

I am about to work for a Realtor, who states he deals with short sales on a regular basis. I'm supposed to call and pitch the homeowners and explain everything and set up a meeting with them and the Realtor.

I'm receiving no salary, just $50.00 per sale. I feel like I'll be doing all the leg work and he's making all the money. Roughly how much money does a Realtor make on short sales? 3-5%? So if he sells a $200,000 property he makes $10,000; is this correct? And I make $50.00. Please let me know, thanks.

Here's my reply...

A lot of salespeople who do cold calling use appointment setters. To get one home sold, the Realtor might need to make 100 or more cold calls.

Now, this is only my opinion ...   but this job seems to be about making appointments. Maybe the pay should be based on how many appointments you make? Because whether the house sells is completely out of your control. On the other hand, jobs are thin on the ground these days so maybe beggars shouldn't be choosers?

As for doing all the legwork, read a couple of our posts about short sales and you'll see that meeting with the homeowner is merely the tip of the iceberg.

On the other, other hand, it sounds like you might be thinking that becoming a Realtor is a better gig? Maybe...

Sellers and Realtors negotiate commissions; there's no set number. Ten thousand on a $200,000 sale is 5%. Not unusual in metro Phoenix. But the seller's Realtor splits it with the buyer's Realtor and then with his/her broker (i.e. boss). Be aware that in short sales the seller's bank often forces a reduction in the commission.

Also, experts say that nationally 95% to 97% of homes listed as short sales don't actually sell.

Don't forget the fees to become & stay a Realtor. I recall writing a check for about $1500 when I signed up at my first brokerage. I routinely write off about $20,000 to $30,000 in business expenses every year. I don't even fudge on my taxes which means I actually spend that much.

The public's perception that Realtors make "a lot of money for very little work" couldn't be further from the truth. My partner Chris has a lot of thoughts on this point as well, which basically boil down to: if a salesperson is lucky enough to make a lot of money, it's because he was willing to walk away from vacation days, sick days and 401k's and risk making nothing for months on end.

I don't mean to be a downer, but if you're thinking about taking a leap into real estate you should know what you'll land in. Whatever you end up doing, I wish you the best of luck!