Transparency in real estate fees

Posted on January 16, 2007 by Jim Duncan

Realtors don’t make tons of money. Seriously. Take for example what happens when I accept a referral from a relocation company.

Say, for example that the Seller is offering 3% commission on a $250,000 house.

$250,000 x 3% = $7500

If I made that much, that would be great.

Now, take the referral fee off the top –

$7500 – 35% = $4875.

Still, not so bad.

Now, split it with the Broker –

$4875 – 50% = $2437.50

Now, from this, take out taxes (being an independent contractor, there is no withholding, etc.), Realtor dues, all marketing expenses … and do you still think that Realtors make a lot of money all the time?

Prices of properties and sales volume certainly help offset the potential negative income when dealing with referrals, as does the repeat business when those buyer referrals contact me to market their homes … but … there is at least one (big) company from whom I never accept referrals because their agreement stipulates that once I work with someone whom they referred to me, all future transactions with that client must send this particular company a 35% referral fee.

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About Jim Duncan

A Charlottesville Realtor who tries to stay on the bleeding/cutting/functional edge of technology and real estate trends. I have been selling real estate for the past 10 years, lived in C'Ville for twenty+ and am married to one of few Charlottesville natives left.
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  • http://www.thelandjournal.com Reseg

    ——————-
    ” and do you still think that Realtors make a lot of money all the time? ”
    ——————–

    Excellent wording there. One would be a fool to think realitors make a lot of money “ALL” the time. There is no profession that will make anyone in it a lot of money “ALL” the time.

    Having the right sales personality and working hard would likely bring in some good money though no? Unless you’re in a dead spot or selling to people that speak a different language. I hear getting a couple of loyal house flippers and developers on your side and do well for agents as well.

  • http://www.realcentralva.com Jim Duncan

    Thank you for visiting and commenting. I truly appreciate your time.

    If only I had some developers and flippers … :) — Plug for FlipperNation —

    Personally, I have yet to work with either, for a variety of reasons.

    I posted this to provide a bit of transparency … apparently the perception still exists that Realtors get 6% on every transaction … in this example, they would walk away with $15k free and clear in that crazy world. Sure, it is possible to make a good living as a Realtor, but don’t forget that not that many made a good living last year.

  • TrvlnMn

    …apparently the perception still exists that Realtors get 6% on every transaction…

    I indeed was under the impression that it was 6 percent- which got split between the Real Estate agents involved in the sale and the guy holding the brokers licence who provides the roof and office.

  • http://www.realtybaron.com marc

    Jim, what exactly does your broker do that earns him/her 50% of your commission?

  • http://www.AssistantForRealEstate.com Kandra Hamric

    Ahhh.. One of the biggest misconceptions – The Real Estate Agent makes all the money!! They should have a sample fee list of all the money it takes to run a real estate business when you go to real estate school. I’m sure that would detour people that might not know what they are in for!

  • http://www.realcentralva.com Jim Duncan

    Kendra –

    That is a great idea!

    Marc –

    That split is for referrals that come in through company channels. More and more of the national relo companies are striking deals with large companies, though, and even if I meet the client first, at some point the relo company nudges their way in. For the customer/client, it’s a “good deal” but for the agents and companies – not so much.

  • http://www.realtybaron.com marc

    Jim,

    So, if the referral is internal (ie. via broker), you kick up 50% to the broker. Is the split different if the client engages you directly (i.e. your website, client referral, etc)?

  • Jennifer

    What is a 35% referral fee? Is that from the broker or another agent (in another community)? Do you have that cost on every transaction? Of course, not all brokers take 50%, in fact some have significantly better splits (but I know only know enough to be dangerous).

  • http://www.realcentralva.com Jim Duncan

    Jennifer –

    A referral fee is a fee paid to the company/person who sends the client to, in this case, me. Personally, I think it to be an onerous fee that encourages “do-nothing” companies to set up shop online who distribute the contact information of unsuspecting buyers and sellers to desperate Realtors. I take them occasionally, but rarely, and would rather send business to another Realtor gratis with the expectation of building a relationship rather than charging a fee for having done very little. Regarding the 50% – that is the split only on referrals. My typical split a bit better. :)

  • Jennifer

    Thanks Jim.

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