The Real Life of a Real Estate Agent

Many people carry the perception that real estate agents receive an hourly wage, have an expense account, a company car, and play golf all day Wednesday. After all, they just show people around a few houses, go to an expensive lunch and then pick up a big fat commission check for doing almost nothing and knock of early, right? Wrong.

When it comes to compensation, most real estate agents are paid strictly on commission without any type of salary or guarantee that a commission will come. Operating on this income structure can be quite stressful because if you don't sell a house, you don't eat.

When buyers or sellers see the percentage of commission the real estate firm receives they often think the agent gets to keep the whole thing, but in reality they take home a much smaller piece of the pie. For example, the commission is first split in half between the listing broker and the selling broker. Then the broker on each side splits with the agent working under them - and that split can net the agent anywhere from about 20 to 80 percent of the half their broker received. If the sale came as a result of a referral from another agent or broker, the agent will hand over anywhere from 10 to 40 percent of their commission for the privilege.

From the income, expenses must be taken. In the real estate business there are some expenses that must be paid up front every month whether the agent makes a sale or not. To have any chance at making a living in real estate the agent must subscribe to the local Multiple Listing Service (MLS) which can be $50 to $100 per month or more. In addition there are association dues, insurance, and the cost of marketing and advertising. Since real estate agents work as independent contractors they must set aside part of their earned commissions to pay income taxes.

It sounds simple: show people some houses, and then show up to get a check. But, even the easiest transaction isn't nearly that simple. First, real estate agents show many houses to many buyers that never result in a sale. Of the ones that do, a sales contract is completed and then the real estate agent follows the contract to make sure everything that is supposed to happen does happen. This entails making sure all those inspections and certifications get done and that the loan company has all the paperwork they need every step of the way. Remember, if the deal falls through, the real estate agent doesn't get paid.

Real estate agents field calls from buyers or sellers and other agents - including calls from the buyer at 2am to see if the stools in the kitchen will come with the house. When a problem arises or something goes wrong the real estate agent is sometimes blamed and almost always the one who is expected to find the solution.

So, why would anyone in their right mind want to peruse this career? First, despite all the long hours and headaches it is very fulfilling to help someone buy their first home and see their happiness as they realize the American dream. It's rewarding to know that you've helped someone who's selling their parents home do so with respect and dignity. While most new real estate agents don't last 5 years in the business, those who stay at it and work hard can earn a good living helping people.