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Making a Living in a High Stakes Profession

by Matt Difanis

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While most consumers realize that commission comprises part of REALTORS’® incomes, most folks do not realize just how high the stakes are for good agents who work diligently on behalf of their clients. Virtually all experienced REALTORS® have been burned by a few clients. Much of the time, this occurs—at least in part—because the consumer does not know how REALTORS® make their living. The purpose of this article is give you a behind-the-scenes look at how the system works and why client loyalty is essential to good agents.

Diligent agents who take seriously their obligation to their clients can easily spend hours working with a buyer before ever showing a house. Once the process of house hunting gets underway, the agent might invest another 10-50 hours for a typical client, and as many as 100 hours for some clients, in the house selection process. Once a property has been selected, an agent might spend another 10-20 hours on negotiations, scheduling and attending inspections, and preparing for and attending the closing. Thus, a typical buyer might require 40-75 hours of his agent’s time over the course of the transaction.

In the case of a listing agent, the time commitment is typically less than that required for buyers, but the expense of advertising can be enormous. Many agents spend several hundred dollars per month on advertising listings. This does not include the cost of agent promotion, such as billboards or commercials, which is largely discretionary on the part of the agent.

Since almost all residential real estate agents are self-employed, there are many costs to the agent beyond the time investment, including the following:

Mileage
Pager & wireless phone
Computer equipment
Office supplies
Copying and printing costs
MLS and other professional fees
Office expenses and/or desk fees
Advertising

For many agents, these expenses can add up to $1,200-$3,000 per month. Most agents pay as much—or more—for regular business expenses than they pay to keep a roof over their heads at home. Good agents commit huge sums of money to their businesses to ensure that they are well equipped to represent their clients as effectively as possible. Despite the formidable amount of time and money that agents invest, most residential REALTORS® represent all their clients on a contingency fee basis. That is, agents do not get paid—not one cent—until a client successfully closes on a purchase or a sale.

Not realizing the agent’s stake in the transaction, many consumers play “musical agents” without considering the implications, or a buyer may decide to ditch her agent under the erroneous assumption that it will save her money if she buys a For Sale by Owner or chooses to build new construction without being represented by an agent. In any case, this means that the agent has worked for less than nothing. The agent has often spent hundreds of dollars and many hours that could have been spent with other clients, the agent’s family, or engaged in other worthwhile pursuits. Consider how many extra weekends, evenings, and beautiful weather days that agent will have to spend attempting to pay the bill for the disloyal client.

One final point: Do not hesitate to switch agents if you have determined that your current agent is not working diligently on your behalf. Incompetent or unethical agents should not be rewarded with your loyalty. Do be considerate of decent agents. If you are unsatisfied or unclear about something, bring it up and provide a chance for the agent to address your concern. Switch agents only when necessary to ensure that you are properly represented. A committed agent-client relationship benefits both the consumer and the agent and encourages good agents to stay in the business.