Local Business

Haisler: Real estate agent perception not fair

Real estate agents. For some of you, that term may have negative connotations.

Let’s face it, being a real estate agent might seem like that of a salesperson. In fact, the industry receives annual results of polls that often put them just above “car salesman.” Please know I’m not picking on car salesman, either, but neither occupation is highly thought of as a whole.

Real estate agents often are thought of as commission mongers, out for the dollar as their sole purpose. This just isn’t true. Most agents are not driven by dollars, but rather by desire to truly help others.

Think of a first-time client who knows little of the industry. An agent will help that buyer understand the market, process, valuation, financing, inspections, disclosures, negotiating, importance of having an attorney, short sales or foreclosure, property condition and more.

A good agent is invaluable, and for all of their knowledge and work, they seek to get paid. They seek to make a meager living while helping to protect the interests of their client, a fiduciary obligation exactly like an attorney has with his or her client. Is it so wrong that an agent looks to feed his/her family while assisting others with what is usually the largest transaction of one’s life?

Many might agree that it is fair for them to be paid but that, perhaps, they are paid too much. Let’s look at that.

As an example: If an agent assisted clients in selling two large homes in the county (above the $156,000 median sales price) each month and the sellers paid a commission of $10,000 each (easy numbers), no one would argue that this is a lot of money. But we need to keep in mind that two agents are going to split those commissions – one for the seller and one for the buyer. (While it is legal and possible for an agent to be a dual agent – working for the buyer and seller in the same transaction – this is not typical).

Most transactions involve two agents and usually two firms. If in this example the commissions were split evenly between the seller’s firm and the two buyers’ agent firm (and it doesn’t have to be), the selling brokerage company would make $10,000. That amount now needs to be split between the office (lots of overhead to be paid) and the sale’s agent. Fact: An agent doing two deals like this a month is a top agent selling almost $5 million a year in real estate.

Let’s guess that such an agent makes a 70 percent commission split with their office. The agent would gross $7,000. But she doesn’t get to keep that money. She has to pay her real estate expenses. Certainly, the seller wanted advertising on their home, which probably included a yard sign (cost of sign and cost for installation) and maybe newspaper or professional magazines. She drove to the seller’s home a whole bunch of times (gas and mileage). She had business cards and professional clothing to maintain. She has cell phone bills like you wouldn’t believe.

She has professional fees as well, such as those to belong to the Multiple Listing Service, the local Realtor organization, the lock-box system and keycards for access, to name a few.

Lastly, let’s not forget Uncle Sam. Most real estate agents are not employees of their firm. They are, instead, independent contractors (small business owners) and have to pay their taxes on their own.

So where are we? If this agent could maintain her expenses at 35 percent and paid a nominal tax rate of 28 percent, she’d make less than $40,000 a year. That’s not quite the millions the public thinks a $5 million agent earns, is it?

So the next time you think about real estate agents, maybe you could recognize this same person probably runs your local Girl Scout or Boys Scout troop or sponsors a local youth sports team.

Real estate agents live in our communities and support our local businesses all while working to preserve the rights of property owners. They are ambassadors of our region and give back so much more than they receive.

• Jim Haisler is CEO of the Heartland Realtor Organization, a nonprofit trade group based in Crystal Lake serving nearly 900 real estate professionals throughout northern Illinois.

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