The Truth About Million-Dollar Producers
If I weren’t in real estate, I suppose I might be more impressed at the sight of a real estate agent driving around in their leased luxury car with “Million Dollar Producer” license frames.
But, I am in real estate and I’m amused every time I see one of them!
Does anyone really care what an agent’s sales volume is?
Well, impressive as those $4 license frames are, here’s the straight scoop about how (un)impressive it is to be a “Million Dollar Producer”.
In real estate, we divide up each sale into a listing “side” and a selling “side” because most sales involve two agents ~ the agent who lists the home and the one who sells it.
And, we typically split the commission (usually equally) between those two agents.
So, if you assume a 6% commission (not always the case anymore, but a good example), each agent gets 3% of the sales price.
If you multiply the $1 million X 3%, you get $30,000 in gross commissions per agent.
But wait . . . there’s more.
Most agents split their commissions with their broker, and many agents typically get to keep 50-60% of their earned commissions.
So, let’s be generous and assume our agent is on the higher 60/40 commission split.
That means that 60% of $30,000 gross commissions now becomes $18,000 in net commissions to the agent after the broker takes his cut.
From that, the agent gets to pay for their car (figure $500/month = $6,000/year), their own health insurance (figure $400/month = $4,800/year), gasoline expended on free tours with buyers who don’t buy (at least another $200/month = $2,400/year), advertising, computer, internet, telephone, MLS fees, dues, E&O insurance, licenses, taxes on any remaining profit, etc.
In the end, our “Million Dollar Producer” hasn’t made a penny after expenses.
The truth is that our “Million Dollar Producer” doesn’t even have any money left over for groceries after expenses.
No wonder we have so many part-timers with “real jobs”!
In the real world of real estate, you don’t even start to earn a living until you sell several million dollars worth of homes each year.
But those license frames sure are impressive, aren’t they?
October 26th, 2009 Posted in Inside Real Estate
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By Brandon Marchand on Oct 30, 2009
Phil, this cracked me up. Stumbled across this while browsing google blogs! Love those plate frames [Sarcasm]. It’s amazing how it shakes down after you “run the numbers.” Hows business in Boise?