Real Estate Myth: Real Estate Agents are all Filthy Wealthy

FALSE: Some are. And they earned it by being the best of the best in an occupation where more than 95% drop out within 5 years (most in the first year). As for the vast majority, they are at best making a living, or are just flat out struggling.

Most people don't realize what comes out of the commission at the end of a transaction. Many people have their hands in the pie of the total real estate commission. For example, a $200,000 house at 6% commission results in a $12,000 commission. At first, this seems extraordinary to pay the listing agent. But typically, the first thing the listing agent does is give 1/2 to the buyer's agent. Then each agent shares a large percent (could be up to 50%) with their company. Now they are down to $3000 and they still have to pay taxes on that money and pay for marketing. At a tax rate of 35%, they are down to $1950 then they have to market your house. Furthermore, most agents are independent contractors so they don’t have the benefit of corporate paid health insurance. They have to get it on their own. Still think they are all rich?

Buyer agents burn hundreds of dollars in gas driving people around so they have expenses too. Most people forget that being a real estate agent is a sales position, so it's a numbers game. Quite often, buyer's agents drive people around that do not end up buying anything. They don't get paid for their efforts unless the deal closes.

So, the reward is big if you're good enough at it and you have the staying power. Many sources say that it takes 5 years to establish a successful real estate career. Most people are not willing to commit that kind of time, effort, and cash outlay to an occupation that most fail in. So, should the best of the best make good money? I think most people would say yes.

Steve Schwartz is a licensed REALTOR in NC and SC specializing in Fort Mill, Tega Cay, Lake Wylie, and Charlotte. Real Estate Law varies from state to state. The comments made herein pertain to a typical real estate transaction in NC and SC and may not be relevant in your state. Make sure to enlist the help of a licensed REALTOR in your state.