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Why Real Estate Agents Don’t Make What You Think They Do…….

As the famous Princess  Diana once said….”There are three of us in this marriage.” That in a nutshell is the reason buyer and seller agents gross the amount of money that they do. But all is not what it seems.

On the surface of it, in Connecticut a listing agent is entitled to 5% of the sales price of a home…or are they?

Lets say your home is on the market for $1million. A 5% commission on the sale of that home is a cool $50,000 right?iStock_000005964579XSmall

Wrong. Consider the following. If the listing agent is fortunate enough to sell his or her own listing, then yes they are entitled to the full 5% commission. However, most of the time a buyers agent will sell the home which immediately ratchets the commission down by 50% to 2.5% or $25,ooo.

Now here’s the kicker….the listing agent has his or her Realtors license “held” by a broker…Sotheby’s…Re/Max…Halstead etc. The broker is entitled to a portion of the listing agents commission too. It can range anywhere from  15-50% of that commission, depending on a number of factors.

That would further reduce the listing agents commission again to as little as $12,500. In addition, Realtors are self employed, meaning that the $12,500 is then subject to income tax and well…I don’t have to tell you what that means.

This of course does not take into account any other costs the agent may have incurred such as staging,open houses,gas, and advertising.

So, there are at least three people, four if you count Uncle Sam ,who are partaking in the agents fee. Not everything is as it seems so think twice before complaining about the cost of hiring a Realtor. Pound for pound they are the best value in town.

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