Hoboken Realtor Commissions and Misconceptions
All too often I run into common misconceptions about Hoboken Realtors and how realtors are compensated, how we are overpaid, and the likes.
There is clearly a lack of education and information on the subject. I'd like to clarify a few things.
First: How much do realtors make anyway?
That widely varies depending on the amount of sales he or she makes, or apartments he or she leases. First things first. A part time agent can make as little as $5000 a year, to the super agent ringing in $5 Million a year or more.
Here are some facts.
- Hoboken Realtors are not paid by the hour
- Realtors are not provided a car
- Realtors are not provided a cell phone
- Realtors do not make a base salary
- Realtors do not get health insurance (unless they pay for it themselves)
- No 401K's
- Taxes are not taken out of paychecks therefore they must pay Uncle Sam quarterly estimates and receive a 1099
Hard to believe? It's true. Realtors work on
100% commission and therefore are considered '
independent contractors' and not employees.
We work under a real estate office where our licenses are "hung" and most are individually owned and operated. The broker owner of the company is paid with each sale or paycheck that a real estate agent earns, by paying a percentage of their commissions to the company.
How much of that commission that is "split", vary per office and per agent, and even within the same agency different realtors earn at different levels.
For example. Agents just starting out, are commonly offered a 50/50 split. That means that for every $1.00 that agent earns, $.50 cents goes to the company.
So, on a $300,000 condo sale, where the agent is due 2.5% of the selling price, 50% of that will go to the company. Leaving the agent with approximately $3750 (minus any MLS listing fees and other misc fees). However that $3750 is all in without taxes taken out. So this agent might allocate 15-20% should for income taxes. Leaving the agent with $3000.
Most real estate agents in Hoboken and nationally average less than 6 sales a year. If they were all at the ex: above, then that realtor would only net about $18,000 annually. This is why so many agents drop out of real estate their first year.
2.5%? But I thought realtors made 5% or 6% for every sale?
On a typical Hoboken condo listing, the MLS forms require the agent to disclose the commission fees and splits to all cooperating brokers. In most cases, the listing realtor will offer half of their commission to a cooperating broker - or that broker that "procures" a buyer.
So for example, on a $400,000 listing, the seller has agreed to pay their realtor 5% commission of the selling price.
Unless the realtor can sell the property themselves, they will share their commission with the procuring broker, consistent with the advertised commission structure on the MLS listing.
Why should the 'listing realtor' offer a cooperating commission?
Because it will help sell the home.
By offering a cooperating commission the chances of finding a buyer are greater because now there are hundreds and possibly thousands of realtors that can bring their client to the property whereas if it was left solely up to the listing agent, then that sole agent would be networking to just their immediate sphere of buyers.
Some realtors may, for one reason or another, take a listing for a lower commission therefore reducing what they can offer to pay cooperating brokers. This can hurt your chances of selling by realtors avoiding your listing to show another listing that offers a higher pay rate.
Offering a lower competing - cooperating broker commission can be a huge mistake, enough so that someone decided it was important to warn potential seller's from the below:
On the MLS l
isting contract, there is a paragraph dedicated to this above scenario.
It says in all CAPS, (2nd paragraph) "The amount of commission split your broker offers can affect the extent to which your property is exposed to prospective buyers working with licensees from other brokerage firms." Then it discloses the split, and then it continues.. "If you feel that this may result in your property receiving less than the maximum exposure to buyers, you should discuss those concerns with the listing salesperson or his/her supervising broker."
The contract also states that any commission can be agreed upon or negotiated.
But there is another reason most agents don't take listings for low commission rates. It's because they simply can't afford it. A typical listing can take upwards of 40 hours to sell, plus dollars in marketing costs, mailings, printing, open houses, phone calls, driving, (gas) staging costs, photo costs and more. If realtors tare paid less then there may be less effort put in to sell your property because there is less money available to pay for those costs associated with marketing and selling a property.
In fact, some savvy realtors ask seller's to pay
higher commission splits when competing in difficult markets that are loaded with incentives for brokers to show their properties ie, higher commission to 'cooperating broker', $3000 bonus to 'selling agent', a Trip For Two to the Bahamas when you sell one of our listings etc..
Each listing is a business decision and all of the agents efforts, energy and expenses are put into that business with the intention of selling it. After all, that is the job of a listing realtor - "SELL MY HOME".
I'm a buyer, do I pay the realtor a commission?
No, your realtor will receive a commission of the sales price from the seller's proceeds the day of the closing.
So you can see, it does not cost you anything to hire a real estate agent assist you in finding a home and negotiating the best possible price and coach you throughout the process.
If you have more questions about hoboken real estate agents, or realtor commissions please do not hesitate to reach me!
Hoboken Brownstone Condo With Roof Terrace
