Broker Salaries & Commission

I've always wondered about that. Maybe they split their commission 50-50 with the firm.

Posted by: guest at October 17, 2007 7:59 PM

There's never a salary. Brokers only get paid commission, and they have to pay for their advertising, floorplans and photography themselves. That's why you see newbie or cheapy brokers never using floorplans or professional photographers (thus they make less money - go figure that logic).

I wonder if the big firms offer the option to buy into group health insurance though, that would be my question.

Posted by: guest at October 17, 2007 8:15 PM

Really?? The brokers at the huge firms don't get a regular salary? So do they have to split that commission with the company (like Corcoran for example)?

Posted by: guest at October 17, 2007 8:48 PM

So the bajillion brokers working for Corcoran are independent contractors? That's crazy.

Posted by: guest at October 17, 2007 10:44 PM

Based on this feedback, I'm selling my next apartment FSBO!

Posted by: guest at October 17, 2007 10:48 PM

I don't understand how there are so many brokers in NYC. There's no way they're all making money. Sure, there's a ton of real estate to be sold, but it's not infinite. It would seem that the brokers outnumber the listings, no?

Posted by: guest at October 17, 2007 11:00 PM

"Based on this feedback, I'm selling my next apartment FSBO!"

If you live in a desireable neighbourhood and you set a realisitc price (this is the key), there is no reason why you cat sell your own apt.

Once you agree on the price, you hand it over to the lawyers, and they do the rest.

Ive done it twice.

Posted by: guest at October 18, 2007 9:07 AM

Howrealnyc: - Just because you sell privately, without an agent, does NOT mean you got the best price in your pocket. Saving 25K, but selling for 40K less doesn't add up to me.

Firstly I don't know of too many places for sale for $410,000 which at 6% realizes a $25k saving for FSBO.

In April 2005 we sold a triplex co-op in Park Slope for $925k within 72 hours of our Craiglist posting (the eventual buyer actually called within 10 hours). Every broker we'd spoken to (and that includes 2 Corcoran brokers) estimated we'd get $850,000 max.

To have netted 925,000 with a broker would have meant we'd have to have sold it for $984,000 and there was no way we were going to get that for a 1200 sq ft 4th, 5th & 6th floor walk-up.

As long as your property is in a desirable area then a well constructed website with photos, floor plan and lots of details plus an add on Craigslist (or even the NY Times) seems to be all one needs to recoup most if not all of the brokers fee.

If the 6% ceiling is ever seriously broken then that might change but while the big players insist on their cartel they're going to see more and more of the best properties going FSBO - it really is that easy.

Posted by: guest at October 18, 2007 3:43 PM

Wow, 3:43 - that was eyeopening. I sold my place well-located, desirable P.S. apartment with one of the big P.S. brokers, for about what they told you you'd get - now I wonder if I could have gotten 75K more. With prices going up so much, it is hard to imagine the brokers underpricing by so much, but what you wrote has made me rethink what I thought I knew.

Posted by: guest at October 18, 2007 4:18 PM

I have both sold homes on my own and with a broker. There is a lot to consider when making the decision to do either. When I went with the broker, I had a full time job and two young children. I did not have the time to market and sell the home which had appreciated outrageously. I therefore listed with a realtor who did the work for me to earn her commission, which came out of my gain. The next home I sold myself and I had to work to get it sold. Although the home was in a prime area it was not as easy as 3:43 makes it out to be. I had to make appointments with complete strangers and allow them to enter my home. I had to become emotionally detatched when showing the home. When I got an offer, which didn't take long, I had to negotiate the counter-offers and other conditions. Of course the buyer wanted a huge discount because there was no broker. I had to stay on the phone with the attornies and buyers until closing. If your home has appreciated considerably, list it with a broker. If you are working with financial constraints do it yourself. It's like paying a painter to paint your house. If you have the money you'll pay someone to do it because it's a pain in the a**, if you don't, you'll do it yourself. I think at the high end of the market, most qualified buyers are coming by way of agents though.

Posted by: guest at October 18, 2007 4:19 PM

I agree that the broker does some of the work - but there's still a lot of work for the seller - I had to negotiate counteroffers, etc., stay in touch with the buyers and their attorneys 'til closing, too, when I sold - and doing it through telephone tag with one or two brokers in the middle was more complicated than doing it directly would have been.

I figured it was worth it because they marketed it for me - I didn't have to do that part. But if they underpriced it, like 3:43's potential brokers did, I'd have to rethink whether it was worth it.

Posted by: guest at October 18, 2007 4:30 PM

3:43 here again.

I am the first to agree that to a certain extent we lucked out in that we found a buyer and had accepted their offer within 4 days of posting our initial ad. But we had a highly desirable (despite it being a walk up) property with 2 bedrooms (plus attic bedroom) with a terrace and views of Manhattan, Statue of Liberty etc. We were also zoned PS321.

And that is my point - if your property is desirable; in a good area etc then I can see little reason to use a broker. Both my wife and I had full time jobs as well as a 18 month old child plus she was pregnant again. But for a $59,000 saving I'm not going to get overly concerned about getting detached from our apartment and showing a few strangers around.

We sold ours for over $500,000 more than we'd paid for it 3.5 years earlier although we'd basically done a gut renovation as well as adding moldings, baseboards, new kitchen, laundry, baths etc. Sure we made a ton of money but I can not see the point in giving a huge slice of that to a broker when it was going to be so easy to sell. I never understand why brokers get such a huge junk and attorney's not so much and could someone explain why a broker's fee should be dependent on the selling price.

Posted by: guest at October 18, 2007 4:51 PM

"Savvy" people are not as smart as they pretend to be. However, everyone is entitled to their opinions.

Posted by: guest at October 18, 2007 8:48 PM

I wouldn't want to give up $59,0000 either but I don't care how desirable a property is, I would not want to have a stranger who could just be wasting my time or worse in my home. Especially with small children and a pregnant wife. Is there some way to prescreen potential buyers before actually letting them into your home. If I do list with an agent, I will make that person earn every dime of their commission and I would not be on the phone with another agent or calling someone else's attorney.

Posted by: guest at October 18, 2007 10:24 PM

A decent, full service agency will take care of all the negotiations, in addition to the marketing and the pre-screening of buyers and handling all the showings and open houses. Sellers shouldn't be calling up the buyer's attorney or any of that. And in fact most attorneys working on behalf of the buyer wouldn't even take a phone call from a seller because they consider it unethical to deal with the other attorney's client.

Posted by: guest at October 19, 2007 8:24 AM

3:43 here again.

10:24pm or others - Can anyone explain to me how the broker's service is worth tens of thousands of dollars (or in my case a possible $59k) whilst the attorney is worth only 2 or 3 thousand?

I admit we were lucky in that we only showed two separate parties around and the first caller and viewer made an offer and after we countered they accepted.

Posted by: guest at October 19, 2007 12:09 PM

yeah, 3:43, I've wondered the same on the difference between attorney and brokers fees. Made me realize (again) that any business where you get paid by the hour - v. a percentage of the deal - isn't likely to earn you as much, relatively speaking.

----

As to negotiations, you still have to evaluate offers, and communicate to the buyers, whether your do it through a broker or not - your broker can't read you mind, you have to talk to them all through the negotiations.

And if you are selling a coop in a self-managed building, with your typical non-professional board, which has no incentive to cooperate with getting information on the building to your potential buyers' attorney and answering the due diligence questions of the buyers' attorney, then you sure do want to provide the information to the buyers' attorney so they can get into contract, and their attorneys will call you, because otherwise their client won't be able to get into contract.

Posted by: guest at October 19, 2007 2:03 PM

Your contract with your real estate agent… it reads in a particular way…and it is unfair… I want to say inaccurate to look at the number without considering the terms of engagement. Basically it says… “If you make me $300K (or some very large amount)… I’ll agree to give you a split.”

So if the agent performs for you they get a big payout. But they also take a big risk… the risk of getting nothing. They also often split that big pay out 4 or more ways in order to get something (two firms co-broke.. and sometimes there is more then one agent on each side).

Try telling your attorney that you will pay him 4x his fee “if and only if he procures a deal”. Your attorney will turn you down. Most non gambling professionals will turn you down. You would probably turn me down if I made you an offer like that at your job. This is what it looks like… say you work for a paper company in Scranton… Instead of a salary… we say this to you…

Come to work… try to build some clients who want to buy paper… if and only if you sell paper… we will give you a split. You may spend a year or two putting in long hours here only to find you made nothing… but if you can land the big client… if you make us X… we will give you 50% of X.

Posted by: guest at October 19, 2007 3:24 PM

Actually, a lot of litigation attorneys do work that way - on different types of cases - they get paid only if they win. And they tend to earn a lot more than those who charge by the hour, like those who do residential real estate.

And many sales people, in all kinds of fields, work on commission. Like with real estate - some do well, most don't really.

Posted by: guest at October 19, 2007 4:53 PM

Yes- you’re absolutely right… other people do work that way.... and anyone that operates like that is going to charge a high split… it just wouldn’t make sense to do it for a normal wage. And it is fair because they only get paid for actually performing.

Posted by: guest at October 19, 2007 5:09 PM

i'm not a huge fan of brokers, but i must admit that i think our broker was worth every penny of the 6% commission he earned. he priced our place appropriately (i would have priced it lower) and -- unlike the apt who rec'd an offer in 10 hrs -- he marketed it well, showed it continually and until we had a good offer (a month & a half). with 2 kids and another on the way, there was no way i was going to be able to do all of that -- it was hard enough keeping the place clean for showings.

and, fwiw, attys working on contingency fee basis (i.e., they get paid if they win) *can* make a LOAD of money -- there are a handful who are some of the richest people in the country b/c of their cut of outrageous jury verdicts. but those attys are pretty rare. and i don't think, on a general basis, they earn more than hourly attys. on why attys don't do as well as brokers on non-corporate real estate deals -- the work they're doing isn't as significant to the transaction, imo. they're documenting the deal, not actually brokering it and, quite frankly, the work is a bit repetitive. (my husband and i are attys, btw.)

Posted by: guest at October 19, 2007 5:11 PM

Exactly 5:11. The attorney that I used to sue when I filed an EEO complaint against my employer did not take any money up front. I agreed that he would take one third if he won my case. He took 100,000 and I got 200, 000. I didn't complain considering that I didn't have the money or knowledge to win the case on my own. I would hate to fork over $59,000 to a broker but I also would not want the aggravation of trying to do it myself. I would do it though as long as I get to walk away with the number that I want.

Posted by: guest at October 19, 2007 5:49 PM

Hi,

I'm a real estate agent. One person, the real estate agent, is typically in charge of doing 100% of the work. This is how we don't really make any money:

Most agents make 50% of the broker fee. The other half goes to the office. If a deal is co-broked, that's down to 25% of the total percentage earned (1.5% instead of 6%).

Whatever money the agent earns, s/he must set aside 50% to cover taxes (federal, state, city, AND social security), none of which are covered by the employer. This means that the agent makes just .75% of the deal if the deal is co-broked or 1.5% if the deal is not co-broked.

The agent incurs the following expenses which must be taken out of the .75% or 1.5%:
Transportation
Flowers
Refreshments
Color copies and printouts
Huge cell phone bills

Other business expenses often include advertising (very expensive), business cards, etc.

In terms of time, the agent spends at least 5-10 hours compiling information for a potential seller. This does not mean that s/he will make any money for this work. If a contract is signed, then the agent has the responsibility of 1) fielding calls at all hours of the day and night, 2) doing open houses (2 hours of prep per open house plus the time it takes to do the open house itself), 3) showing the apartment to people who couldn't make it to the open house, and 4) marketing the apartment (1 hour to take photos, 3 hours to make flyers, 30 minutes to write a good ad, and 30 minutes per week on other advertising endeavors). Once you sell the apartment, you oftentimes spend 10-15 hours per week calling lawyers, management companies, board members, and clients. It's just nuts!

I just sold my first apartment apartment and made just $4100 (the total broker fee was $8200) - half of which will go to the government. I spent $1000 on expenses and probably spent about 120 hours on marketing, fielding calls, negotiating, and showing the apartment.

I probably made about $9 per hour. Needless to say, I am reconsidering my career choice.

Posted by: guest at October 19, 2007 8:05 PM

once a lit lawyer takes the case
s/he is at least ensured of either
winning or losing.

IOW you arent in 4 different courts fighting the same case with 4 seperate law firms, and deciding which firm to accept based on the outcomes.

which is exactly what happens to brokers.
offers get tendered declined renegotiated accepted, but

wait never mind we found something else...thru someone else...

but thanks for your time !

that's just the way it goes.....

Posted by: guest at October 21, 2007 1:12 PM