The Great Real Estate Pay Structure Debate

In their Real Estate Compensation Report for 2011, Inman News interviewed real estate agents from across the U.S. and even internationally.

More than half of the respondents were agents who averaged 4-10 years in the business. Brokers, Broker Associates and Owners made up 44 percent of those surveyed and only 4 percent were new to the business.

photo credit: Alex Mahan

The report's findings reflect the decline in the market and the tough economic climate that agents face daily.

"Some survey respondents shared their frustration about deals falling through in the tough economic environment, with some expecting this decade to usher in a new era for real estate compensation." stated the report.

A growing number of agents are frustrated over the number of hours spent with clients compared to their income. "We work so hard and we end up not getting paid when the deal falls through or clients have remorse. We are real estate consultants. We should get a flat fee to begin with, and at the end a commission split on closed transactions as a bonus." declared an Arizona agent.

35 percent of respondents said that they think the "flat fee" compensation for real estate services will become the norm in the next five years compared to 43.6 percent who believe percentage-based commissions will remain the same.

The typical real estate commission, based on the survey, is 3 percent, with bank owned properties averaging a little lower compensation at 2.5 percent.

Agents are spending longer hours on the job. One-third of the respondents said they spent more than 50 hours a week in real estate, compared with only 20 percent of respondents the previous year.

"Most agents are underpaid (and) work long hours, seven days a week. That's why so few young people are entering the industry," a Pennsylvania agent said.

Over half of the respondents said they closed more than 11 transactions in 2010, compared to 47.2 percent the year before, and over 20 percent predicted their gross income will be over $100K in 2011.

Inman News Report "What has had the most impact on your income?" asked Inman News. The economy, of course, is the greatest concern for realtors, with 29 percent feeling the crunch compared to 26 percent in 2010. Distressed properties were a new concern this year with 17 percent stating that they feel distressed properties have had the most impact on their income.

Discounts and low-cost brokers are not making as big an impact as they were a couple of years ago. The report said that, "While 67.3 percent of respondents in a June 2006 compensation survey said that competition from agents offering discounts had the most impact on their compensation, only 3.4 percent of respondents to the latest survey said business from low-cost brokers had the biggest impact on compensation."

And so, the great Real Estate Compensation Debate goes on. "There is growing sentiment among respondents that the existing real estate fee structure could see some substantial changes in the coming years." said Inman News.

Posted on May 12, 2011 07:34:56 by Blog Author