Million Dollar Man
Next time you stop in a real estate agent’s office take a quick look around the walls. You may see some impressive awards for “Million Dollar Producer” with the name of the agent you happen to be working with. Unfortunately that isn’t all it’s made out to be. A million dollars in sales… that means that the agent could have sold a single home for $1 million. The agent could have also only sold one home worth $500,000 if the office handles both the buyer and seller (called dual agency) and the office counts both sides of the sale. Typically though, the agent will have sold around four to six homes (based upon current averages listed at homegain.com)
Again, if the agent happens to represent both the buyer and the seller (which they love to do, by the way) then it’s only two or three sales. And at the rate that homes are appreciating the million dollar mark is easier and easier to hit. A million dollar producer in the 70’s would have had to sell somewhere around 60 homes1 and that would have been an impressive sales agent, today a million dollar producer makes barely more than a full time job at McDonald’s.2 Take a look at the numbers. A million dollar producer (remember that’s sales not commissions) could gross $30,000 from $1 million in sales. That assumes a 6% total commission with a 50% split between the buyer’s agent and the seller’s agent. So 3% of $1 million = $30,000. Of course most agents don’t get the full 3%, here’s why: the agent has to pay the broker depending upon the broker anywhere from 5% to 40% of their cut with something like a 25% cut to the broker. That makes 3% look more like 2.85% to 1.8% of the sales price… or if we use the average 2.25%, then the agent only gets $22,500 (even “worse” would be the 18,000 at the bottom end of the scale). Start subtracting all the expenses like advertising $400 - $1000 per sale (assuming that every single home sold), gas to run out to the property every time someone wants to see it, business cards (many agents are buying the really expensive glossy photo cards) additional insurance on their automobile (the broker is typically an “also insured” on the agent’s policy) and the self employment tax that they have to pay and we begin to see why some “successful” agents have a second job and send their spouse to work (not that their is anything wrong with more than one job or working spouses - at least to me) all the while trying to appear successful. Of course, appearing successful costs too, reducing that minimumal compensation even further. I saw an ad for Taco Bell that promised $7.50/hr… that’s $15,600/yr. Almost as much as selling $1 million worth of homes.
1 - Housing Report page 25
2 - Minimum wage = $5.15 x 40 hours = $206/ wk x 52 weeks = $10,712.00
So you are saying that seeing a Million Dollar Sales certificated really doesn’t mean much? Really, a real estate agent sells themselves to make money. Selling their personality, their schtick, and what they say is how a product gets sold and how they sell for more than what their client wants (thus making more money themselves.) So having a certificate on the wall that says something that would be impressive to a perspective client is all part of the deal. If the certificates on the wall were developed back during the day when it meant something is probably not in the interest of the real estate companies that hand the certificates out. Having something on the wall that might impress somebody and potentially create more business is a bonus.
But, the main part to keep in mind is that it means that the real estate agent might have actually done something the year before. It also means that they didn’t just come straight out of the “Real Estate Academy and Beauty College” down in the nearest strip mall with a freshly printed license. But, it doesn’t mean a whole lot more then that.
Comment by steve — 12/15/2005 @ 12:03 pm