It is easy to think that becoming a real estate agent is a road paved with gold. As with many professions, those with the right attributes, which include diligence, hard work, intelligence, and drive, make a good living. There are a select few that do better than that and earn enough to become truly wealthy.
It is not for the faint-hearted, however. This is particularly true in the ultra-competitive New York City real estate market.
In the typical arrangement, real estate agents are paid strictly on a commission basis. There is no salary or even a draw. This means an agent is only compensated when a deal closes.
Traditionally, the total commission rate is 6% of the purchase price. The agent/broker negotiates the amount with the seller, so this is not a hard and fast rule. You could see a full-service firm lower the rate to 4% – 5% based on some factors. Assuming a 6% commission, this leaves 3% for the seller’s brokerage firm, which is then divided with listing agent based on their commission split agreement.
If the buyer has representation, it is customary to split this evenly with the other firm. Therefore, the buyer’s brokerage receives 3% (further divided with the agent), assuming the 6% commission structure.
A Wide Range
The average New York City real estate agent makes approximately $80,000. This is misleading, though. Given New York City’s high real estate prices, there is an opportunity for agents to make a lot of money. However, many do not make a dime. There are also those that work on a part-time basis.
There is an old saying that 20% of a company’s sales force represents 80% of the total sales. We have heard it is even more lopsided for New York City’s real estate market, with 90% of the closings completed by 10% of the agents.
The Buyer’s Agent
For buyers, you want to pick an agent that has staying power. When you interview the agent, it is advisable to ask questions such as how long he or she has been in the business and how many deals he or she closed on in the last year.
We suggest having your own representative. An exclusive buyer’s agent represents your interests in the deal. The seller pays the entire commission cost, so having a buyer’s agent is a prudent option. If you chose to go it alone, the listing agent and his or her brokerage merely split the entire commission.
Your buyer’s agent can help you through the process, without you having to pay a dime. These are a myriad of items, including sorting through listings, crafting an offer, compiling your board application, and helping you prepare for your interview in the case of a co-op purchase.
The process of selecting either a buyer’s or seller’s real estate agent, with a plethora to choose from, is a challenging endeavor. But, venerable agents have proven their staying power. They know how to close a deal and have mutual respect for the players in the process
It is also important to remember that your agent earns his or her entire living based solely on commissions. You should undoubtedly expect him or her to provide you with top-notch service, including answering all of your questions and not rushing you off the phone. However, you need to respect his or her time, too.