The purpose of a real estate agency office
Most real estate agents work for a real estate agency that operate from an office and these offices are very visible along strip malls because of their large and illuminated images of properties for sale (and that they’ve sold). These offices are a place of work for real estate sales agents as well as admin & support staff and the property management team, but the significant reason for having a street frontage is visibility and exposure.
Revenue streams for real estate agencies
The traditional real estate agency business model is a combination of real estate sales and property management and the profile of their revenue streams are:
- Lumpy (but high) for real estate sales
- Consistent (but low) for property management
Property management revenue is normally calculated as a percentage of rental income and for this work the real estate agency manages the collection of rent as well as the fixing of any problems that are reported by the tenant from time to time.
When you look at the value of a real estate agency from the perspective of an investor the most attractive aspects are the risk free income, income that keeps coming in, and most of that comes from what real estate agencies call the rent roll.
Expenses of a real estate agency
The property management side of a real estate agency is predictable. You need a property manager who will handle most aspects of the day to day management of the business including building a team of contractors who can go to a property when needed to perform works – these works are usually plumbing and electrical work. Real estate agencies are a good source of information about local trades people because they need a team that they can rely on every day.
The other side is managing the paperwork for new leases, termination of leases and start and end of lease inspections to determine the state of the property with regards to the bond payment.
The most important skills for a real estate sales agent is to
- run an efficient and effective marketing campaign and
- encourage a competitive bidding environment of potential buyers to get the highest price possible
But most of time for a real estate agent is spent on prospecting to find vendors who want to sell their property. Due to the lumpy nature of the sales process and a strong reliance on the real estate agents personality the financial reward for an agent comes in the form of a commission.
Real Estate Agents Commission
Most real estate agents will quote a commission rate for the sale of your home and it is commonly between 2-3%, but sometimes as low as 1%. In the past this fee was a fixed fee of 3% and it was regulated by state governments so couldn’t be changed. The important thing for you to know as a property seller is that the agent doesn’t get all of this commission when your property is sold but they split it with the real estate agency they are connected with. The better the agent the higher percentage they’ll be able to negotiate if the agent is a commission only agent.
If the agent is an employee or are paid a commission that is based on the sales performance of the team then you’ll find they are rewarded differently again. Read about real estate agent commissions for more information about how the agent is rewarded.
A typical reward scenario is that the agent receives between 30-40% of the final commission fee and the rest goes to the agency with the agency providing the support of a brand and the trust fund for property transfer transactions.
Become an independent real estate agent
If you’re at this page because you’re disgruntled with your current pay or commission split and you believe you can do better for yourself AND your clients by becoming an independent real estate agent follow the link below.
If you are new to real estate sales but have sales experience in other industries and want to work closer to home in the real estate industry read on and inquire with us.
What does a real estate agent do
Many people think that real estate agents earn too much money and sometimes that true – in a rapidly rising market where prices are on the move and buyers are in a rush to jump in. That’s called a sellers market but for all of those other times selling real estate can be hard work, involves
- talking to a lot of prospective clients (sometimes for years before they’re ready to sell)
- providing honest property value appraisals
- doing good preparation for home opens, and
- remaining in regular contact with your vendors (sellers) about who’s interested, how much they are willing to pay and why
The hardest part of a real estate agents job is actually getting stock (or listings) of properties for sale.