Information For Buyers

How Real Estate Agents Get Paid

How Real Estate Agents Get Paid

For my real estate friends who don’t quite know how to explain commission to their clients, here is my take on it. I have a bit of a background, having been a real estate agent for 25 years. Although people understood that I worked on commission, some still thought I got a paycheck or could get advances in tough times. Some thought that I got paid for every hour in the car or on the phone and got a bonus if something sold in my office.

Real estate agents do not typically make a salary. They receive a commission if one of these three things occur:
1. A buyer buys a house through the agent and it closes escrow.
2. A seller sells a house through the agent and it closes escrow.
3. A buyer or a seller uses an agent whom their agent referred. If this happens, their agent receives a referral fee (commonly 20-25% of the commission) from the agent who actually did the deal.

An agent does not receive monetary compensation for doing a market analysis, for showing property, for listing a property that does not sell (even if it is over-priced by the seller), for giving advice, for helping clients find a needed professional such as a contractor, for holding an open house, for taking “floor time”, or for any other service, except the three instances mentioned above.

Commissions are paid upon sale, from the proceeds of the sale. The seller agrees to the amount of the commission when they put the house on the market. The rate can vary, usually a percentage of the sales price. The most common commission rates are between 5% and 7% although they can be as high as 10% and as low as 1%. The seller’s agent offers a split of the commission to an agent who procures a buyer. Sometimes the split is equal, and sometimes one agent or the other receives a higher percentage. Agents also split commissions with their broker, the manager/owner of the office they work in.

Here is an example of a typical commission and how much ends up in the agent’s pocket:

Sales price $250,000. Commission 6%, split equally.

In this scenario $7500 would be given to the buyer’s representative and $7500 would be given to the seller’s representative. This starts with funds going to the broker’s office.

If the office is a franchise, a fee is taken from the top of the commission, a common amount is 8%. This would be $600.00, leaving a balance of $6900.00.

After the franchise, the broker/agent split occurs. A common split is 60/40 although top producing agents may receive 80% or more. Let’s use 70/30 for our example. The agent receives $4,830.

We are not done yet. From this amount, the agent is responsible for self-employment tax as well as income tax. Assuming a rate of 30% for both taxes combined, this amount would be $1449. The net to the agent, after taxes is $3381.

From this amount the agent pays all the costs of doing business (which may lower their taxes to some degree) and their living expenses. They fund their retirement account and pay their own medical insurance. Agents have numerous expenses. They write checks for licenses, dues and fees, for education and continuing education, for photographs, promotional materials, mailers, postage, advertising, desk fees, copies, forms (like contracts), insurances including errors and omissions as well as an upgrade on car insurance, gas (for showing property), a decent car (if possible), professional clothing, internet placement, glossy magazines, newspaper ads, flyers, signs and posts, gifts, client appreciation parties, snacks for open houses, keys and lockboxes, assistants and/or transaction coordinators, seminars, and more. Many agents end up paying for a host of other things to satisfy their clients such as staging, cleaning, snow removal, landscaping, and minor repairs.

Yes, a real estate agent can make good money. One big sale can change their life. Yet, they have a different salary from the executive with what appears to be the same salary. Real estate agents write checks before they get checks. They build relationships with everyone they meet, not just their “higher-ups” and their “subordinates”. They take calls at 4 am from a seller who can’t sleep because they are worried about their urgent need to move or a buyer who is scared because they have never spent this much money on anything in their life. They get to know people on such a personal level, helping them find a home, that they develop lifetime friendships. They get happy, slobbery kisses from the kids of their clients. They become a part of the families of each and every client they help. Real estate agents don’t do this job for the money and they sure don’t do it for the free time. Real estate agents do this job because they love helping people live the American Dream. Real estate agents do this job because they love you.

Thank you – Shahri Masters of Incline Living – inclineliving.com

 

Princeton High School rated #2 in state for SAT scores

The List: Ranking the Top 10 Open-Admission High Schools by SAT Scores
Colleen O’Dea | February 9, 2015
Recently released results from School Performance Tests help draw a bead on New Jersey’s top public high schools

2. Princeton High School — 1867 total SAT
This used to be considered a regional school, accepting students from both the borough and the township before they merged to form a single school district in 2013. Home of New Jersey’s Ivy League university, Princeton is both a well-educated and wealthy community. Eight of 10 students who took the SAT scored at least 1550. The school had 1,460 students last year.
Source: NJ Spotlight.com

Comment: Cranbury Township send it’s students to Princeton High School – which has been a terrific arrangement for Cranbury’s students.

If you’re curious, Millburn High School in Essex County was #1 with scores of 1897.

 

 

 

 

4 Wynnewood Drive SOLD!

4 Wynnewood Dr Sold photo  This is the 9th home sold or marketed by Katherine in this neighborhood! Obviously she has a following of buyers looking for homes in this lovely neighborhood.  If you’re considering selling and live on Wynnewood or Woodview Drs, she’s got buyers waiting for homes to become available!!

A positive outlook for the upcoming real estate market-

Message received today from Jim Weichert:

I told you last week that I believe 2015 will be the best year for real estate in a while. I outlined the unique selling situation we are in, highlighted by interest rates still near their all-time lows, a better selection of inventory than we’ve had in a long time and buyer confidence at the highest level since 2007. On top of that, gas prices are very low, which helps consumers and the economy, plus we’ve had much less snow so far this year!

Here are some numbers which will help you see just how favorable current conditions are, compared to even just a few years ago: 

Now

2013

2010

Gas per gallon (NY area)

$1.99

$3.81

$2.73

Stock market (Dow Jones)

17,893

14,776

11,578

Avg. 30-year fixed rate

3.73%

4.43%

4.71%

Consumer confidence rating

92.6

76.2

   63.4

Household income

$53,891

$53,046

$49,276

Unemployment rate

5.67%

7.4%

9.3%

Foreclosures

1,117,426

1,369 ,405

2,871,891

 

Price Reduction on a Fantastic Home in Cranbury!

126 Plainsboro RoadThis lovely 4 bedroom colonial that backs to preserved open farmland has a new asking price –
$410,000! With hardwood floors throughout, and a great backyard – it’s a opportunity to live within walking distance to the historic village of Cranbury and take advantage of the township’s highly-rated school system.

Affordable new listing in Cranbury!

img_8968OPEN HOUSE SUNDAY APRIL 7TH 1-4PM

126 Plainsboro Road, Cranbury, NJ

Terrific 4BR, 1.5 BA colonial backing to preserved farmland is now offered for sale. Well-maintained, with hardwood floors throughout, an updated Kitchen with corian countertops, and updated baths.  Walking distance (really!!) to historic village with lovely restaurants, shops and ice cream stand. Cranbury Elementary School is a Blue Ribbon designated school and students attend Princeton High School . This is also an very easy commute by car or train.   offered at $435,000

Five-Buyer-Strategies-to-Survive Today’s-Real-Estate-Market

    • Don’t wait to look at new listings. With homes selling so quickly, the longer you wait,   the less likely you are to get the home you want.
    • . If you can purchase a home with cash, do so. It makes your offer stronger than those who have to get financed. With a cash offer, there is no risk of a loan being denied, and a quick closing saves the seller money on insurance, taxes, utilities and maintenance. If you don’t want to tie up your funds for a long period of time, speak with a mortgage loan officer about re-financing the home into a mortgage after six months of ownership. Your interest rate could be a bit higher and you will have a few more closing costs than had you financed it upon purchase. However, the money you save in having no mortgage for the first six months will more than compensate for those costs.
    • Refrain from making your highest bid until you know if there are other offers on the property. If there are other offers, you will be notified and given a second chance to bring in your “highest and best” offer.
    • Consider buying a fixer upper that’s been on the market for a long time. Yours will probably be the only offer, so you may be able to negotiate a lower price and can use the savings to make the repairs and cosmetic improvements. Both FHA 203k and Fannie Mae Homepath Renovation loans allow the borrower to roll repair costs into the mortgage.
    • Don’t be reluctant to bid above list price on a foreclosure. Most of these properties are priced well below fair market value for the neighborhood, so you will likely still be buying the home below the appraised value. If you are buying an investment property as a long-term rental, it makes sense to bid above list price as long as your monthly cash flow is still in double-digit percentages. To determine the annual gross potential return (i.e. before expenses), multiply the likely monthly rent times 12, and then divide that number by your cash basis (cash paid + fix up costs).

    Of course, another possible strategy is to wait for this strong real estate market to taper off. A recession or drastic rise in interest rates could throw cold water on the hot market.

    Of course, the chances of this happening any time soon are slim to none, so if you need to buy a home right now, just get out there and give it your best shot.

    Source: Ethan Roberts, InvestorPlace Contributor

4 Orchardside Dr, Cranbury

4 Orchardside Dr Cranbury, NJ  Recently sold in Cranbury, NJ – 5Br 6 Ba Colonial on 4+ ac. 4100 sq ft with 2400 sq ft finished basement.  Listed at: $1,099,000  Sold at $876,500 on 12/27/2012

 

3Ryan Rd., Cranbury, NJ

2 Ryan Road, Cranbury, NJRecently sold in the “Cranbury Estates” neighborhood- 3BR 1.5 BA split level home with beautiful updated kitchen, exp. MBR, 3 car garage with walk-up attic. Walk to town location. Listed at $459,900 Sold on 11/20/2012 $422,000 177 Days on Market

Cranbury Market Stats 09-10-12

While the market in our surrounding area continues to be very active

Cranbury’s demand is lagging. Pricing it right from the start is the key!

Cranbury Stats 09-10-12

Source: Middlesex MLS

Cranbury Market Update
Real Estate Market Chart by Altos Research www.altosresearch.com Real Estate Market Chart by Altos Research www.altosresearch.com Real Estate Market Chart by Altos Research www.altosresearch.com