Imagine an Ordinary (Traditional) Real Estate Office: Acme Realty . . .
Average Sale Price: $300,000
Average Commission per closed side: 3% ($9,000)
20 agents averaging 1/2 a closed side per month (some do more most do less — and the ‘average’ is way above what’s typical today)
Average Agent Commission Split: 70%
- Rent: $5,000
- Utilities: $500
- Office Equipment: $500
- Supplies: $500
- Admin: $4,000
- Management: $7,000 (Most Brokers do this job 24/7 and never budget for it . . . which is voodoo economics to the max)
- Dues: $300
- Conventions and Training: $500
- Insurance: $300
- Marketing: $5,000
- Total: $23,600/ month
10 closed sides/month X $9,000 GCI per closed side = $90,000 GCI/month
Less 8% Franchise Royalty + Mass Ad Fund: $7,200 (and you’d be crazy to start a business today without a recognized brand and support)
Less 70% to Agents: $57,960
Net Operating Income (Company Dollar): $24,840
Less Expenses: $23,600
Net Profit, Before Taxes: $1,240 = 1.37% . . . which could easily be wiped out if the copy machine breaks or one of the closings falls through.
Is there any question that the ‘Ordinary’ real estate business is broken???