(Un) Balance Sheet

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%

Expenses:

  • 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

Production:

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???