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Comment by codedokode | Hacker News Reader

If you divide 6% commission by hours spend, how much does an agent earns per hour? Probably more than senior Google AI developer?

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Well typically 6% is split between the buyers agent and the sellers agent. And each agent has to kick up a percent to their broker. Most real estate agents I know working in the average market (I.e. not NYC or the Bay Area) are not clearing $100K.

How did you ever get to the situation where two people want to buy and sell one of life’s fundamental commodities, and 3 people get to insert themselves into the middle to the cost of thousands of dollars?

America confuses me sometimes!

It's a hell of a lot more than 3! The list of other agencies and fees I had to pay when buying my house and getting a mortgage were absolutely insane.

Before whole online thing from marketing it really made quite a bit of sense.

At least the seller agent side. You need to advertise somewhere and someone doing it full time is much more efficient, in spreading the marketing. Some level buyer agent gathering what is available if they did that is also logical.

Here not in USA. Buyer agents are more rarely used, but advertisement was taped to my building this week. But for seeing what is available agencies made lot of sense. And still do the paperwork and take somewhat better pictures or are around to show property.

Google thinks 2-10 homes sold per year. Assuming the same on the buy side, at 6%, using the median home price of $416,100, that's $50k (2) to $250k (to 10) per agent per year.

(That accounts for the split. That doesn't account for whomever the agent works for taking whatever cut.)

It's generally 6% split between two agents, so 3% per agent. Experienced agents often have something like a 60/40 split with their brokerage (such as ReMax). So, that's 0.9% -- let's round up to 1% to be generous.

My home state (Washington) is the 4th-most expensive state in the country. In the Seattle area, a senior software engineer makes about $275k on average. Meanwhile, the average house price in 2022 was $650k. Easy math here - an experienced agent will make $6.5k on a sale in WA. (Yes, it would be higher in Seattle - but real estate doesn't necessarily concentrate in the same way as engineering talent, so I don't think that's a fair comparison.) Thus, an agent would need to be the buying or selling agent in 42 sales per year to make as much as a senior engineer.

Selling agents probably sell ~30 houses a year in a really strong market, so even in peak COVID relocation times, less than a senior software engineer in a similar location.

On the other side of things, when my wife and I bought in the competitive market of 2021, we probably toured about 30 houses. We put offers in on eight of them. Our agent coordinated inspections and was present for all of them. I'd guess they put in, conservatively, 60 hours of work for our house. We paid $670k, so our agent got around $6.7k for those 60 hours of work - around $110/hr, or a lot less than I was making as a senior engineer at Dropbox at the same time (almost twice that).

tl;dr, no, they probably don't earn more per hour than a senior software engineer at a high-paying company, unless the real estate agent also happens to live in San Francisco.

Thank you for a detailed analysis.

Why do you need two agents though? Isn't one enough to do all the paperwork and inspections? As for advertisement, I guess today it can be totally automated.

40% of 3% is 1.2%, where’d you get 0.9% from?

Real estate agents' job is not so much buying or selling houses but getting clients. There are so many agents ready to grab those insane fees that most agents can only manage an occasional transaction.

Then there are a few that are great at marketing themselves and can make truly insane money.

I think you end up with a similar distribution like in software. A few are making Google AI money, while the majority are not.

I still think 6% is too high, there are just too many RE agents out there right now. It was seen as an easy job to make decent money until the recent slow down.

And yet the stats tell us the average U.S. agent is only making on the order of $60k / year, so… how’s that work?

The commission attracts entrants until it is no longer worth new people taking the job? That's what you'd expect to happen!

What's surprising is that this competition doesn't reduce the fee rate, that's the part I don't understand.

This is a combination of factors:

-- In any market, there are agents with a range of compensation options. It really isn't as straightforward as the "6%" that the public believes.

-- Brokerages more than agents set the commission. So you can have loads of new agents in a market and it won't change the commission.

-- It costs money to represent buyers and sellers. Drones, video, photography, glossy magazine spreads, social media, advertising buys, brokerage, MLS, and other fees, signs, key boxes - I can spend thousands on a property listing or dozens+ hours with a buyer with absolutely no guarantees that I'm going to get paid.

Question is how many properties they are moving per week or a month on average over a year?

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