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So, when the customer walks through the store, uses the restroom including two flushes and three feet of TP and 5 paper towels, unfolds 8 shirts and sweats in three of them, tries on two pairs of shoes, holds the door open and lets the heated/cooled air outside, mars the floors with his shoes, let's his kid drool onto the showcase which has to be cleaned immediately and knocks over a manikin breaking it into pieces, and leaves without making a purchase, none of that creates costs that are covered by revenue from paying customers? Because none of it is "marketing?"
.
Since we are comparing business owners to realtors, what overhead do realtors have? Ooops, not much!
The ones in my family have no store front, no rent, no inventory, no commercial utilities and cleaning service, no commercial liability insurance, and no public restrooms to maintain. Realtors do have a small expense paying for gas, but guess what, they use their gas and personal vehicle as a tax write-off.
If you are going to compare real estate agent hourly fees to attorneys hourly fees, you do have to consider the required qualifications and bar for entry for both occupations. It looks like about half of agents have degrees from the NAR, however as you point out many of these degrees have nothing to do with real estate. On the other hand, all attorneys are REQUIRED to have graduate degrees, in law no less. That being said, I don't think anyone is suggesting that agents can or should charge what attorneys, doctors, engineers or other true professionals charge. The bar for comparison is what other semi-skilled yet licensed/certified occupations charge.
Not "All" attorneys have graduate degrees... there was an interesting profile of someone that "Read" for the bar and became a successful attorney...
It's just like not all agents and brokers are necessarily Realtors...
My lawyer and friend is a licensed broker and has never been a Realtor... same with a portfolio manager that I know...
Since we are comparing business owners to realtors, what overhead do realtors have? Ooops, not much!
The ones in my family have no store front, no rent, no inventory, no commercial utilities and cleaning service, no commercial liability insurance, and no public restrooms to maintain. Realtors do have a small expense paying for gas, but guess what, they use their gas and personal vehicle as a tax write-off.
That is rather like saying "...comparing Manu Ginobili to a basketball player..."
Realtors ARE business owners. Self-employment = being a business owner.
But, again, the amount of expenses is not relevant until it is recognized that all expenses have to be covered by revenue.
I agree that it is not a terribly expensive business to be in, but no business is cheap to go broke in. If you don't generate adequate revenue to pay the bills, you are broke. This is the point that a few posters deny, and that is a hurdle to get to the numbers.
Of course, good real estate agents have business liability insurance, E&O, vehicle maintenance, professional fees, office equipment and supplies...
Some agents are more professional than others and have their insurances. Some put their clients at more risk than others, to save a few bucks.
And a tax deduction is not a tax credit or a profit center. Any accountant can tell you that no one with any acumen creates "write offs" as a profit center. Tax deductions for business expenses are damage control at best. The bulk of the money they are accounted against is still an expense to be recognized.
That is rather like saying "...comparing Manu Ginobili to a basketball player..."
Realtors ARE business owners. Self-employment = being a business owner.
But, again, the amount of expenses is not relevant until it is recognized that all expenses have to be covered by revenue.
I agree that it is not a terribly expensive business to be in, but no business is cheap to go broke in. If you don't generate adequate revenue to pay the bills, you are broke. This is the point that a few posters deny, and that is a hurdle to get to the numbers.
Of course, good real estate agents have business liability insurance, E&O, vehicle maintenance, professional fees, office equipment and supplies...
Some agents are more professional than others and have their insurances. Some put their clients at more risk than others, to save a few bucks.
And a tax deduction is not a tax credit or a profit center. Any accountant can tell you that no one with any acumen creates "write offs" as a profit center. Tax deductions for business expenses are damage control at best. The bulk of the money they are accounted against is still an expense to be recognized.
Again you're trying to make a gigantic leap in logic.
Do you honestly think the FP&A analysts at major retail operations account for the expenses of someone walking in and not buying anything? Hint: They don't. They're major concerns are actual overhead costs that show up on the accounts every month like rent, utilities, paying employees, and insurance.
Are agents concerned in making enough on a deal to cover the other deals that they spend lots of time on but don't close? Yes.
How about using basic economic principles.
When someone walks into a retail shop, goods are exchanged when someone buys something. There is no exchange if someone walks in and walks out. What direct services or goods does a retail shop have to cover if there is no purchase? Does a paying person actually subsidize someone who doesn't buy goods? Not really. That's a huge stretch in logic that makes no sense. Whatever benefits a non payer receives would be either non existent or very very low that it can't be quantified. It's not at all comparable to an agent needing to make up the costs of spending hours on a deal that doesn't pay off.
When a Realtor works with a client, goods and services are exchanged in hopes for a later payout. If that payout doesn't come, services have been exchanged without a payout. Now the agent needs to cover the services rendered without pay with their next client.
The biggest difference is that in the case of the agent, services have been provided with no payout. In the case of retail operations, no services have been provided and no goods have been exchanged until the customer buys something.
Realtors (and the general public) suffer from free riders in the real estate industry and are forced to pay for the benefits they receive that they don't pay for. That is why this whole thread started. The public doesn't suffer such a problem in retail operations.
Again you're trying to make a gigantic leap in logic.
Do you honestly think the FP&A analysts at major retail operations account for the expenses of someone walking in and not buying anything? Hint: They don't. They're major concerns are actual overhead costs that show up on the accounts every month like rent, utilities, paying employees, and insurance.
Are agents concerned in making enough on a deal to cover the other deals that they spend lots of time on but don't close? Yes.
How about using basic economic principles.
When someone walks into a retail shop, goods are exchanged when someone buys something. There is no exchange if someone walks in and walks out. What direct services or goods does a retail shop have to cover if there is no purchase? Does a paying person actually subsidize someone who doesn't buy goods? Not really. That's a huge stretch in logic that makes no sense. Whatever benefits a non payer receives would be either non existent or very very low that it can't be quantified. It's not at all comparable to an agent needing to make up the costs of spending hours on a deal that doesn't pay off.
When a Realtor works with a client, goods and services are exchanged in hopes for a later payout. If that payout doesn't come, services have been exchanged without a payout. Now the agent needs to cover the services rendered without pay with their next client.
The biggest difference is that in the case of the agent, services have been provided with no payout. In the case of retail operations, no services have been provided and no goods have been exchanged until the customer buys something.
Realtors (and the general public) suffer from free riders in the real estate industry and are forced to pay for the benefits they receive that they don't pay for. That is why this whole thread started. The public doesn't suffer such a problem in retail operations.
A leap in logic?
Not at all.
I make one simple point that confuses people, and we have become wrapped up in examples to prove and disprove that point.
The point: Revenue - Expenses = Profit or Loss.
I have earlier said it as Payers subsidize non-payers.
You disagreed strongly, and promptly claimed, "It's all factored into the merchandise price in retail."
I said, Yes, "Revenue covers overhead and is factored into the price." And in one of those truly weird internet moments, you found a way to disagree with THAT point.
In anti-agent zeal, a few posters have claimed that covering costs with revenue to make a profit is not an accurate premise.
I had dinner last night with my accountant, and told her about that and we had a good chuckle. Her quote, "That is the first fundamental of business."
Why is it that some businesses have signs "Restrooms for paying customers only?" I mean, you say that there is no cost to offer that service to the public, yet some business owners feel the need to limit access unless revenue is received. Are they superstitious, or prefer to limit costs?
Actually, if you have read the thread you will see:
This thread started wondering about an hourly rate for agents.
It took off when people:
Proposed babysitting rates.
Confused a $36/hour professional fee with a $75,000 salary job.
Disagreed that agents have overhead that they need to cover with revenue. And furthered that error by denying that business revenues cover business costs.
There has been a LOT of help offered freely here to help people with those misunderstandings, and that help is met with resistance.
A leap in logic?
Not at all.
I make one simple point that confuses people, and we have become wrapped up in examples to prove and disprove that point.
The point: Revenue - Expenses = Profit or Loss.
I have earlier said it as Payers subsidize non-payers.
You disagreed strongly, and promptly claimed, "It's all factored into the merchandise price in retail."
I said, Yes, "Revenue covers overhead and is factored into the price." And in one of those truly weird internet moments, you found a way to disagree with THAT point.
In anti-agent zeal, a few posters have claimed that covering costs with revenue to make a profit is not an accurate premise.
I had dinner last night with my accountant, and told her about that and we had a good chuckle. Her quote, "That is the first fundamental of business."
Why is it that some businesses have signs "Restrooms for paying customers only?" I mean, you say that there is no cost to offer that service to the public, yet some business owners feel the need to limit access unless revenue is received. Are they superstitious, or prefer to limit costs?
Actually, if you have read the thread you will see:
This thread started wondering about an hourly rate for agents.
It took off when people:
Proposed babysitting rates.
Confused a $36/hour professional fee with a $75,000 salary job.
Disagreed that agents have overhead that they need to cover with revenue. And furthered that error by denying that business revenues cover business costs.
There has been a LOT of help offered freely here to help people with those misunderstandings, and that help is met with resistance.
Please point out where, in any retail operation, a person is receiving services without paying in a similar fashion to a non closing deal in real estate.
I originally responded because you claimed that a scenario of someone going into the bathroom at McDonalds is the same thing.
No one is saying revenue doesn't cover costs. But, a lot of people don't see your time spent with non closing deals to be their costs. I'm receiving zero benefit from those costs. I don't see why I'm covering that if I use an agent. I couldn't care less if they spent 1000's of hours and got nothing in return. It's not my problem. If I walk into Walmart, I understand that my purchase is covering the overhead and I receive goods in return. No one is walking into Walmart and receiving free stuff while others have to pay for the goods (like in real estate). I would gladly pay an agent by the hour to do things I needed without paying for all their deals that fall through.
You're trying to bend the scenario to be black and white and that's not the case.
Please point out where, in any retail operation, a person is receiving services without paying in a similar fashion to a non closing deal in real estate.
I originally responded because you claimed that a scenario of someone going into the bathroom at McDonalds is the same thing.
No one is saying revenue doesn't cover costs. But, a lot of people don't see your time spent with non closing deals to be their costs. I'm receiving zero benefit from those costs. I don't see why I'm covering that if I use an agent. I couldn't care less if they spent 1000's of hours and got nothing in return. It's not my problem. If I walk into Walmart, I understand that my purchase is covering the overhead and I receive goods in return. No one is walking into Walmart and receiving free stuff while others have to pay for the goods (like in real estate). I would gladly pay an agent by the hour to do things I needed without paying for all their deals that fall through.
Why point out examples, when we have just now arrived at a point where one poster can (begrudgingly) admit after 5 pages and 196 posts that revenue covers costs: "No one is saying revenue doesn't cover costs."
Really? Have you read the thread at all?
You yourself say that my revenue shouldn't/doesn't pay for costs of services to clients who don't consummate a transaction, in the last sentence of this very post.
Of course, people like to simplify to deny costs for their own benefit. It is just human nature to make that error in shortsightedness. When one makes the error purposely only to chisel, it becomes greed.
"I'm receiving zero benefit from those costs."
Wrong.
When I show you 5-10 houses and you decide to stay put where you are, my paying clients will cover my cost and benefit from that activity. And often, the non-paying client gains great benefit at the paying clients' expense.
On another note, I spent 2+ hours in a breakfast meeting on Thursday, with the NC REC, RRAR, and TMLS presenting several topics.
It cost me money to get there, and time to be there, and my paying and non-paying clients will benefit from the shared information.
I would not have gone if I thought it would not help me be better at what I do.
Revenue will cover the cost of attending.
Business activity yields one type of valuable experience. Everyone recommends experienced agents, and all clients benefit from that non-paying activity that provides skill and experience.
Really doesn't matter to a consumer what an agents expenses are. Consumers shouldn't have to care.
If an agent makes a generous 70k/yr take home pay - lets say they make gross profit of 100k before expenses - that's $50/hr working 50 weeks at 40 hrs a week. I've given them 2 weeks vacation off. An agent should have no problem accepting $50/hr. if they are getting business that is paid without incurring additional expenses - since those expenses are already factored in to calculate a more than fair wage. There are varying degrees of expense models and you can not compare a retail establishment to a real estate broker and this nit picky tit-for-tat is meaningless and a waste of time.
Since Mike Jaquish continually refers to "babysitting wages", you can go to the website Care.com: Child Care, Senior Care, Pet Care and More to get the prevailing babysitting wage in your area. In my area it's $10/hr. In some respects a babysitter may have more responsibility than an agent since the parents are literally putting the life of the baby in their hands.
The cartel is what makes the current commission rates possible for agents - plain and simple. This has been discussed repeatedly in this thread.
Are there any Realtors or real estate agents in this topic who want to switch to the hourly rate? And if so is that for buyers only, sellers only, or both?
Am I the only non-agent who likes the present system? Well maybe not likes it, but thinks it's fine the way it is, and doesn't need fixing.
I've been buying lately, and at least I knew the actual price in advance. Maybe my 4 houses in 3 days would have worked out for me... I did all the driving because I couldn't leave my dog at the hotel, do I get a discount off the hourly?
Really doesn't matter to a consumer what an agents expenses are. Consumers shouldn't have to care.
If an agent makes a generous 70k/yr take home pay - lets say they make gross profit of 100k before expenses - that's $50/hr working 50 weeks at 40 hrs a week. I've given them 2 weeks vacation off. An agent should have no problem accepting $50/hr. if they are getting business that is paid without incurring additional expenses - since those expenses are already factored in to calculate a more than fair wage. There are varying degrees of expense models and you can not compare a retail establishment to a real estate broker and this nit picky tit-for-tat is meaningless and a waste of time.
Since Mike Jaquish continually refers to "babysitting wages", you can go to the website Care.com: Child Care, Senior Care, Pet Care and More to get the prevailing babysitting wage in your area. In my area it's $10/hr. In some respects a babysitter may have more responsibility than an agent since the parents are literally putting the life of the baby in their hands.
The cartel is what makes the current commission rates possible for agents - plain and simple. This has been discussed repeatedly in this thread.
LOL
"Cartel."
Of course, anyone recognizing the fact that revenue - expenses = profit knows you can compare any variety of businesses and break their model down to that fact.
I only refer to the $36/hour you proposed as babysitting wage, which is what it is when you break it down.
Babysitters get $10/hour+ cash without reporting around here.
By the time an agent pays expenses and fees, your $36 approaches that figure. Heck, even some conservatives are now agreeing with raising minimum wage to $15.00/hour, and then you can add social security, food stamps, and EITC to that.
I see you don't allow for retirement.
Yes, no one has to "care" about someone else's expenses. But to deny they exist and have to be covered by revenue is the definition of pure shortsightedness.
It is quite appropriate to present fact in a thread about compiling an hourly fee, particularly when one sees fact denied repeatedly.
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