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nearly all LOs are paid on commission. 0.8 - 1.1% is the norm.
plus think about this:
1.) average LO commission is less than 1%, but let's just say 1% for simplicity's sake. well, it's 3% on average for a real estate agent and some times even more, especially if they double side the transaction.
2.) LOs still have to find business, just like real estate agents, but they also have to try to get their clients approved - which takes an enormous amount of time. despite what anyone will tell you, a good LO is NOT a salesperson. they are detailed oriented, rule-following accountants with a touch of people skills.
3.) in my area of the county, 30% of all transactions are cash. so LOs make less per deal, (0.8% vs. 3%) and they get a smaller piece of the pie
4.) there is nearly no differentiating factor when it comes to LOs. rates are the same across the board (for the most part) so marketing oneself is a challenge
5.) when LOs get busy, they spend time talking to underwriters, reading guidelines and combing over complex documents. when real estate agents get busy, they are on the phone with potential clients, showing properties, making listing presentations, networking and doing other marketing. which is your preference?
full disclosure: I am a licensed LO and am in the process of becoming a real estate agent. although I am great at numbers and am a very good LO, it's just not worth it. besides, I am definitely a sales, marketing kind of guy, not an accountant.
And you forget about the referral fees a realtor can get. Loan Officers cannot get this anymore, legally. There is one state that has some extremely favorable tax deductions for realtors (starts with an F)
Worth Revitalizing Thread Comparing RE Agent to LO
For a fairly brief period of time, while primarily an experienced and competent loan officer, I did maintain and actively use my Real Estate agent license. Many Mortgage brokers and loan officers under their management had active Real Estate licenses before obtaining their NMLS mortgage license (deadline to pass State & national licensing tests came about in 2009). I knew being a most competent and busy loan officer/mortgage loan consultant required 99% of my focus on originating mortgage loans and overseeing them to a timely funding. Yet, by being a licensed R E sales agent under a separate R E only company from my mortgage company, I was able to obtain a referral fee for referring qualified borrowers to Real Estate agents who then in turn do what they do best. However, that took a minimum of my time to do so and was no distraction from overseeing my pipeline of qualified proposed and active mortgage loans. The problem I had though, was FHA insured loans were becoming more and more necessary for a lot of borrowers, and regulations did not allow one to originate loans and have any part in R E transactions at the same time. I changed companies and transferred from a BRE license (Bureau of Real Estate) to a DOC license (Dept of Corporations). Now we come to which is better. I think a lot depends on the individual.
To reiterate, I do not think it is generally wise to use a R E agent for originating and overseeing your loan as well, or visa versa. Each should focus on being very good and knowledgeable at what they do best. Years ago, in an extended 5 day personal growth workshop, one young woman working as a Scientist in a Lab discovered how much more of a "people person" she was that did not fit in with her current job, and she discovered that Real Estate sales allowed her to connect with people in a way that she was much happier in her work. I think that is very important in choosing to be a real estate agent, though in either profession you need to at least like working with people. However, I think being a mortgage loan officer requires so much more time sitting at your computer and doing a lot of loan analysis, math & detailed work, such that one is very attuned to applying a different skill set than the primary skills needed of a Real Estate agent. As mentioned previously in the thread a R E agent must be prepared to spend a lot more time, hand holding & so forth, with their clients seeking to buy a home. More and more sales & marketing become essential for both R E sales agents and for mortgage loan originators., but a mortgage loan officer is required to just spend a brief amount of time in the beginning with clients and even briefer time periods in proper follow up. There is a lot of work either could do in spinning their wheels, however, there are the top 20% or less of R E agents that have a team in place and the similar top tier of mortgage loan originators with a team in place (often including a personal Assistant doing what agent is not best at) who are doing what they are passionate about and very good at. They are the ones with the $200,000 to $1,000,000 annual earnings while the average L O or real estate loan officers are making somewhere south of $100,000 a year. Neither are easy industries and requiring lots of work and working thru timelines wherein the unexpected can cause stress for everyone concerned.
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Worth Revitalizing Thread Comparing RE Agent to LO
