Seven out of 10 Realtors® are Compensated Through a Split-commission Arrangement
May 6, 2010
With the real estate market improving, three-quarters of REALTORS® are very certain they will remain active in the market for two more years, according to the 2010 National Association of REALTORS® Member Profile. Only 8 percent were uncertain about their future.
The study’s results are representative of the nation’s 1.1 million REALTORS®, who account for 60 percent of the 1.85 million active real estate licensees in the U.S. The typical NAR member has 10 years of experience, and many have increased their training, Web presence and use of social media over the past year. More than half use social networking sites, up from 35 percent in 2009.
Analysis of data from the Association of Real Estate License Law Officials shows the number of active real estate licensees in the U.S. fell 7.5 percent last year from 2.0 million in 2008. The number of licensees who are not REALTORS® was 750,000 in 2009, down 14.8 percent from 880,000 in 2008. At the same time, NAR membership fell only 0.7 percent.
NAR President Vicki Cox Golder said these comparisons mark a sharp contrast. “REALTORS® are much more likely to remain active in the business than real estate agents or brokers who are not NAR members. REALTORS® are helped by the support and benefits they receive from NAR, as well as their local and state REALTOR® associations. Many members take advantage of down time to improve their skills and training to better serve future clients, but there also are intangible benefits that come from networking and membership in the nation’s largest trade association,” she said.
“In addition, many are diversified in their business practices – they don’t put all their eggs in the residential sales basket,” Golder said. “While eight in 10 members specialize in residential sales, almost all REALTORS® also have secondary areas of focus – only 3 percent don’t.”
Twenty-two percent of respondents also offer commercial brokerage, 21 percent are in relocation, 18 percent residential property management, 15 percent counseling and 13 percent land development. Smaller percentages were also in commercial property management, residential appraisal, international, auction, and commercial appraisal.
Residential brokerage was cited as a secondary business for 11 percent of respondents who had other primary specialties.
Although home sales rose modestly in 2009, lower values hit the bottom line. The median income of REALTORS® fell 3 percent to $35,700 last year, which followed a 14 percent decline in 2008. Members licensed as brokers earned a median of $49,100 in 2009, while sales agents earned $26,600.
REALTORS® in the business for two years or less earned a median of $8,800, while those in the business for 16 years or more earned $52,300. “The longer you’re in the real estate business, the more you make based on growth in referrals and repeat clients from serving their long-term interests,” Golder said. “Real estate is constantly changing, which is why continuing education is so important.”
A median of 20 percent of all NAR members’ business is from referrals from past clients, ranging from 2 percent for newcomers in the business for two years or less, to 23 percent for respondents with at least 16 years of experience.
Paul Bishop, NAR vice president of research, said 24 percent of REALTORS® in 2010 held at least one out of six certifications in specialized training, up from 16 percent in 2009. “The fastest growth in training is for members holding the Short Sales and Foreclosures Resource Certification, underscoring the impact of distressed sales on the housing market,” he said. “Although it was just launched at NAR’s Annual Conference and Expo in November 2009, the SFR Certification has already become NAR’s top certification, held by 12 percent of respondents.”
SFR surpasses the e-Pro Certification, which is held by 11 percent of members, offered to help them serve the online needs of their clients.
Thirty-four percent of REALTORS® hold at least one professional designation, about the same as in 2009, with the most popular being GRI (Graduate REALTOR® Institute), held by 19 percent of respondents; ABR® (Accredited Buyer Representative®), 13 percent; Certified Residential Specialist® (CRS®), 10 percent; and Seniors Real Estate Specialist (SRES®), 5 percent. Smaller percentages hold one of 13 other designations, including the recently launched Green Designation, which already is held by 2 percent of the membership.
Only 6 percent of members report real estate is their first career; most bring expertise and experience from other fields. Previous full-time careers include management, business or financial, 19 percent; sales or retail, 15 percent; office or administrative support, 10 percent; and education, 6 percent. Twelve other categories were each 4 percent or less.
Only 11 percent of REALTORS® work fewer than 20 hours per week, 30 percent work 20 to 39 hours per week, and 60 percent work at least 40 hours per week.
The survey shows the typical NAR member is 54 years old and works 40 hours per week; 57 percent are women. Women account for 51 percent of brokers and 63 percent of sales agents. Four percent of all REALTORS® are under 30 years old while another 5 percent are 30 to 34 years old; 17 percent are 65 or over.
Seven out of 10 REALTORS® are compensated through a split-commission arrangement, 18 percent receive all of the commission and another 3 percent receive a commission plus a share of profits; 81 percent of members work as independent contractors for their firms. Seventy-three percent receive no fringe benefits; however, 11 percent are covered by errors and omissions insurance and only 6 percent receive health insurance.
There are two sides to every real estate transaction – one each for the seller and the buyer. Among REALTOR® sales members, the median number of transaction sides or commercial deals handled in 2009 was seven, equivalent to 3.5 full transactions, unchanged from 2008.
The most important factor limiting potential clients in completing a transaction was difficulty in obtaining a mortgage, cited by 34 percent of respondents.
Residential specialists generally offer buyer agency, with 41 percent offering both buyer and seller agency with disclosed dual agency, and another 11 percent provide exclusive buyer agency; 7 percent offer exclusive seller agency.
Technology plays a critical role in REALTORS®’ success: 94 percent use e-mail daily or nearly every day, 91 percent use computers, and 56 percent use smart phones with wireless e-mail and Internet capabilities. Less frequently used but important technologies include digital cameras, instant messaging, GPS devices, and PDAs without phone capability.
More than six in 10 NAR members have a personal Web site, while 89 percent report their firm has a Web presence. Seven out of 10 REALTORS® have a home office.
Fifty-four percent of members are affiliated with an independent, nonfranchised firm; 32 percent are with an independent franchised company, 9 percent with a franchised subsidiary of a national or regional corporation, and 4 percent with a nonfranchised subsidiary of a national or regional corporation. The median-sized firm has 29 licensees with one office.
Respondents have typically been with their firm for five years. Twelve percent of REALTORS® report their firm was bought by or merged with another during the past year.
The survey shows 14 percent have one personal assistant, while 3 percent have two or more personal assistants. Only 4 percent of members who have been in the business for two years or less have a personal assistant, while 25 percent of those with at least 16 years of experience have at least one personal assistant.
REALTORS® often invest in real estate and own other homes in addition to their primary residence – 39 percent own at least one investment property and 16 percent own at least one vacation home. In addition, 12 percent own at least one commercial property.
NAR members are active in the political process – 96 percent are registered to vote; 93 percent participated in the last national election and 81 percent voted in the last local election. They are well-educated, with 48 percent holding at least a bachelor’s degree.
The 2010 National Association of REALTORS® Member Profile was based on a survey of 58,022 members which generated 6,830 usable responses, representing an adjusted response rate of 6.7 percent. Income and transaction data are for 2009, while other data represent member characteristics in early 2010.