Chapter 16 Blog

Article from The New York Times:

http://www.bizjournals.com/portland/stories/2009/03/09/daily22.html

SUMMARY


It is reported that residential real estate agents on the west side of the United States earn the most commission on home sales last year. The average home price in the west is the highest in the country, reaching $312,000. ForSaleByOwner.com, a website that provides home sales advertising services in 1999 reported that western real estate agents averagely earned a commission of $16,230, which is a figure a bit higher than that of the northwest and significantly higher than those of the south and midwest. Although these figures may not look bad, but if we look at the total agent commission nationwide, we can see that a significant drop of $12 billion from 2007 ($58.4 billion) to 2008 ($46.6 billion). There is no big surprise since the commisions started to decline ever since 2005, when the figure that year reached a high $71 billion. The national average commission in the year 2008 was $12,600, which is around $1,000 lower when comparing it to the figure in 2007.

CONNECTION

I connect this article to the first of section of Chapter 16, where it talks about the three different types of gross pay. Real estate agents are one of the best examples for people who earn money by commission. Some of the agents are hired by real estate companies, therefore they are paid a basic salary, but some portion of the commission they earn obviously has to go to the company. This kind of job is more secure since if the country goes into recession and less people buy houses, even if they don't get to sell any houses, they are still paid to support their livings. However, some of the agents create their own little company. In this case, although they get more commission, that is the only money they'll earn, And if a recession happens and the market falls (like right now), they will have no income if no houses are sold. Other examples of commission earners are sales representatives from large retail stores. They often try to persuade customers into purchasing additional products and services, such as accessories, service plans, and extended warranties. If the customers agree to purchase them, a large portion of the money goes to the pockets of the sales representatives.

REFLECTION

First of all, I am quite impressed to find out that real estate agents in the United States are earning an average of $16,230 per home, while the average price of homes is $312,000. That is more of 5 per cent of the home price. As far as I know, the usual amount of commission a Vancouver real estate agent earns for selling a house is around 5 per cent of the home price for the first 100 to 200 grand, then 2~3 per cent for the rest of the price. This information may not be THAT accurate, but we kind of have the idea that US real estate agents seem to be earning a bit more commissions than Canadian agents. I also find that a drop of only $1,000 in the national average commission between 2007 and 2008 but that bad since the US fell deeply into recession in 2008. The significant drop of $12 billion in total commissions is quite predictable because it is obvious that not many people like the idea of buying houses during such a period of time.