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COVER FEATURE: Income and expenses
BY ROBERT FREEDMAN
Size up your earnings
Growth in the income of real estate professionals tracks the home sales surge of the past several years, with practitioners’ median gross personal income up almost 10 percent in recent years, reaching $52,000 in 2002, the latest year for which the NATIONAL ASSOCIATION OF REALTORS® has figures. Gross personal income for U.S. workers as a whole, by contrast, has been flat, up approximately 2.8 percent during the same period, to $26,794, according to U.S. Census data for 2001, adjusted for inflation. At the same time, practitioners’ expenses are holding steady, helping them to keep more money in their pockets, according to the 2003 NAR Member Profile, released in November.
The Profile suggests that higher sales associate income is driving the growth in their personal income: Associates earned a median of $39,300 in 2002, an increase of more than 15 percent from the previous survey. The income of practitioners who hold a broker’s license actually went down from the previous survey, from $73,400 to $65,300, but the 12 percent drop is seen as a statistical anomaly by NAR researchers, who speculate that there are three potential factors based on their analysis of the data.
- An influx of new, less experienced brokers
- A drop in broker hours worked per week
- An increase in practitioners with broker’s licenses functioning as sales associates
Practitioners’ out-of-pocket spending on marketing, administrative services, and technology, among other expenses, rose a scant $300, from $6,600 to $6,900. With inflation factored in, the expense side is virtually unchanged for the typical practitioner. Of that $6,900, personal marketing takes the biggest bite out of practitioners’ income, a median of $1,200. Brokers spend more than sales associates on marketing, a median of $1,700 compared with $900.
The household income of real estate professionals remains well above that for the country as a whole. Practitioner households earned a median $100,400, about 140 percent higher than U.S. household median income in 2002 of $42,409. Household demographics play a big role. Just under 75 percent of practitioner households are headed by married couples, and many of those households have two incomes. That percentage of married households is considerably higher than the 57.4 percent national average.
Residential real estate continues to be dominated by independent contractors earning a commission split. Almost 75 percent of practitioners earn a commission split compared with 20 percent earning 100 percent commissions. A few practitioners earn a mix of commissions and salary or profit sharing, or just salary.
To order the 2003 NAR Member Profile, go to REALTOR.org/store, or call 800/874-6500 and ask for item #186-12-03
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BROKER/BROKER
ASSOCIATE
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SALES ASSOCIATE
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2002
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2000
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2002
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2000
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GROSS PERSONAL INCOME (percentage distribution)
Over two years, sales associate income rose 15 percent, but broker income dropped, an anomaly caused partly by an increase in the number of broker licensees working in sales, says NAR. |
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Median
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$65,300
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$73,400
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$39,300
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$34,100
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$34,9999 and less
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31%
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23%
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47%
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51%
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35,000-49,999
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11%
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12%
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12%
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13%
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50,000-74-999
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16%
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16%
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14%
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13%
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75,000-99,999
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14%
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13%
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10%
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8%
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100,000-149,999
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14%
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17%
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9%
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8%
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150,000 or more
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16%
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19%
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9%
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7%
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GETTING OLDER, GETTING RICHER (median income by years of experience)
Both brokers and associates had steady income increases—even after 26 or more years in the business—perhaps an indication that practitioners are delaying retirement. |
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5 or fewer
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$53,400
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$38,800
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$30,800
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$18,800
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6-10
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59,600
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60,800
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40,700
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44,900
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11-15
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67,200
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74,300
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48,800
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51,500
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16-25
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70,400
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82,300
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53,900
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50,500
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26 or more
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70,900
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78,500
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56,900
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37,200
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THE COMPANY YOU KEEP (median income by company type)
Earnings are roughly equal for real estate professionals at non-franchised and franchised companies. But those working at company subsidiaries, a category not tracked previously, often earn more. |
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Independent,
non-franchised
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$64,900
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$72,700
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$35,400
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$31,300
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Independent,
franchised
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63,500
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75,00
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41,700
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35,900
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Non-franchised
subsidiary
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74,700
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N/A
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44,000
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N/A
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Franchised
subsidiary
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65,200
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N/A
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44,900
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N/A
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| N/A=not available |
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PEER PRESSURE (median income by number of associates)
Professionals at mega companies—with more than 500 associates—earn the most. |
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1-5
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$63,200
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$66,400
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$38,400
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$22,900
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6-25
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68,000
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77,300
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31,400
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29,700
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26-50
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64,100
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72,700
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41,300
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31,700
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51-100
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66,800
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85,300
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46,900
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41,000
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101-500
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65,100
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N/A
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45,000
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N/A
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501-999
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70,000
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N/A
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37,900
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N/A
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1,000 or more
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63,000
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N/A
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43,500
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N/A
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| N/A=not available |
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BRANCHING OUT (median income by number of offices)
The more offices your company operates, the higher your income—up to a point. Income drops slightly for brokers in companies with 11 or more offices. |
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1-2
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$63,600
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$72,800
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$38,300
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$29,200
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3-10
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71,600
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71,600
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38,500
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N/A
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11 or more
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70,700
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70,700
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46,500
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N/A
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| N/A=not available |
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COST OF DOING BUSINESS (percentage distribution)
Promotion remains the biggest expense for both brokers and associates, roughly one-fifth of expenses, while affinity relationships have dropped to a median of $0, largely due to a reduction in after-the-fact referral fees, some say. |
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Median
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$9,100
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$10,600
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$4,800
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$4,700
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$999 and under
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10%
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8%
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16%
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16%
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1,000-4,999
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27%
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23%
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36%
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38%
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5,000-9,999
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17%
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18%
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17%
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19%
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10,000-19,999
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16%
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20%
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13%
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14%
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20,000-29,999
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12%
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12%
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8%
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7%
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30,000 or more
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18%
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20%
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10%
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7%
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| EXPENSES (median) |
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Promotion
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$1,700
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$2,800
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$900
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$800
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Professional development
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800
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700
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600
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500
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Affinity/referral relationship
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0
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500
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0
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300
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Administrative
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1,100
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700
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600
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400
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Technology
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1,100
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1,200
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700
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700
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HOW YOU’RE PAID (percentage distribution of residential practitioners)
Commission splits remain the dominant compensation structure, followed by 100 percent commission. Other structures remain negligible. |
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Percentage split
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66%
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59%
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82%
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83%
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100%
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25%
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26%
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14%
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14%
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Commission
plus profit share
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3%
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4%
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1%
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2%
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Salary plus
share of profits
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3%
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5%
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2%
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1%
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Salary
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2%
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3%
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1%
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1%
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Share of
profits only
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2%
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2%
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1%
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*
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Median
starting split
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60%
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65%
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55%
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60%
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Median
year-end split
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65%
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70%
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60%
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63%
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| *Less than 1 percent |
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YOUR WORK WEEK
Median work hours have been steadily dropping since 1999, but brokers still work more hours than associates. |
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BROKER/BROKER ASSOCIATE
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SALES ASSOCIATE
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2003 |
41%
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38%
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2001 |
45%
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41%
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1999 |
48%
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41%
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| Source of all charts: 2003 NAR Member Profile |
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