Monthly Archives: February 2012

Readers Beware: Media Writes For Money or Influence

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Great looking Louisvile home with vinyl side
Sure, it costs less to clad the exterior with vinyl side than brick but not half the price of the entire home.

I’ll admit it, I’m an idealistic. Whether that’s genetic or learned behavior, I’m not in a position to deduce. But I am, and at the mid-way point of this life, I doubt that’ll change.

It’s my desire that the media is supposed to report the unbiased, un-embellished truth.

The truth, as it turns out, is that the media fits the facts to their agenda, whether that’s selling more newspapers, getting more hits on their Web sites or influencing people to their cause. I can’t say it any more simply than that.

Today’s example is truly a mild one. But because it falls under that mantle of Louisville real estate, it caught my eye.

Eric Flack wrote “Law not on side of property owners hurt by vinyl homes” earlier this month. Sticking up for the everyman against big corporations has been the modus operandi for many in the media since Day One.

But what’s interesting to me about this piece is how the case was made with such exaggeration. Flack apparently interviewed Louisville Metro Councilman James Peden for the story; there are direct quotes in it. But look at this paragraph.

Peden said all brick homes that sold for $300,000 in Washington Green are having their property values pulled down by vinyl homes that sell for half that. Peden said the cheaper homes bring down property values so much existing homeowners often can’t sell or refinance because they’ve lost so much equity.

Doesn’t that read like, switching a brick clad home to a vinyl clad home reduces the home’s cost by 50%? Absurd!

That tells me that the truth must bend to make their point.

Next time you’re chatting with a builder, ask them how much more brick is than vinyl and they’ll confirm that brick is generally 2x-4x the cost of vinyl but that’s only the exterior cladding, not the cost of the entire home.

The main thrust of the story is whether or not developers have the legal right to modify a subdivision’s deed restrictions due to market changes but that question doesn’t seem to get answered. Incite aggression and the WAVE3.com Web site gets more traffic.

See? Even I got hooked by their strategy.

2011 Louisville Real Estate Agent Salaries Report

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I was very interested in the results when I began writing “So how much do Louisville real estate agents make?“ last year.

It had long been my belief that the majority of sales were garnered by a small handful of real estate agents.

Running the numbers again this year for 2011, I saw similar results. Keep in mind that these charts show sales volume, not salary. If an agent sold five, $1 million homes that would be $5 million in sales. (That would also be an outstanding year!)

But, determining their salary would require estimation.

Let see how this year’s tally concluded. These numbers take into account only agents who completed a deal in the calendar year, not agents with no sales or whose licenses were in escrow.

Chart of Top 20% of Louisville real estate agents portion of all 2011 sales
Chart of Top 20% of Louisville real estate agents portion of all 2011 sales.
Chart of Top 10% of Louisville real estate agents portion of all 2011 sales
Chart of Top 10% of Louisville real estate agents portion of all 2011 sales.
Chart of Top 5% of Louisville real estate agents portion of all 2011 sales
The Top 5%, 130 agents, had just under 1/3 of all sales volume, or an average of $8,359,094 sales each during 2011.

We are now forced to make a few estimates in order to translate sales volume into salary. Understand that commissions aren’t paid directly to the agent, but rather by law to their broker.

Then the broker “splits” the commission with the agent. Splits are negotiated between the agent and their firm. New agents most often start with a 50/50 split, while more experienced agents can negotiate a much better arrangement.

For the purpose of this article, and because there is no public data available on this topic, I’ve chosen to split the total commission 65/35. Using this percentage, I created the following chart.

Chart of 2011 Louisville agents salary distribution
As you can see from this chart, salaries remain relatively flat until you reach the top performers then increase dramatically.

Under this equation, the top performer in Louisville garnered a $425,146 salary in 2011.

In reality, it was likely much higher as brokerages are driven to bring in the most successful agents, which helps their firm in both revenue and prestige. Those agents can negotiate better splits. Therefore, on a sales volume of $21,802,330, it wouldn’t be unreasonable to guess Louisville’s top agent made more than $550,000 last year!

Please remember that these dollar amounts are gross sales, so taxes, expenses, mandatory fees and insurance, bring this number down, sometimes considerably.

2011 performed very close to the previous year in percentage of sales.

	2010	2011
Top 5%	30.7%	30.5%
Top 10%	45.8%	45.6%
Top 20%	63.2%	64.5%

Maybe the Top 5 percent and Top 10 percent couldn’t keep up with last year but the Top 20 percent gain more than a percent.

Also interesting to note, was that 2,737 agents had deals in 2010, while just 2,594 did this past year. That’s a 5.5 percent drop in the Louisville’s real estate workforce.