Friday, 14 December 2018
Agent Resource Center
This Old House - Do-it-Yourself

What's Your Strategy for Estimating Overhead?

Written by Posted On Thursday, 06 December 2018 05:00

A Question from the RealTalk Community

A while back, Kathleen Allardyce, a member of our RealTalk Community asked:

"I'm wondering if anyone has a formula they use for estimating expenses or overhead to calculate: Gross Annual Commissions - Expenses = Net Annual Commission. Is there a percent of commissions you can use for estimating?

A dollar figure per side? Can you use an estimating figure, or do you need to use hard dollars for desk fees, etc, then add a dollar figure for selling a listing and working with a buyer?"

Ardell DellaLoggia, a successful real estate veteran from the Northwest responded:

"I use an estimate based on my own reality. I take all of last year's "Buyer Agent" fees actually received, deducting expenses directly related to that sale. An example would be if you paid for a home warranty or gave them a closing gift. Add up the total "net" commission and divide by the number of Buyer Agent Transactions. Do the same on the listing side deducting that house's specific expenses. An example would be, sign up/sign down fees, advertising costs, not the lockbox as that is an overhead/inventory item."

Other Considerations

Only deduct the specific cost of advertising this house, not personal promotion advertising or other houses grouped into the ad. Take the total net commission and divide by the number of listings.

I do my plan based on half of my transactions/sides being Buyer Agent and the other half being Listings Sold. YMMV I round down the final number to account for buyers who don't buy and listings that don't sell. If my buyer agent $ is $4,450 I count that as $4,000 for planning. If the listing side is $3,450, I count that as $3,000 for planning.

Then I take the total number of sides from last year and up it to wherever I want it to be next year. Say that is 40 total transactions. 20 X $3,000 plus 20 X $4,000 equals my annual goal.

Then I do the plan, strategy, action list to meet the goals, etc into two separate plans. One, for achieving the listing goals; and then a second for achieving the buyer agent goals. They overlap a bit where I count on meeting buyers from my listings.

General overhead like buying enough lockboxes to keep a stocked inventory, I do not count at all when doing my business plan as eventually, that becomes a constant. If you are a newer agent, these things are one-time "start-up" costs.

I have taken some classes lately on planning, but the "new ideas" didn't fit my business model. This one still works for me."

Read 258 times Last modified on Monday, 03 December 2018 21:07
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Saul Klein

In 1948, doctors told my father that his life aboard submarines on war patrol in the South Pacific and the depth charging he experienced had rendered him sterile. Although controversial and not widely applied, he was treated with an Ayurvedic therapy called “shivambu.” If you are unfamiliar with this term, I recommend you Google it because against all odds, I came to exist.

That was a loony segue into my life but is a fitting precursor to a career that would be just as incredible.

Like my father, I joined the Navy. However, due to a medical inconvenience, I was honorably discharged after 6 years of commissioned service, all on Sea Duty. This was an opportune misfortune that led me down the path to a successful career in real estate. Both my father and grandfather flirted in real estate brokering and flipping part-time, and I followed suit but making a lifelong career out of it.

With over 40 years in real estate, it is impossible to talk about my experiences in this small window. But I can proudly say that I am well-recognized as an industry pioneer, especially in real estate syndication and education, and one of the few luminaries that paved the way for real estate’s transition to the online world.

Some highlights of my life’s work:
● Co-created ePRO, technology certification course that certified 70,000 students
● Created the first online communities for real estate professionals to network, learn, and sell
● Created "Opt Out" Listing Syndication, aggregating over 1.4 Million Listings in 18 months
● Built the #2 National Listing Syndication Service, Point2 Technologies, sold to Yardi in 2010
● Founder of the California Association of Buyer’s Agents
● Member of the first REALTOR.com Team, pre-IPO, responsible for obtaining first 500,000 listings
● Helped Zillow and Trulia build up their MLS data inventory

Today I continue to lead efforts that bring new technologies to the real estate industry. Feel free to reach out and learn more.

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