This video covers the use of an income and expense data worksheet to provide prospective recruits with an analysis of their potential earnings with a brokerage.

Income and expense data worksheet

To assist the agent in an analysis of potential earnings, an income and expense data worksheet is prepared by the agent. The agent enters the approximations made by the broker for the various expenses a typical agent may experience during their first year with the brokerage office. [See RPI Form 504]

The agent uses the worksheet to further analyze income, expenses, cash reserves and the sales goal they determine are necessary to provide an acceptable after-tax income for personal living expenses.

As a prerequisite to an agent’s use of an income and expense data worksheet, the agent needs to collect income data during an interview with a prospective broker, including:

  • the price range of property the agent is most likely to list and sell;
  • the number of sales the agent is likely close in that price range during the first year;
  • the gross broker fees generated by the number of sales during the first year; and
  • the share of the gross broker fees the agent will receive under the fee-sharing schedule offered by the broker.

The likely gross fees the broker is to receive and the agent’s share of those fees are entered on the worksheet as a result of the interview. [See Form 504 §§1 and 2]

Ultimately, the sales goal set by the agent is reflected in the amount of after-tax income the agent seeks for themselves. [See Form 504 §11]

Until the worksheet is filled out accurately, projecting fees to be received by the agent, estimating expenses to be incurred and attempting to set sales volume goals or probable after-tax earnings is an uneducated guess.

The broker supplies information

Brokers, by experience, tend to be more organized than agents.

Brokers who employ agents are also better able to anticipate the income and expenses an agent will incur than recently licensed agents. It is the broker who is best able to draw a conclusion about an agent’s future with the broker’s office, not an agent new to the world of real estate sales or who has been languishing in another office due to inadequate or nonexistent planning and organization.

A broker’s primary objective when hiring agents is to increase the gross broker fees received by the office without a disproportionate increase in operating expenses. For the broker to make hiring a productive endeavor, the broker needs to organize an agent selection and evaluation plan to avoid the turnover of agents who remain with the office for only a short period of time.

Long-term employment of agents contributes to a favorable industry-wide reputation for the broker, and provides a return to the broker for the time and energy invested with each agent during the employment process and the agent’s start-up period. Energy, money, time and enthusiasm all wane fast when the turnover of talented agents in an office is due to the failure of unrealistic expectations held by the agents.

A broker’s full disclosure — upfront and prior to employment — covering the agent’s likely income and expenses, and why the fee sharing and expenses allocations are reasonable, leads to a realistic expectation of income by the agent.

Monthly and quarterly sales goals may then be set at levels designed to meet projected earnings when the agent is employed by the broker.