The Housing Scene by Lew Sichelman

How Much Do They Earn?

Ever wonder how much the folks who build, sell and finance houses earn? How much of what you paid went right to their bottom line?

If so, you've come to the right place. Now it can be told who makes what in the typical real estate transaction. Let's take a look, starting with the companies that build houses.

BUILDERS: According to the National Association of Home Builders' (NAHB) latest "cost of doing business" study, builders averaged just a tad over $3 million in gross profit in 2014 on $16.23 million in revenue. That's an 18.9 percent gain.

But after accounting for operating costs that averaged $2.02 million, their take was just 6.4 percent, or $1.04 million.

The remarkably detailed report goes further, though, breaking down the data by type of builder: those who build solely on their own lots, those who build on lots owned by their clients and those who do both. It also details earnings by region and by volume, and by builders who put up fewer than 25 houses a year and those who build more.

Since there is not enough space here to go into each category, let's just concentrate on the two largest segments: builders with land costs, also called speculative builders, who make up 38 percent of the total respondents to the NAHB survey; and combination builders, who build on their customers' lots as well as their own land, and make up 37 percent of respondents.

According to the survey, speculative builders' net profit averaged 5.9 percent. So if you paid $356,200 for your new house -- the average price for new homes in March, according to the latest figures from the Census Bureau -- figure that your builder pocketed $21,016 on your deal, give or take.

Combination builders netted more -- 7.6 percent per house, on average -- which works out to $27,071 in pure profit on the typical house. Not bad, except that it sometimes takes years to obtain the necessary government approvals to build, and then 90 days or so more to actually construct the place.

Breaking the profit picture down another way, small-volume builders, who comprised 65 percent of survey respondents, earned 5 percent on average, while their larger colleagues, aka production builders, made 6.8 percent.

REALTY AGENTS: The men and women who sell houses earn anywhere from under $10,000 annually to more than $250,000, depending on experience, hours worked and education. A deeper dive finds that the median yearly pay for a sales agent in 2014, according to that year's National Association of Realtors' annual member profile, was $23,300.

It is well understood that agents work on commission, typically 6 percent. But what is not so well understood is that they don't get all of that. Rather, they split their fee with their brokers, under whose licenses they work.

Nearly 80 percent of all agents work under a split-commission arrangement, generally 50-50. But the more productive they are, the better the split. And 13 percent keep the entire commission and pay their brokers a so-called "desk charge."

Income varies widely in the industry: After taxes and expenses, appraisers take home about $46,200, and brokers take in $96,200 if they don't act as agents themselves ($45,500 if they do). Experienced agents with 16 or more years on the job net a median of $42,000, but 3 percent walk away with more than a quarter-million dollars.

LENDERS: In 2015, independent mortgage lenders -- those unaffiliated with larger banks or with the mortgage subsidiaries of chartered banks -- earned an average of $1,189 in profit on each loan they originated, according to the Mortgage Bankers Association's (MBA) annual performance report. But in the first quarter of this year, their net gain on each loan slipped to $825.

A closer look shows that net production profits in 2015 were 55 basis points, or 0.55 percent of the loan amount. So multiply that times the amount you borrowed, and you'll have a good idea of what your lender made off of your deal, before expenses.

Because of larger loan balances last year -- $239,265 vs. $223,108 in 2014, a jump of 7 percent, and up 22 percent since the housing market collapsed in 2008 -- lenders' bottom lines rose nearly $450 per loan in 2015.

To show you how volatile the mortgage market has become, at least for lenders, the average pre-tax profit per loan in the first quarter dropped to 33 basis points, or 0.33 percent of the loan amount. Since the MBA began keeping records, net production income has averaged 52 basis points.